Friday, June 18, 2021

Stock exchange board divided over outgoing CEO’s consultancy proposal

The board of directors of Botswana Stock (BSE) exchange is reportedly divided over a proposal by the Chief Executive Officer (CEO), Hiran Mendis to be retained as a consultant after his resignation in December 2015.

Reports reaching Sunday Standard indicate that some members of the board support Mendis’ proposal while others are against it, saying it would be against principles of citizen economic empowerment and localization. Early this year, Mendis tendered his resignation from the exchange effective 31 December 2015, citing personal circumstances which compel him to be stationed in Sri Lanka. BSE board chairlady Regina Sikalesele-Vaka then recommended for Deputy CEO Thapelo Tsheole to be appointed acting CEO for a period of 12 months, in line with the BSE succession plan that was put in place in 2014.

Sikalesele-Vaka also told Finance Minister Ken Matambo about Mendis’ proposal to serve as a consultant for a further 12 months, during which period he would mentor Tsheole and make inputs to the demutualisation of the exchange and other strategic initiatives. She further told the Minister that the Main Committee of the BSE had discussed Mendis’ proposal and resolved that it is the best option available as it would enable smooth transition of the leadership of the BSE.

“Accordingly, the Main Committee resolved to appoint Tsheole as acting CEO and enter into a consultancy agreement with Mendis. The Governance and Remuneration sub-Committee has been entrusted with the task of negotiating a consultancy contract with Mendis and the process is underway,” she added.

In the consultancy deal, Mendis would spend two weeks in Sri Lanka and the other two weeks in Botswana. Matambo responded on June 24th, endorsing the decision of the BSE Main Committee. When the news surfaced, the financial sector responded with uproar, as some posited that the decision to engage Mendis as a consultant was made without due consideration of its cost implications, adding that Tsheole was very capable of leading the stock exchange. Financial industry insiders also revealed that all has not been well at Exchange House, as brokers and employees are not happy with Mendis’ ‘unilateral’ management style, while the BSE board seems to be content with rolling over and giving him whatever he wants.

They also opined that Mendis, who already earns as hefty package as CEO, will cost the exchange a lot of money if he is paid a consultancy retainer. Sunday Standard is informed that Mendis currently commands about 20 percent of the BSE’s total annual wage bill of around P12million. The CEO always travels first class, and his return ticket to and from Sri Lanka would cost around P45, 000 per trip. This translates to P90, 000 every two months and P540, 000 per year in travel costs alone. Further costs will be incurred in his retainer fee, accommodation and benefits. Questions also abound as to exactly what role Mendis will be playing at the BSE. Others believe that retaining him as a consultant would be against Botswana’s localization and citizen economic empowerment ideals.

“The citizen economic empowerment policy clearly states that all consultancy services must be reserved for locals. If the BSE needs consultancy services it must advertise and call for tenders, not to readily accept a proposal from a man who has resigned from his post in the first place,” they said.

Stock Exchange insiders have also revealed that all is not well at BSE, as employees are unhappy with Mendis’ management style. The BSE is currently embroiled in a legal dispute with its former IT Manager, who is suing the bourse for unfair dismissal. He was fired after he accused Mendis of conflict of interest during the purchasing of the automated trading system from his home country, Sri Lanka. The Public Accounts Committee has previously raised complaints about high staff turnover at the BSE, asking why key personnel always opt to leave while Mendis remains the longest serving employee at Exchange House. A special investigations unit chaired by then BSE board chairman Rizwan Desai has previously raised concerns about disharmony between the bourse’s senior managers and the CEO, saying such a situation was untenable and unacceptable.

 

Responding to a question from Sunday Standard, Sikalesele-Vaka said the BSE Main Committee has not made a decision on Mendis’ proposal.

“Discussions with the CEO are still ongoing to determine the areas that he shall consult on if necessary,” she said in a text message.

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