A few weeks ago, this newspaper carried articles in which it revealed the acquisition of a stake in a BIHL subsidiary (Bifm) by a cabal of directors styling themselves as the Investment Committee.
The official responses to this article have been offered by the Chairman of the Board, the CEO of Bifm and a Board Memo. Suffice it to state the totality and thrust of these responses can be summed-up as follows:
the directors of BIHL believe that they were bound only by existing legislation in their execution of their scheme and in their duty to all stakeholders
the directors believed they were indispensable to the operations of their company and ought to have been compensated accordingly whether it be for turning around the fortunes of the company or as a means of implementing Government’s stated policy of citizen empowerment the directors believe that the expressed approval of their South African parent company is all they required to legitimize the transaction and, therefore, they consider all expressions of concern regarding their conduct to be hullabaloo.
The above position is stunning, given the all recent attention that has been accorded the need for all public companies to implement the principles of good governances. In an era where the financial markets have undergone rigorous scrutiny following the collapse of huge companies (Enron, etc) and in the present climate wherein financial markets are taking a pounding , it is only with great trepidation that one can understand the input of such official responses.
Utmost Good Faith
The insurance and pensions industry in general hold themselves to be guided by the principles of utmost good faith. This standard is premised particularly in the long-term business, on the fact that the company promises to hold and grow persons and future pensioners’ savings for a long period of time and to ensure that this money will be available at the end for their use. The underlying contractual principle is that the company will hold its business practices to a higher standard than that merely stipulated by existing legislation.
In fact, Bifm holds out in its mission statement that it will rejuvenate the faith in long-term contractual savings and utilises this refrain, together with the fact that it is part of a listed company and thus open to public scrutiny, as a purported competitive advantage over its competitors in the asset fund management business.
It may well be true that existing legislation was complied with. However it may also be that due consideration was given to the impending establishment of the Non Banking Financial Institutions Regulatory Authority hence fastracking of the deal.
Whatever the case, when the Board of Directors met to consider this transaction, it must be assumed that they must have been seized with the question as to whether they could implement the decision and still be within the bounds of their corporate duties towards all other share-holders – apart from their South-African parent.
In so doing, it is odd that it did not occur to them that none of them could have been considered objective in this exercise. It would seem that this was simply a case where the self-styled Investment Committee declared itself indispensable, proposed that the action would be looked upon favourably by Government, and agreed a methodology of valuation to determine the price of the acquisition.
In this subjective atmosphere it is not surprising at all that none of the Directors might have considered:
consultation and approval of other shareholders alternative methods of citizen empowerment without conflicts of interest that, for minority share-holders, the best valuation method for the price would be to allow for an open-market bid
No, not at all …….instead, all other stakeholders have been left pondering the truth of this transaction and the implications that such truths hold for them now and when they retire.
Truths
Having been placed on the back-foot because of the failure to act within the principles of utmost good faith and in accordance with the principles of utmost good corporate governance, two themes are given prominence by the Board representatives;
the size of the transaction is made the subject of un-clarity
the transaction itself is styled as citizen economic empowerment
That both the Chairman and the CEO of Bifm, have attempted to represent the extent of the transaction to at most 10% is dishonest in the extreme.
The Botswana Insurance Holdings Limited Group Results for the Year Ended 31 December 2007 states on it’s last page
During the year, there was a successful completion of minority stake sale of 27.5% in Bifm Botswana to a local consortium and Sanlam Investment Management.
The question therefore arises as to how it is conceivable that the Investment Committee could attempt to represent this as a Citizen Empowerment Scheme if they are correct in asserting that they received 10% only and their South African counterparts in the transaction received 17.5%?
Poverty of Philosophy and Patriotism
It is difficult to escape the conclusion that the locals have been placed in a situation where in order to obtain some crumbs they have to cede most of the bread. Indeed it is humiliating to us all that it appears that an honourable local initiative has been allowed to be manipulated in favour of foreign interests. All these so that a few can be at least elevated to an individual level higher than their compatriots.
Therein lies the tragedy and the truth of this sorry episode …….the betrayal of trust in the future of long term contractual and the plunge of the BIHL share on the stock market
