Corporate Governance
“Corporate Governance” came into universal lexicon only in the 1970s, high profile corporate failures in the developed economies in the early 1990s making the use more common. Framing of the code in Pakistan in March 2002 had decided impact on the way companies are presently being governed. The State Bank of Pakistan (SBP), in partnership with International Finance Corporation (IFC) and Pakistan Institute of Corporate Governance (PICG), hosted a one-day conference on “Corporate Governance in Banks” for Board Members, Presidents and senior executives of Banks and DFIs, to apprise them of the rationale and approach of Board of Directors in implementing “Good Corporate Governance”. Presided over by the Governor SBP Ms Shamshad Akhtar, this welcome initiative brought home to the participants the parameters of their corporate job descriptions and the modus operandi for executing their responsibilities. Suggestions and reservations proliferated in the inter-active Session. Dr Ishrat Hussain, the previous Governor SBP, may be a difficult act to follow, it was refreshing to see the new lady on the block not only confidently handling things in an adroit and knowledgeable manner, but holding her own in her own right. The SBP baton has been passed onto safe hands!
How the Rot Started
US Secretary of State Colin Powell recently called US President George Bush, Jr. with some good news and bad news about UN inspections for Iraq’s weapons of Mass Destruction (WMD), “Mr President, the good news is that Saddam Hussain has agreed to unconditional across-the-board inspections, the bad news is that he has asked for “Arthur Andersen” to carry out the inspections.” That joke sums up the backlash of the ENRON financial scandal that has afflicted a score of previously untouchable US blue-chip multi-billion dollar companies like Worldcall, Tyco etc, almost all major international accounting firms like “Arthur Andersen” are under pressure because of “creative accounting” and/or fudging financial numbers. When World Bank President Wolfensohn accused the Ms Benazir Regime in 1996 of fudging statistics, he was being discriminatory, almost all governments are guilty of this “soft” white collar crime of inflating their revenues and masking their expenditures, India regularly puts military pensions and border fortifications under innocuous “Heads” other than “Defence Expenditures”. In this new world of accounting “glasnost” it is becoming harder to mask the financial shenanigans of the kind that this country (and the world) has been witness to.
Constitutional Proposals
The military regime last Wednesday solicited public opinion for the first batch of 29 constitutional amendments proposed by the National Reconstruction Bureau (NRB) to improve the performance of political and democratic institutions of the country. The National Security Council (NSC) and the Federal Cabinet will meet after a month to finalize the amendments in the light of suggestions received.
Nobody should have any problems with (1) reducing the term of the National Assembly (NA) and the Senate from five and six years respectively to four (2) increasing the existing 207 NA muslim seats to 357 and (3) reducing the voting age from 21 years to 18 years. It is better for the Assemblies to finish their natural terms (even though reduced) rather than having them artificially shortened by arbitrary authority. The population growth necessitated the increase in seats and the precocious nature of modern youth the decrease in age. The Provinces should be happy with the relative increases in seats, both in the NA and the Provincial Assemblies.
Great Aspirations, Missed Opportunities
The present military regime came to power with greater potential in its leadership to do good for the country than its predecessor three martial laws, the professionalism of the hierarchy being more potent than their counterparts in earlier regimes. For the most part the senior officers are sincere and dedicated people, well motivated to do their best for Pakistan. The agenda unfolded by Pervez Musharraf aroused great aspirations among the people of Pakistan, and while much has been accomplished in the way of establishing good governance, the past 24 months has seen many missed opportunities, as the clock winds down to Oct 12, 2002, these will haunt the legacy of this military regime.
The economic record, priority No. 1 is a mixed bag. There is certainly financial stability when compared to the dark days of Oct 1999, yet in the President’s own words, “we are not out of the woods”, unquote. The banking sector is doing well but the initiative for reforms of the nationalized financial institutions was one of Mian Nawaz Sharif’s few achievements, it was he who brought back expatriate Pakistanis like Shaukat Tareen and Zubyr Soomro to run Habib Bank (HBL) and United Bank (UBL) respectively. But even the Sharif regime looked the other way while Allied Bank Limited (ABL) was being looted in broad daylight. And why did State Bank of Pakistan (SBP) Governor Ishrat Hussain wait nearly two years before ridding ABL of crooks like I A Usmani and Jawaher Hussain, even now he has left their close henchman Tahir Saeed Effendi in place? And despite their public intentions even the Sharif regime decided reforms was too much of a good thing when they (and their friends) were asked to also return overdue bank loans and pay due taxes, they then started to target their own appointees. As far the present meltdown at NDFC, SBP was quite aware about Asif Saeed’s reputation before approving him as Chairman, so after he had taken NDFC to the cleaners, who allowed National Bank (NBP) and UBL to acquire his services as a highly paid Consultant? Hundreds and thousands of small depositors have been running from pillar to post, mainly pensioners with their life savings, yet we persist in giving protection to a man who is most responsible for their miseries.
Elsie is Not a Girl
Unlike most nations where individuals excel in some discipline or the other, Pakistan has been blessed with professionals of world comparison but we do not seem to recognize this varied excellence. It would be nice from time to time to eulogize our own potential. Which other country can boast pilots and doctors of world compare in such large numbers, or for that matter, bankers? Even in sports, hockey and squash we ruled the world for quite some time, in cricket we have (and have had) the best individual players. Many of today’s top airlines in the Middle East and Asean made their beginnings on the strength of PIA’s airline management staff, pilots and engineers, two of the largest hotel chains in the world began with PIA’s participation. Let us recognise Air Marshal Nur Khan’s initiative in most of these fields of excellence.
Agha Hasan Abedi turned Bank of Credit and Commerce International (BCCI) into one of the leading banks of the world. The institution remained very much synonymous with the personality of its maker. The seamy side in the Bank’s operations may have suited special clients but without Agha Sahib’s constant monitoring the whole system had a tendency to explode in the face of its investors and it did. With bad legal advice and gung-ho activists in collecting “private deposits”, BCCI became vulnerable (So-called Black Network, 30 July 91 THE NATION) and thus targeted for extinction. Big money transactions are commonplace in every large international bank (there being a very tenuous fail-safe line with respect to money laundering), BCCI was singled out for punitive action and a dream based on Pakistani professional competence was brought to an end (The Collapse of a Dream, 30 July 91, THE NATION) with the reputation of Pakistani bankers in shreds, or was it? Pakistani banking professionals continued to excel in other international banks, particularly Citibank (The Banking Professionals, 15 Oct 91 THE NATION). Our present Finance Minister, Mr. Shaukat Aziz, is on leave of absence as Head of “Private Banking” in Citibank, the largest conglomerate in the world, formed by a merger of Citibank and Travellers Group. Habib Bank’s Shaukat Tarin, UBL’s Zubyr Soomro (both Citibank) and NBP’s Mohammadmian Soomro (Bank of America), all left US$ one million plus (Rs.5 crore plus in today’s Pakistani Rupees) salary packages abroad when they were motivated to return to Pakistan in 1997. And this when not counting their bonuses in preferred stocks which ran into millions more! Under very trying political circumstances, all three have been very successful in bringing the nationalised commercial banks (NCBs) back from virtual extinction. In comparison Allied Bank, run by the old crowd, has been a virtual role model for corruption, inefficiency and nepotism of the worst kind. Messrs Tarin, Soomro and Soomro’s virtuoso performance was achieved by assembling a bunch of Pakistani professionals in the banking industry from abroad, almost all of whom were persuaded to leave secure jobs at the call of their country. As financial compensation they opted for less than 20% of what they were getting abroad. Worst off was probably Mr Moinuddin Khan, who resigned as Head of Standard Chartered in Hong Kong, to come as Chairman Central Board of Revenue (CBR). Faced with public criticism at his “high salary” in Pakistan and the foreign exchange crisis post-May 28, 1998 he opted to work without salary, living off his savings. The moment he started to give sleepless nights to the “fat cats”