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Making up the rules as we go
Henley Morgan
Thursday, November 01, 2007
WHETHER or not we in Jamaica want to believe it, there is such a thing as conflict of interest. It ranks as the major 21st century governance issue and is at the root of much of the fraud, corruption, insider trading, illegal dealings between connected parties, and the resulting destruction of confidence dominating the headlines. If we ignore this fact we do so at our own peril.
In the imbroglio surrounding the recent appointment of corporate executives to high public office, no one, to my knowledge, has enlightened the discussion with a definition of exactly what we are talking about. A conflict of interest arises when an individual is appointed to a position of trust without first relinquishing competing interests. In other words, the individual is placed in a position which he/she can ostensibly exploit for personal or corporate benefit. The classic example would be an executive employed to a firm that's in the business of acquiring and reselling property, being appointed to the board of an institution in charge of divesting government assets. As we joke in business, this would be like giving Col Saunders chickens to carry to market, with the expectation that he will sell them live and dutifully return the proceeds.
Given the simplicity of the issues surrounding the appointment of Don Wehby and John Lynch to top positions at the Ministry of Finance and Jamaica Tourist Board respectively, I am confused by the comments of Mr 'Butch' Stewart which appeared on the pages of this newspaper a few days ago and in which he never made fun to heap coals upon the head of Dr Wykeham McNeil and the government of which he was a part. It had me asking, did Dr McNeil say something offensive about Mr Lynch (Mr Stewart's employee) that I missed? Maybe like many others, 'Butch' thinks that saying there is a conflict of interest impugns the character of the affected individual. The existence of a conflict of interest is not, in and of itself, evidence of wrongdoing. Having cleared up this popular misconception, we can move beyond emotional and partisan rhetoric to look at some of the more germane issues.
Let's begin with an indisputable fact. For high achievers, particularly in a small economy, it is virtually impossible to avoid having conflicts of interest from time to time. The only way to avoid the problem completely would be to do as Pulse modelling agency CEO Kingsley Cooper did in refusing the appointment to the Air Jamaica board. Having decided to accept the appointment, one may seek to mitigate the appearance of having a conflict of interest by resigning one's substantive post, as Wehby did in resigning from GraceKennedy. In a case where the appointment makes one privy to insider financial information, one may also sell all corporate stocks that one owns before taking office or move them to a special trust, which would be authorised to buy and sell without disclosure to the owner; which I also suspect Mr Wehby may have elected to do.
Lower down the totem pole of options there is the disclosure of assets, corporate positions held and other conflicting interests, as politicians and some high-ranking government officials are required to do. A good ploy is to have these issues fully and publicly ventilated, and for the parties directly involved (say, government and the opposition) to jointly engage in the decision to appoint or not to appoint the individual.
There are two dilemmas we face in Jamaica as government widens its recruitment net to tap the wealth of talent on the island. First, the low levels of trust people have in public institutions and in the private sector. Studies have repeatedly shown that a significant majority of our citizens believe that for officials in both groups self-interest takes precedence over nationalistic fervour. One has to be realistic in recognising that with widespread public perception that the JLP came into government with unusual private sector financial assistance, the nexus between the two (private and public officials) is especially volatile at this time. Second, career politicians are in the dark as to the extent of the pool of competent persons who are willing to serve. To put it bluntly, politicians know few people outside of politics. And so they continue to fish for talent in an already depleted and stagnant pool, and among high-profile candidates where conflicts of interest are most likely to occur. Instead of wasting energy defending the indefensible issues concerning conflicts of interest, we would better spend our time thinking about how we are going to solve these two damning problems.
John Milton said, "Where there is much need to learn, there of necessity will be much arguing." On the subject of conflict of interest specifically and corporate governance generally, Jamaica is fortunate to have its own homegrown "guru".
Vindel Kerr authored a book entitled Effective Corporate Governance, with the foreword written by Douglas Orane. There is much enlightenment on the pages of this book. We dare not succumb to the small-island mentality:, making up the rules as we go.
hmorgan@cwjamaica.com
Henley Morgan
Thursday, November 01, 2007
WHETHER or not we in Jamaica want to believe it, there is such a thing as conflict of interest. It ranks as the major 21st century governance issue and is at the root of much of the fraud, corruption, insider trading, illegal dealings between connected parties, and the resulting destruction of confidence dominating the headlines. If we ignore this fact we do so at our own peril.
In the imbroglio surrounding the recent appointment of corporate executives to high public office, no one, to my knowledge, has enlightened the discussion with a definition of exactly what we are talking about. A conflict of interest arises when an individual is appointed to a position of trust without first relinquishing competing interests. In other words, the individual is placed in a position which he/she can ostensibly exploit for personal or corporate benefit. The classic example would be an executive employed to a firm that's in the business of acquiring and reselling property, being appointed to the board of an institution in charge of divesting government assets. As we joke in business, this would be like giving Col Saunders chickens to carry to market, with the expectation that he will sell them live and dutifully return the proceeds.
Given the simplicity of the issues surrounding the appointment of Don Wehby and John Lynch to top positions at the Ministry of Finance and Jamaica Tourist Board respectively, I am confused by the comments of Mr 'Butch' Stewart which appeared on the pages of this newspaper a few days ago and in which he never made fun to heap coals upon the head of Dr Wykeham McNeil and the government of which he was a part. It had me asking, did Dr McNeil say something offensive about Mr Lynch (Mr Stewart's employee) that I missed? Maybe like many others, 'Butch' thinks that saying there is a conflict of interest impugns the character of the affected individual. The existence of a conflict of interest is not, in and of itself, evidence of wrongdoing. Having cleared up this popular misconception, we can move beyond emotional and partisan rhetoric to look at some of the more germane issues.
Let's begin with an indisputable fact. For high achievers, particularly in a small economy, it is virtually impossible to avoid having conflicts of interest from time to time. The only way to avoid the problem completely would be to do as Pulse modelling agency CEO Kingsley Cooper did in refusing the appointment to the Air Jamaica board. Having decided to accept the appointment, one may seek to mitigate the appearance of having a conflict of interest by resigning one's substantive post, as Wehby did in resigning from GraceKennedy. In a case where the appointment makes one privy to insider financial information, one may also sell all corporate stocks that one owns before taking office or move them to a special trust, which would be authorised to buy and sell without disclosure to the owner; which I also suspect Mr Wehby may have elected to do.
Lower down the totem pole of options there is the disclosure of assets, corporate positions held and other conflicting interests, as politicians and some high-ranking government officials are required to do. A good ploy is to have these issues fully and publicly ventilated, and for the parties directly involved (say, government and the opposition) to jointly engage in the decision to appoint or not to appoint the individual.
There are two dilemmas we face in Jamaica as government widens its recruitment net to tap the wealth of talent on the island. First, the low levels of trust people have in public institutions and in the private sector. Studies have repeatedly shown that a significant majority of our citizens believe that for officials in both groups self-interest takes precedence over nationalistic fervour. One has to be realistic in recognising that with widespread public perception that the JLP came into government with unusual private sector financial assistance, the nexus between the two (private and public officials) is especially volatile at this time. Second, career politicians are in the dark as to the extent of the pool of competent persons who are willing to serve. To put it bluntly, politicians know few people outside of politics. And so they continue to fish for talent in an already depleted and stagnant pool, and among high-profile candidates where conflicts of interest are most likely to occur. Instead of wasting energy defending the indefensible issues concerning conflicts of interest, we would better spend our time thinking about how we are going to solve these two damning problems.
John Milton said, "Where there is much need to learn, there of necessity will be much arguing." On the subject of conflict of interest specifically and corporate governance generally, Jamaica is fortunate to have its own homegrown "guru".
Vindel Kerr authored a book entitled Effective Corporate Governance, with the foreword written by Douglas Orane. There is much enlightenment on the pages of this book. We dare not succumb to the small-island mentality:, making up the rules as we go.
hmorgan@cwjamaica.com