By Robert Andre Emmanuel
Parliament has officially passed an amendment to close a loophole that previously allowed directors of public companies to maintain their positions indefinitely by serving on subsidiary companies.
Both the House of Representatives and the Senate approved changes to the Companies Act which increased the number of years that a public company director can serve from six to ten years while also including service on subsidiary companies.
The aim of the legislation was to address a loophole unearthed by the government in the Companies (Amendment) Act of 2004 where it stated that “[n]o individual who has served as a director of a public company for six consecutive years shall be qualified for re-election as a director for that company unless two years have elapsed after he last served.”
According to Prime Minister Gaston Browne, some directors used subsidiary boards to circumvent the rule.
“What we’re trying to avoid is the creation of a cabal within these public companies that could potentially undermine transparency and corporate governance,” Prime Minister Browne said on Monday.
The legislation now stipulates that an individual who has served as a director of a public company or any of its subsidiaries for a total of ten consecutive years must step down and wait two years before being eligible to serve again.
Barbuda MP Trevor Walker, who offered a critique of the legislation, argued that the amendment was simply “kicking the can down the road” and said with the establishment of the University of the West Indies Five Islands and other educational institutions, generational renewal in corporate leadership should be easier to develop.
He argued that giving persons a two-year hiatus was “nonsense”, stating that he would be willing to accept a future amendment increasing the term limit to 12 years but one that removes any ability for the director to re-serve as a director of the public company or its subsidiaries after those 12 years have elapsed.
“You have young people who have access to tertiary education and an average young person today who is a school leaver, in 2-3 years, has a first degree; there is no reason why we should be rotating these directors in law.
“I am of the view that this Parliament should reconsider [this legislation] … the directors of these public companies should view it as a privilege to serve,” MP Walker said.
Meanwhile, members of the Upper House offered a unanimous approval of the bill, with Senator Shawn Nicholas noting that the aim of the amendment ensures a retention of talent while also creating opportunities for new leadership, especially youth and women voices.
“Your job [as a director of a public company] is to come in, train, serve, and then move on,” she said during her final speech in the Senate.
Senator Dwayne George also noted that allowing directors to serve for 10 years should provide sufficient time to groom successors without having to import external talent.
Senator Michael Joseph, in his maiden contribution to the Senate, spoke about the “double edged sword” that the bill creates.
He stressed the importance of preventing the creation of “oligarchies” within companies and praised the bill for preventing the creation of “Machiavellian operators”.
He however said that this will also affect persons who are great directors within public companies.
“If you have good directors, then of course you have growth. The challenge is if you have bad directors, then there’s a risk that the company could fail.
“We have to understand that in our country and in our economy, the risk of some companies failing poses significant economic challenges for the growth of development of our country,” Senator Joseph added.
