Stock Market Gloom by Wiraj Silva.

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An interview with corporate governance crusader – ‘Victor Vigna’, victorious in so many encounters. The robust rage of a righteous Royalist in his quest, ‘with goodwill to all and malice to none’; fairness and equity, not only in expression and deed but in thought also.

Snapshots of the iconic champion of an enterprise sector. He deals with the great, good as well as the bad and the ugly, leadership in the corporate sector, with much humor, admiration and kindness, as well as vigorous, vitriolism deemed necessary to give immediate relief to the adversely affected.

K.C.Vignarajah is known affectionately as Vigna to his close friends. His speeches and articles highlight items of great importance to Enterprise Development,‘with fairness and equity to the investing Public, the economy and the people of our beloved country’.

 

 

The great gloom is due to great uncertainty whether the government actions will benefit the people or mafia, inter alia, to stock market mafia action regarding:

 

a) Reduction of Public  Shareholding or Public Float (PF), which greatly reduces liquidity and  marketability of shares.

 

b) Creation of ‘Shareholder Fatigue’ (SF) caused by a sense of helplessness against oppressive acts of CI & RP.

 

c) Absence of Good Governance, acts of  malpractices, manipulations, ‘pump and dump’, Related Party Transactions (RPT), Conflict of Interest(CoI) and/or significant proximity/influence of cohorts.

 

d) Cabals of so-called experts and pretenders, framing codes of ethics, best practices, rules and regulations which skillfully avoid punishing or even disclose or prevent unethical, unlawful, unjust enrichment practices of controlling interest (CI) and the related party (RP). They also failed to prevent impoverishment of IMS, thus negating the essence of fairness, equity and justice to Independent Minority Shareholders (IMS), the investing public and the country.

 

e) Delisting is a heinous crime perpetrated by CI&RP on investing public, the IMS, image of Colombo Stock Market as a healthy, fair emerging market  and that of the country as a portfolio investment destination.

 

f)  Oppressive dividend payout policy. Many unfair CI & RP pays low or no dividend, whereas the proper conduct expected is at least 50% of Net Profit After Tax (NPAT). World renowned authority Benjamin Graham (BG), Warren Buffet (WB) as well as locally Deshamanya Chari P de Sliva (CPdeS) and Vigna have written reams on the ‘rights and ownership by current shareholders of current profit’, retained earnings and reserves and IMS should be consulted as a class or group interest. Excess retention of profit and reserves may be  justified only if they can yield better returns than possible in the market. A healthy dialogue between CI&RP and IMS should take place;if there is no reasonable conclusion, SEC, Company Mediation Board and Registrar of company must intervene at the request of IMS, and also Ministries involved in Enterprise development, Economic Affairs and Finance.

 

g) Retrieve the dollars robbed by the mafia, instead of taxes on people and enterprise society.

 

Macro economic matters

The artificially propped up Rupee coupled with high interest rates is distorted version augmented by the dollar supply through borrowings.

Unfortunately, much of it is siphoned out through various means by powerful politico business mafia groupings. “The propped up rupee is detrimental to, inter- alia:  exports, added value manufacturing and services,  tourism, plantations and import substitution sectors, providing the bulk of the country’s employment,” he said. The propped up rupee inextricably linked to higher interest rates, deal multiple blows,including speculation and insider trading in shares driving away foreign and local investors.

 

Urgent Remedial measures to boost. Revenue as well as the enterprise sector.

 

a) Heavy ‘Delisting tax’, on the CI & RP and Directors attempting to delist, enrich themselves and impoverish IMS and the country.

 

b) Penal rate of tax for public float (PF) less than 25%, preferential (incentive) rate of tax for public float for 45% or more.

c)  Remove retrospectively Superior incentives/preference for Corporate debenture and debt; this is in contrast to highest risk bearing ordinary Equities.

 

d) The Finance Minister Ravi Karunanayake made a move in the correct direction when he gazetted that 15% shareholding would be entitled to a Board seat. Vigna had wanted shareholders of 10 percent to be entitled for the board seats. The delay in implementation is worrisome and is one of the main causes of the lack of confidence in the share market.

 

Good governance, transparency and accountability can only be  ensured effectively by significant independent and minority shareholder representation on Boards,  while maintaining rights of CI & RP to manage the company. The IMS have been submitting that 10% each shareholders or shareholding by not more than three related IMS should be entitled to nominate a director.  This measure recognizes the significant interest of IMS for supporting the management of the company. Ideally CI&RP could nominate five directors and other shareholders who are not connected, related or controlled by CI & RP,nominate or elect up to a maximum of four directors.

 

In some jurisdictions, there is a further laudable provision that if the Chairman is not independent, then the majority of directors should be independent.

 

We are a unique nation with multi-talented people, resilient to overcome temporary disadvantages caused by ruthless mafia and mollycoddled criminally inclined hangers on. Don’t pretend to  look for precedents in other developed countries and markets Sri Lanka is ‘land like no other’.

The cultures of Lord Rama and Lord Buddha were inculcated as early as  3500 years and 2600 years ago. Islam and Christianity enriched all our people and our culture. King Ravana received boons, became bad later and had to be destroyed when he refused to reform. So must the present day Corporate Ravana’s, Lord Ishwara, with the famous battle cry of Barbarians at the ‘Gate of the temple of Justice’, eminent Romesh de Silva, Neelakandan, Upul and a host of civil society leaders of BASL, CPA, CIMOG, Friday Forum battled for CJ43 and sent into obliviation with a trace, an appointee of MR. No precedent but great justice.

 

The World’s first lady Prime Minister Sirimavo Bandaranaike and first democratically-elected husband, wife and the daughter as head of Government and State! World’s greatest bowler Muttiah Muralitharan, the elegant record beaters Kumar Sangakkara, Mahela Jayawardene, outstanding world cup winning  Captain Arujana Ranatunge,world’s snooker champion Lafir, shone brightly. In the Legal and Administrative field Sir Pon Ramanathan, Sir Ponnambalam Arunachalam, Professor Dr. C.J. Weeramantry, Dr. Neelan Tiruchelvam and a host of others created unique examples of abundant  talent and they set precedents in their field of endeavor.

 

The spirit of ‘we can change’ of the people brought in the silent revolution of Jan 8 2015, propelling President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe to the leadership positions. Are they to rely on pretenders and chocolate tin soldiers of the Corporate World to save our country?

 

He will identify related people and events, in his love for the country and in the best interest of the IMS, the enterprise sector  and the people in the next few weeks after accessing corrective measures, if any.

 

http://www.thesundayleader.lk/2016/06/19/stock-market-gloom/