Corporate governance Editorial
Stabroek News
March 11, 2004

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Corporate governance, in particular the management of public companies, has come under increasing scrutiny by analysts and shareholders in the United Kingdom, the United States of America and other developed capitalist countries. Indeed, there has been the increasing incidence of shareholder activism, shareholders organising by way of soliciting the votes of other shareholders to be exercised at an annual general meeting or organising pickets outside company offices to protest against what they perceive to be excessive remuneration for executive directors, unsatisfactory annual results and a host of other matters. Perhaps the managerial revolution described by J.E. Burnham in his famous book of that name in 1941 in which he described a divorce between ownership and control and argued that managers had virtually taken control of public companies and become a self-perpetuating oligarchy is coming to an end and shareholders are demanding a greater say in how the companies in which they have invested are run. In an interesting Reuters feature a man they describe as a veteran corporate raider, Carl Icahn, is quoted as saying "In many cases, corporate CEOs become dictators even when they are doing a worse than mediocre job. Why do the shareholders at companies permit it?"

In Guyana there is no tradition of scrutiny of the management of public companies. Both the major political parties have for long declared that the private sector is the main engine of growth but the corporate culture that is a vital part of a vibrant private sector economy remains completely underdeveloped. This is no doubt partly due to the fact that the private sector was virtually eliminated during the experiment with socialism which led to extensive nationalisation and the miniaturisation of private business. What was left of the private sector has regrouped and there are now at least three active business organisations. The birth of the stock exchange will also help to make people more aware of share ownership and share values though as Mr Clifford Reis, the Chairman of Banks DIH has pointed out, these can be manipulated. But more has to be done. This newspaper has for some time had a Business Page on Sunday which deals with business issues and reviews the accounts of public companies. More recently, in a weekly business supplement, Stabroek Business, it has sought to put the focus on business issues describing what companies are doing, their plans for the future, trading on the stock exchange and other relevant matters.

Creating a corporate culture will not happen overnight. Explaining to the public the possible attractions of investing in shares or bonds takes time. In these days of very low interest rates on savings at the bank many people may be interested in alternative forms of investment if these are explained to them. There will also be animosity and misunderstanding on the part of managements being put under the microscope for the first time. Some have argued that the standards appropriate to developed capitalism cannot be applied in a developing country. Yet if we are to make progress, if we are to have that vibrant private enterprise economy everyone talks about and hopes for, we have to start somewhere. What we hope to develop gradually is a dialogue on corporate and business matters in which people will write to the business editor, Ms Gitanjali Singh, on business issues of the day and there will be a much greater focus on economic and business issues.

It is time that the concept of having a private sector economy goes beyond being a slogan.