Air Mauritius & SBM : “The setting up of a commission of enquiry will put an end to the culture of impunity”

Interview – Raj Ramlagun – Listed Companies Minority Shareholders’ Ass

‘If we had a governance and accountability culture as Singapore does, no one would hesitate to trust its government to run the affairs of the country’

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Raj Ramlugun of the Listed Companies Minority Shareholders’ Association, gives his opinion on the problems that have led to the downfall of Air Mauritius and SBM. For him, the central concern is one of governance and accountability, which have been messed with down the years by the connivance between board/management and the successive governments. They preferred to maintain the status quo which served their interest instead of that of the SOEs they were responsible for. And still there seems to be no will to seize the opportunity to turn around these entities by appointing a commission of inquiry as LCMSA has been asking for? Why? – questions Raj Ramlugun. Read on…

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Mauritius Times: There are certainly lots of unanswered questions as regards the “crash” of Air Mauritius and the dire situation in which SBM finds itself today, with its profits tumbling down to Rs 15 M in 2019-20 from Rs 1.2 billion in 2018. But you would not expect the Government shooting itself in the foot by setting up a commission of inquiry as it is being requested by the Listed Companies Minority Shareholders’ Association (LCMSA)?

Raj Ramlagun: Indeed there are many unanswered questions. Both for Air Mauritius (MK) and SBM. Foremost, we should understand what those questions are and answering them in all transparency would be in whose interests? Likewise, not willing to answer them would mean what for all the stakeholders?

In both the cases of MK and SBM, there is the widespread perception that there has been dereliction of duties by the Board and Top Management in the way certain important decisions have been taken and approved over the years. These have seriously damaged the financial status and integrity of these organizations in terms of good governance and sound management practices. In view of the extent of the damage and prejudices caused, would it not warrant a fully-fledged independent enquiry in order to probe the weaknesses in the decision-making process and hold to account those who might have failed to exercise due diligence in the performance of their duties?

The government has the ultimate fiduciary duty to safeguard the interests of the nation. It delegates this duty and responsibility via Board members and officers that it appoints in various state-owned enterprises or state-controlled entities via its majority shareholding. If those appointed officers or directors fail to protect the interest and integrity of the organizations, is it not a serious breach of trust and dereliction of duty? Would it not be in the interest of all stakeholders, including the government, that they support this call of the LCMSA for a commission of enquiry? Being against or refusing to consider our request would mean that the government is condoning the status quo and the way things have been going on in these two listed companies.

In our view, if the government is reluctant to support us in this endeavour, only then it will be shooting itself in the foot as it will be perceived by the nation as being an accomplice of the rotten status quo that is eating away at the governance and accountability culture in the country. The urgent setting up of a commission of enquiry will be a tremendous opportunity for the government to send the right signal and put an end to the culture of impunity at the highest level and restore trust in our governance mechanisms. The ball is in their court!

* Would the LCMSA’s campaign for a commission of inquiry suggest that other avenues for redress of the situation at the level of Air Mauritius and SBM have failed to bring to light what you suspect are gross irregularities and corrective measures not implemented?

Over the years, we have been drawing attention publicly and via official correspondences to Board Members and Executive Management about what we considered to be abuses, mismanagement and dereliction of duties. We have even been to the ICAC on several occasions in the past to report alleged wrongful HR practices. At General Meetings of Shareholders (especially MK), year in, year out, we have been raising our concerns. But it’s all been to no avail.

Those in control seem bent on treating the shareholders meetings as mere formalities as they display an arrogance and diffidence in their treatment of minority shareholders’ queries and concerns. Simply because they take it that they have the full mandate of the majority shareholder (the state via the government) to act as suits their agenda (or prescribed agendas). Even the other minor shareholders represented at Board level would tend to be part of the rubberstamping culture imposed by the representatives of the majority shareholder. That’s the governance culture that is rampant in state-controlled entities (whether listed or not) since decades and under all governments.

* Does this mean that there is a legal void in the related laws governing companies and in the judicial arsenal that allows the boards of directors and management of State-Owned Enterprises to run the affairs of these bodies without let and hindrance and as it pleases them?

Definitely, this is the case and that’s why so many who are at the helm of SOEs can so easily walk away or stay put with total impunity, even when the entity is failing or has crashed. You are hitting at the very heart of the problem. It is very true that accountability is central to an effective governance culture – from top down. But it does not suffice to just throw textbook or academic prescriptions about those concepts.

In corporate settings, these concepts of Good Governance and Accountability should be living values, part and parcel of the organizational culture. Not simply a matter of laws. There are the more proactive and lasting values of personal and professional ethics alongside the legal framework. MK had initiated some good steps in that direction in the early 2000s. Especially after the caisse noire saga in 2001, a new corporate conscience had emerged as a reaction to restore trust and accountability.

MK had its code of ethics in place and disseminated throughout the organization, various board mechanisms/committees were put in place in order to ensure greater control and accountability in all aspects of the business. From Finance, Risk to HR Management. Internal Audit was made more independent of the Executive Management and reported directly to the Board Audit Committee rather than to the CEO. special arrangements were made at board level for unions or employees to report any matter they felt required to be ‘whistle blown’.

At national level, the ‘National Committee of Corporate Governance (NCCG) was set up, with Tim Taylor (who was also simultaneously a MK board member) as its first Chairman. From 2005 onwards, what has happened to all these watchdog and good governance mechanisms? The heavy-handed politicization under every government in terms of appointments and interference in strategic decision-making kept undermining all the sound principles of Governance and Management. We went back to square one, if not worse. It simply killed the sense of business continuity and work ethics. Even the most committed employees inside those organizations got highly demotivated and surrendered to the agendas imposed by political nominees or blue-eyed boys/girls.

Competent leadership succession planning from inside was anathema. All should be a matter of political prerogative and political loyalty. Every new government means a new CEO, a new Board with new chairperson, a new clan with new protégés ruling the roost. What matters is not what you bring to the organization but to whom you are connected in the political power hierarchy and inside the organization. All boiling down to endless power games, organizational politics and rapport de force that one could establish through public opinion or political connections in order to impose a given agenda that serves vested interests more that the utmost needs of the organizations.

Given these disturbing realities, how can we be surprised that most, if not all, state-owned and state-controlled entities are in an utter state of decay as far as competent leadership, governance and accountability are concerned? But who cares? The blame game at the political level is endless for all the ills that afflict our SOEs, including MK and SBM. But no one among our politicians who have been or are in power will confess and own up to their share of responsibility in the chronic mismanagement or crash of those State Owned/Controlled Enterprises.

Why? At least, can’t they come together in a bipartisan spirit in order to set up a new framework of Governance and Accountability for those state related entities. To prove that the State through its representatives appointed by the majority shareholder can deliver effectively in public interest? If that is not possible and our politicians in Parliament (and unions) are bent on perpetuating the rotten status quo, does it make sense to keep subsidizing quangos or other state related enterprises with government support and public funds?

* What would the situation be like in other State-Owned Enterprises or State-controlled companies – in Mauritius Telecom, State Investment Corporation Limited, etc., — which fall outside the purview of parliamentary scrutiny?

Well, I leave you to guess. I have said it all in my previous reply. I do not know up close and personally how these other SOE entities are managed and people at the helm held accountable there. Specific circumstances and leadership might explain for nuances in assessment and actual performances, but overall, I am convinced that we have a hardwired decadent governance culture throughout that is fostering vested interests and lack of public accountability in our SOEs & SCEs.

It takes two to tango. It cannot be just the board or management and government interference all the time. Very often this systemic governance issue arises out of complicity with different stakeholders inside and outside. But leaving all these state-related entities totally outside the purview and scrutiny of parliament is totally unacceptable. Laws and regulations should be amended to make them more transparent and accountable in the public interest and not be the hostage of parochial political agendas.

* We also hear of alleged irregularities taking place at the Mauritius Duty Free Paradise Ltd and at Casino of Mauritius (incidentally one of the few loss-making casinos in the world). These and the other loss-making SOEs are making the case for their privatization. Would the LCMSA support that option?

Ideally, we would prefer that the State remains a major and active player in areas of the economy that have high potential in generating wealth for the nation. But over the years the heavy-handedness of politicians in power and the performance of those they handpick to lead these entities tend to make people more inclined towards privatization. Is this the solution to addressing the problem of incompetency and mismanagement through state ownership? I do not think so. But that is what successive governments are unfortunately pushing us to believe as preferred option… out of despondency.

If we had a governance and accountability culture as Singapore does, no one would hesitate to trust its government to run the affairs of the country. But here, I wonder if even the most stubborn ideologue would dare give any benefit of the doubt blindly to State ownership in light of the way SOEs are managed. If there is a change in governance values among our politicians in power, this will surely trickle down and make things better. Otherwise, a proper balance of public and private partnership, with due state safeguards, might be a better option for the survival and efficiency of these ailing entities.

* There is a long list of alleged irregularities and mismanagement problems within Air Mauritius relating to procurement, HR, fleet renewal and purchases, pension fund, transport services contracts, legal fees paid to outside counsels cited in the letter to the President. One would have assumed that more effective Governance and Accountability mechanisms would have been put in place at Board and Management levels in the aftermath of the ‘caisse noire’ episode that shook the company. Why didn’t that happen?

The constant disruption of business continuity through haphazard changes in leadership at CEO, HR and Board levels have not helped to maintain the effectiveness of good governance and accountability mechanisms that were meant to be there permanently to protect the interests of MK. Very quickly those at the helm have given in to all kinds of lobbies and short-term costly trial and error experimentations and compromises.

The governments in place have not helped to sanitize the governance and accountability framework. They have often made it worse by playing party and judge. Whether with regard to MK’s business strategies, the role of Board and Executive leadership or mere HR matters, etc. MK managed to get away with all these when less harsh circumstances and unconditional government support could allow the company to keep going. But now with the fatal blow dealt by the pandemic, all the accumulated failures and the shortsightedness have come to the surface. Shockingly with no one being held to account for the crash. Be it at Board or Top Management level! The innocent employees are the first to bear the brunt for the lack of due diligence at all levels.

* In its letter addressed to the President of the Republic the LCMSA questions the appointment of the Voluntary Administrators. Do you consider that this was not the best option and that the MK Board and Top Management would have done a better job at rescuing the company? 

To be fair to the government, we might tend to think that by opting for the voluntary administrators (VA), it has preempted MK from going into direct insolvency. Thus, demonstrating its willingness to do its best to save MK as our national airline. However, as shareholders, we do not understand the true terms of reference and plan of the VA, except that all emphasis seems to be placed on employees cost and layoff while through his own admission during his press conference on 1 june 2020, the va through stated that covid-19 was only the final blow that caused MK’s crash in April 2020.

In our view, he should have gone further in investigating and quantifying the extent of damage resulting from past mismanagement and wrong decisions.

      * We all suspect that political interference has been a recurrent culprit in the downfall of Air Mauritius as in that of SBM or other SOEs. But does that explain everything?

Politicians in power (under all governments) should learn to hear the inconvenient truth. They enjoy taking all the credit when things go right in SOEs and SCEs. More so at MK with all the glamour it carries. They should also have the humility to take with dignity an equal measure of blame when things go wrong.

But to be fair, though political interference is rampant, it does not explain all and absolve individual responsibilities in failing to uphold personal integrity and exercise of due diligence when doing one’s duty to protect an organisation. There are many, abusing of political patronages or other high-level connections, who have played ‘le calife à la place du calife’ and wreaked havoc in the governance and finances of the organization.

Others, even CEOs, have connived with unethical employees, venal unions and outside lobbyists in order to solely ensure personal survival at the top. Were the politicians in power always aware of the full extent of these maneuvering and internal politics? If they were not directly involved in such culture that have gone a long way towards undermining the full potential of MK and its sustainability, they better take note going forward.

If MK is given a new lease of life, they should all (including the accomplices of the rotten status quo) learn their lessons and stop treating MK as a cash cow or their personal property. In any case, no one would dare use his personal property to make costly experimentations or appoint people with doubtful competence and integrity to manage it. Isn’t it? So, why should MK, SBM or any of our SOEs and SCEs be subjected to such practices?

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* Published in print edition on 23 June 2020