Mark Ricketts | Petrojam: it’s about leadership from the top
I do believe that Jamaicans are so tired of scandals and fiascos that after a time, they will accept any proposed solution to a deep-seated and costly problem such as Petrojam without properly thinking it through. Compounding the situation is the country's deep division, rooted in tribalism and garrisonism, so one party's suggestion is automatically accepted by loyalists and discredited by supporters on the opposite side of the fence.
Functioning and coping in such a manner has been destructive in the past and has accounted for much of the country's corruption, lawlessness, and lacklustre growth. We can't continue like this. There has to be meaningful change in leadership and management if the country is going to make significant strides in growth and development.
I wish I could take encouragement from the prime minister's latest move to keep Dr Andrew Wheatley in the Cabinet, having relieved him of the energy portfolio. That portfolio will now fall under the PM's superministry, which already has so many agencies under its control, suggesting this is all a game of musical chairs.
Let's go back to Holness' election promise of good governance, which he reaffirmed after he took the reins of government. With such commitment, one would believe that the Cabinet, the prime minister, and Dr Wheatley would have vested the country's largest company with the best board of directors and management.
I should point out here that if management is about running a business, corporate governance is about running it properly.
So important are good-
governance practices that countries are now adopting a corporate governance index to assist in evaluating a company's performance. The move to such an index was inevitable, given the fact that there are significant differences between companies with better and worse governance practices.
But there is no way in the world that Petrojam could fall under the worst government practices and that the major players, including the minister with portfolio responsibility, the PM, and his Cabinet would not be aware of it.
First, Petrojam, as the state-owned oil company, is not a micro enterprise. It is our largest corporation. Therefore, updated financial and non-financial information must have been available.
Second, oil affects everyone and every business. In the jargon of economists, oil has a massive flow-through impact in the economy. That being the case, the Government could not have insulated itself from relevant data from Petrojam. It must have known what was happening.
Third, oil prices have been increasing on the world market over the last several months, with implications for almost all the sectors in the domestic market. Unless Cabinet was burying its head in the sand, it needed to know a lot from the minister involved and the board of directors. That would be crucial for trust and reputation.
Fourth, the United States' publicly declared stance against the Venezuelan government's approach to democracy, and its imposition of far-reaching sanctions on that country, affecting countries like Jamaica with collateral damage, must have pushed Cabinet to want to be reassured of the corporation's management and leadership capability in combating these headwinds.
Fifth, with the divide between the US and Venezuela, and with Jamaica suffering associated losses by virtue of its oil agreements with Venezuela, there must have been detailed and intense discussions in Cabinet on financial flows, valuations, and sustainability practices, as Jamaica attempted to buy out Venezuela's 49 per cent equity interest.
Sixth, with JPS, a major consumer of Petrojam's products, enticed to switch suppliers, necessitating Petrojam to try to thwart such a move by making a heavy-duty capital purchase, surely, the Cabinet could not have been sitting idle, indifferent to whatever level of corporate governance existed. Cabinet members must have been aware of financial audits and board meetings, if any. They must have had in place rules and guardrails and a culture of excellence to ensure final accountability.
Seven, the disproportionately large contribution to the constituency of the portfolio minister must have raised a red flag somewhere - that is, of course, if anyone was looking or due diligence was imperative!
Eight, Holness, during the elections that made him prime minister, had an inviting innocence suggesting change, the elimination of crime and corruption, and the installation of good corporate governance. Surely, with Petrojam's large size, its product demand, its international exposure in a changing world order of sanctions and trade conflicts, the prime minister and his Cabinet would have used this as a test case of the benefits of good corporate governance and election promises given and fulfilled. In this instance, transparency and disclosures would have been a foregone conclusion.
However, today, Petrojam is at reputational risk, with board meetings not held for extended periods, with prior board members living overseas, with the retired board members insisting there was propriety, probity, and transparency, even after information to the contrary came to light.
Recently, Petrojam was a disappointment in Parliament as it highlighted huge disparities in income in the public sector and reaffirmed the rationale of the cry of the despairing; nurses, rank-and-file policemen, and some teachers who receive less in a year in annual salary than the nearly $3-million annual increase given to an HR officer after only two months on the job. It should be pointed out that in a meeting of a parliamentary committee in Gordon House, the HR manager acknowledged that she had not met the full qualifications as advertised for the job.
Oliver Horton, regional programme manager of corporate governance for Latin America and the Caribbean at the International Finance Corporation (IFC), points out that in keeping with good corporate governance, there should be some degree of independence and objectivity among board members. The IFC is a division of the World Bank and is the largest finance development private-sector entity in the world.
Speaking at Mayberry's investment programme series, Horton made a case that beyond processes, structure, and composition, a board should focus on board effectiveness and value to an organisation. He pointed out that better governance practices underline the strength of the culture, the tone from the top, which then percolates through the board of directors, then permeates down to management, and eventually, throughout the entire organisation.
Better corporate governance starts from the top, with you, Mr Prime Minister.