QUESTIONED about the State’s policy on granting indemnities to officials in charge of state companies, Finance Minister Colm Imbert on Wednesday told the House of Representatives such indemnities, generally, are standard practice the world over.
“In many jurisdictions, companies provide in their articles of incorporation that a director does not have monetary liability to the company except in cases of certain extreme misconduct,” Mr Imbert said in reply to a question from Mayaro MP Rushton Paray. “In fact, most companies’ corporate by-laws or articles of incorporation contain indemnification and advancement provisions.”
At the same time, the minister said the State’s policy on indemnifications is actually to deal with each matter on a case-by-case basis.
“Each request of indemnity for directors of state corporations is considered on its merits,” Mr Imbert said.
The latter admission clearly reveals the lack of a cogent position on this issue.
That the State carefully weighs requests for – and does not automatically grant – indemnities signals that such indemnities may be inappropriate in certain circumstances, no matter how well established the practice generally is.
Whatever the nuances of the differences between limited liability versus indemnity, the minister is correct to point to the fact that there is a standard practice by which company officials can insulate themselves from financial ruin, should things go wrong under their watch.
The need to attract skilled personnel to run state enterprises demands such officials not be dissuaded from offering their expertise through the prospect of being trailed by expensive litigation after their tenures. Such proceedings have the potential to seem unduly punitive and overly political.
But when it comes to state companies, which often receive funding from the Treasury rivalling that received by traditional government departments, the issues are much deeper than technical legal considerations.
If there is a decades-old “policy,” as the minister says there is, it is a woefully deficient one that risks appearing ad hoc and that does not seem to pay sufficient attention to the wider imperatives of accountability and transparency.
A state company is a special beast – this much is clear, given the difficulties of regulation encountered in relation to them over the years. They bear all the hallmarks of private entities, but their shareholders are ministries and, by extension, the people.
A corporate culture that has an appetite for risk-taking might be fine in a private company. But when that private company is, in fact, owned by the Treasury – such a culture is likely to be highly unacceptable.
Instead of skirting the issue, the State needs to come up with a better policy position that addresses corporate practices in state companies, not mere boardroom paperwork.