Bank warned against shareholder change

It is not only disgruntled private shareholders of the Reserve Bank who are opposing proposed legislative amendments to the way the institution is governed.

An independent think-tank and a university professor have joined the chorus of opposition, on grounds that the proposals would undermine corporate governance and democratisation.

Until now opposition to the South African Reserve Bank Amendment Bill — and its provisions to limit shareholder power — has seemed to emerge from a fringe of noisy shareholders who every year cause a rumpus at the bank’s annual general meetings and are demanding a greater share of its profits as a dividend.


But in submissions to Parliament’s two finance committees during public hearings on the bill yesterday, democracy institute Idasa and the University of Western Cape School of Business and Finance’s Prof Chris Visser argued on principle rather than from self- interest that the amendments were ill-advised. Reserve Bank governor Gill Marcus has defended the proposals as necessary to maintain the Bank’s independence and integrity.

The proposals include a prohibition on any shareholder, together with family and associates owning more than 10000 shares. The new rules also stipulate that the seven directors nominated by shareholders be vetted by a panel and that four (instead of three) directors be presidential appointments.

Nonresidents would not be eligible for election to the board which would have a supervisory, rather than a managerial role.

Idasa’s head of research Nancy Dubosse said the proposed presidential nomination of directors would undermine the independence of the Bank. It was improper for the Bank to be managed by politicians, she said. Parliament’s oversight role should be strengthened and it should vet shareholder nominations, not a panel.

Prof Visser said giving the state more control over the privately owned Bank was not an acceptable form of corporate governance. Private investor participation was vital for checks and balances.

He urged that an independent risk management function within the Bank be established and for shareholders’ compensation to be aligned with the Bank’s performance and not fixed at an annual dividend limit of 10% of profits.

“The Reserve Bank should fully respect shareholders rights or fully compensate shareholders financially for the loss of their rights. Surely it is unconstitutional to take away shareholders’ rights without compensation? This would amount to nationalisation by stealth,” he said.

German shareholder Michael Duerr complained that no proper oversight was exercised over the Bank, which consistently refused to provide shareholders with the information they requested.

Source: Business Day