Business and Finance

The troubles at Ecobank and where things may go from here: Video

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Transcript: Ecobank’s chairman and chief talk to the FT

By William Wallis

Ecobank chairman Kolapo Lawson denies allegations he sought to write off debts linked to him

Ecobank Transnational’s chairman Kolapo Lawson, and chief executive Thierry Tanoh have been campaigning to draw a line under a flurry of allegations undermining confidence in governance at the pan-African lender. The boardroom drama recently drew in one of Nigeria’s most senior bankers.

Mr Lawson and Mr Tanoh recently flew to London to put their side of the story. The following is an edited excerpt of an interview with them by William Wallis, the FT’s African affairs writer.

On the controversial decision to suspend Laurence do Rego, executive director in charge of finance and riskTT: I felt that, based on what I had seen so far and where I wanted to take the bank, this was the area which I think needed some strengthening. So, on June 19 I mentioned to the board that I intended to make one change and I requested approval to do this. And after discussion, the board did approve this. Without me giving any names….

….So on July 2nd I informed the person of my intention and I asked this person in this context, I think I’d like you to think about other options. Take a week off. And after that, this person didn’t take this very well . . .

WW: Do you stand by this allegation that Laurence Do Rego falsified her qualifications?

TT: There is . . . Laurence mentioned that she had a degree that she never had.

WW: So, you’re saying she lied about her qualifications?

TT: I’m not calling anybody a liar. What I’m saying is, there is a degree for which we have . . .

WW: But your formal on-the-record position is that she said she had a degree that she never had.

TT: Let me go off the record.

On allegations he pushed Ms Do Rego to manipulate results, and writedown debts owed by Mr Lawson

TT: I have never asked anybody to change any accounts. As I said, I came here to make them proud of an institution and not to change the accounts. So I’ve never asked it and I don’t think it is something possible . . .

On allegations the chairman and CEO sought to sell off non-core assets on the cheap to Oba Otudeko, chairman of the holding company of First Bank of Nigeria

TT: The non-core assets are under the responsibility of the deputy CEO for corporate and investment banking, Mr Albert Essien. Also I want to highlight that all these non-core assets . . . their assessment, evaluation, and purchase were made before my team. So, I had nothing to do with them. Now, when I came in – and you could check every board member – my advice to the board on the Waves (real estate) project has been to develop it . . . So, since I joined Ecobank at no time until the meeting in Kigali last week . . . at no time did I ask the board that we should sell this building. On the contrary, I told the board that we should develop it.

WW: Are you saying that changed in Kigali?

TT: Yes, because . . . I explained to the board because of the second non-core asset and I’ll explain to you why. The second non-core asset that was bought with Oceanic is the shares in Bharti Airtel, but there’s a litigation on that. Because of these litigations, an asset which in theory we should have been able to sell easily . . . we have difficulty selling it . . .

WW: Is there any sort of schedule for the next hearing?

TT: I think the most recent one we heard is October, I think . . .

WW: And the proposal I understand that Mr Otudeko made was first for $50m and then it went up to $88m. So, if you were to sell these shares now, it would be at a substantial loss to the bank.

TT: So, this is what I’ve said to the board; that under no scenario do I want to make a loss on that because this loss would be directly at ETI and that would affect my result and my capacity at ETI. So, I have said to the board repeatedly that I don’t want to sell this asset at a loss; never. So, it has never been put on the table.

On changes to Thierry Tanoh’s bonus

KL: . . .  The bonus system we used to have with Mr Ekpe and previous CEOs was just a straight percentage of profit and tax. In the case of Mr Tanoh, we decided to be much tougher and introduced a cap. No matter how well he does, he will not go beyond that cap. Then we said it will not be just a straight percentage of profit but will be based on his performance on four elements.

TT: There’s return on average equity. There’s cost-income ratio.

KL: And organic growth . . . thank you. Now, in 2011 the return on average equity was put at 25 per cent. That was the original contract, but between November 2011 and December 2012 we took on $350 million of new equity . . . simple arithmetic tells you that your average return on equity must automatically drop. so, there’s simply no way arithmetically that anybody can expect a 25 per cent return on equity for 2013. It’s not an incentive. I might as well tell him, over 100 per cent return on equity . . .

WW: But nevertheless subsequently the . . . because it was decided – as I understand – to cut other bonuses of the senior management, we’re told that the bonus pool was diminished.

TT: First, my bonus has nothing to do with . . . my bonus is separate from the other bonus pool, so whatever comes to me is independent from the other issue. So, Mr Wallace, what I’ve done is very simple. When I looked at what this has raised again, I’ve just foregone entirely my bonus for 2012. I think in the interest of the institutions and moving forward I made that decision….

WW: Do you acknowledge that maybe it was a mistake to increase the CEO’s bonus at a time that other bonuses were being cut?

KL: Well, that’s the question you haven’t answered. Why were other bonuses cut?

TT: The other bonuses were not cut. There was an issue last year and the previous year and there was a mistake made and there was a result this year the same bonus but was lower. That’s it.

KL: So, it was an adjustment.

TT: Yes. It was the bonus last year. It was higher than it should have been and when the bonus was paid this year, there was a difference. So, although the profit had increased, there was this . . .

WW: What was the mistake that contributed to the bonus pool being lower?

TT: Look, I think . . . as I say, it was not done during my time and for confidentiality reasons I’d prefer not to say.

WW: But you’re saying that the reason why bonuses were lower than last year was because there was a mistake that they were so high last year.

TT: Yes. It was . . . look . . . yes.

KL: There was a calculation error.

WW: All of which has added up to this impression within the bank that while your bonus was going up, everyone else’s was going down. The assumption that people have made wrongly or rightly is that the money that made your bonus go up was taken from their bonus.

KL: No. It’s absolutely not true.

On longstanding debts linked to the chairman

KL: I’ve just told you categorically that until the beginning of last week I was not aware that Mr Otudeko or his company owed Ecobank money. I wasn’t.

WW: And it’s just a coincidence that his bank or not his bank but the bank he chairs structured the deal that enabled you to sell your property and pay your debts back to . . .

KL: No. The sale of the property . . . the negotiations had started since February 2012. We had about three offers because we used agents and each agent came up with potential buyers. As of March the best offer we had was for 3.5 billion naira and this offer I even made available to Amcon and the central banks. It was open. Now unfortunately people started reading articles in the Financial Times about [unclear] Mr Lawson owing money, blah, blah, blah, and the people . . . the bargaining power then shifted to the people who were making the offers because that’s the nature of business people. If they think they are in trouble, then they will push as hard as they could.

WW: But the final buyer – I understand – was the chief executive of a subsidiary of First Bank.

KL: No. He’s not . . . he owns a company called Commonwealth Consortium Limited.

WW: But he’s also former executive director of First Bank and he’s an MD of one of the subsidiaries.

KL: Kayode Ayeni . . . again, I met him through an agent who presented the offer and we negotiated with this gentleman. I had never met him before. I met him for the first time around the ninth of July 2013; first time in my life that I had seen this gentleman . . .

First Bank is the biggest bank in Nigeria. So, I would expect that if anybody wants to raise the sort of money needed to buy this sort of property, First Bank would be a likely financier; probably Zenith Bank as well . . .

WW: So, have we heard the last of the issues surrounding debts linked with you?

KL: I believe so.

WW: But nevertheless you have an investigation ongoing by the stock exchange regulator in Nigeria. I’ve heard that the central bank has issues still on corporate governance matters. So, you still have a pretty serious issue. You’ve still got some unhappy shareholders. How are you going to actually stop this whole discussion around corporate governance?

TT: So, as we said, the first thing here is . . . we have nothing to hide. So, we are hiring – as I said – one of the top big firms to really do a comprehensive review of our corporate governance and we will implement their recommendations fully. We’re collaborating with the work that has been . . . with all our regulators and I think this is the best way to move forward.

On whether they might resign

WW: I suppose I’d like to know from both of you if this continues to . . . if there continues to be all these corporate governance issues and if the bank continues to be divided in a way that is anathema to what you originally said at the very beginning where there was a whole ethos of the bank, will either of you consider resigning?

KL: . . . All I know is that we’re going to board meetings. We have heated debates, but we come out without having to put anything to a vote. We come out with a consensus. How can that happen if things are as you described?

WW: Are you sure that – for example – if there was a shareholder meeting you’d have the same level of support given this . . .

KL: Well, I have had shareholder meetings in ETI going back nearly 20 years. There have been some smooth ones and there have been some difficult ones . . . but we have managed to come through all of them. So, I don’t see any crisis today that is worse than a crisis we’ve had in the past or issues we’ve had in the past . . .

WW: So, to answer the question, neither of you consider this anything that might lead you to resign?

TT: No. As I said, I have done things by the book and I am showing you the performance I am working on. I am extremely focused in what I’m doing and I need . . . I have 19,000 people that are focused in working and in trying to beat our competition and be number one.

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