During my investment career I have always been perplexed by the make-up of most firm’s Board of Directors, from my coverage of U.S. stocks to global Stocks, from small cap to mega cap companies, from the buy side to the sell side. I have seen it all, and I have almost universally been disappointed. I have seen a medical doctor sit on the board of one the largest railroads in the U.S., management from top customers sitting on compensation committees, and active Fortune 100 CEO’s that also held three board of director positions. But like most investors, I have just noted the poor board make-up, and included it in the mosaic of information I use to make investment decision, because in reality most board memberships are poorly filled and there was little as investor I could do about it. Unfortunately, I did not think about it much, I did not ask why boards were so poorly filled.
In the UK the shareholding structure of most public listed companies are dispersed. In Sri Lanka most public listed companies display a concentrated share ownership structure. However the regulatory regime in Sri Lanka including the corporate governance code is seemingly designed to cater to companies in which the shareholdings are dispersed as in the UK. This is because of the significant influence of UK company law and corporate governance codes on Sri Lanka company law and corporate governance codes. This requires reform. The Sri Lanka Corporate Governance Code should be revised to take into account that by far most public listed companies in Sri Lanka display a concentrated ownership structure and the regulatory framework must be changed to take into account of this reality.