#BTColumn – Stocks, shares and economic freedom

Disclaimer: The views and opinions expressed by this author are their own and do not represent the official position of the Barbados Today.

by Ralph Jemmott

The Brass Tacks programme of Friday October 9, 2020 focused on stock, shares and the compulsory acquirement of minority shares by majority shareholders. Dr. Leroy McClean posed the most critical issue in the discussion.

He asked what all the talk about ‘economic enfranchisement’ was about, if local minority investors could so easily and so frequently be bought out by foreign majority shareholders?

Barbadians, were blamed for failing to invest when a former government decided to privatise the Barbados National Bank (BNB) and the Insurance Corporation of Barbados (ICB).

Shares were made available to the public but controlling interests were ultimately acquired by the Republic Bank of Trinidad and Tobago and Bermudan interests respectively.

In 1991 the late Tony Johnson published a booklet entitled Toward Economic Democracy: The Role of the Securities Exchange of Barbados.

In the Preface to that text, Dr. Neville Duncan stated that Dr. Hilary Beckles’ ‘popularised the notion of ‘economic democracy’ in Barbados’.

The Stock Exchange would in Duncan’s words be a ‘peaceful means’ for ‘widening of share ownership in an environment of deregulation and privatisation.’    

Surely the persistent acquisition of locally owned minority shares by majority foreign entities cannot be compatible with anything calling itself ‘economic enfranchisement.’

I have always suspected that terms such ‘economic democracy’ and ‘economic enfranchisement were shibboleths, catch phrases designed to fool the poor black man.

One understands the concept of political democracy, one man, one vote. But there is no such thing as economic democracy in a polity based on the capitalist mode of production. Per capita income does not speak to equity and income distribution levels may be wide or narrow.

Wide as in Latin America, the ‘Mansions and the Shanties’ or narrow as in Scandinavia. But would the difference equate to something that could be realistically described as being economically democratic?    

A lady called to state that four times she had purchased shares in local companies only to have them bought over by foreign majority shareholders. The crux of the matter is that more often than not the foreign entity, having acquired total ownership, later sells its shares to other foreign companies sometimes below the rate trending in the local stock exchange. In a recent case, shares trending on the Barbados Stock exchange at $Bds. 3.00 per share were offered at $Bds.1.78.

Interestingly Doug Skeete from the Association of Corporate Shareholders admitted that majority shareholders do not always take kindly to minority stockholders coming to Annual General Meetings and asking embarrassing questions.

The question is; embarrassing to who? He also stated that minority shareholders are too often, not privy to the internal workings of companies in which they have only a small interest. None of these factors would seem to encourage Barbadians to buy shares.    

Between 1976 and 1986 Prime Minister, Tom Adams pursued a policy of what I once termed ‘economic nationalism.’ This was a vision of broader capital and business ownership, native and increased State ownership of enterprises, what the social democrats used to call, ‘capturing the commanding heights of the economy.’

This was largely reversed by the Owen Arthur regime between 1994 and 2008. Historians will forever debate the wisdom of that reversal.

There is the economic question as to whether Barbados is better served by foreign companies through access to more capital for expansion, better management, better marketing etc.

Then there are those who feel that the country would be better served by the ownership of some kind of National Development Bank and a Government run Insurance Company.

There is also the emotive issue of a sense of National pride in indigenous ownership, as Dennis Johnson put it, the joy of seeing ‘Barbados’ on a building or more significantly as caller Chris Sobers often notes, the pride of patrimony, of knowing that there are assets that can be passed down to our children and grandchildren like a precious heirloom.

Mr. Arthur would later claim that he wanted to create in Barbados, ‘a new entrepreneurial culture and a new entrepreneurial class.’

It is difficult to see how this could be achieved if there are massive buy-out of local enterprises which are then managed by foreign elites whose prime interest would be in maximising profits and repatriating much of them to foreign shareholders. Certainly corporate profitability should redound significantly to a country’s wellbeing.

The operative word there, being ‘significantly’…. meaning not simply in terms of providing employment, important as that might be in countries like Barbados where there is a
Telabour surplus.

Beyond the incessant rhetoric, I do not know that there is much evidence of a substantive and broad based entrepreneurial enterprise. Some days not a single share is traded on the Barbados Stock Exchange. There was a time when Barbados could boast some 30 companies trading on the local Stock exchange. Now there are reported to be only about 18 as many have been delisted from the BSE.

Buyers lose interest when companies are repeatedly bought out, particularly where there are doubts about the future direction of acquired companies.

Most Barbadians are generally speaking, poorly educated in financial matters and recent events from Trade Confirmers, CLICO and the losses on Government Paper have aggravated the natural Barbadian tendency to risk aversion and suspicion of capital accumulation in foreign hands.      

Ralph Jemmott is a respected retired educator.