Fresh information has emerged about the issues that led to the purported resignation of the Chairman of Nigeria’s Diamond Bank Plc. Seyi Bickerstheth and three non-executive directors Rotimi Oyekanmi, Juliet Anammah and Aisha Oyebode (“4 NEDs”). In a 15 November letter to regulators and some shareholders of the bank, Bickerstheth revealed the depth of poor corporate governance in the bank, which seemed to have been encouraged by the Central Bank of Nigeria (CBN), especially on recent decisions made by the Managing Director/CEO of Diamond Bank without recourse to the Board of Directors.
Bickerstheth made four major revelations in his letter published by Proshare.
1. CSSAF DBN Holdings wanted Uzoma Dozie out
As we highlighted in our 25 October article, Diamond Bank has struggled since MD/CEO Uzoma Dozie took over. Having recorded a loss of N9 billion in 2017 and several financial obligations due in 2019, it was obvious that the bank needed capital injection, which a key shareholder Carlyle Group’s Carlyle Sub-Saharan Africa Fund (CSSAF) DBN Holdings, with 17.75 percent stake, indicated interest in providing, on condition of a change in management.
With potential gaps in corporate governance as highlighted by the CBN, poor performance of the bank in recent years and the capital it intends to inject, CSSAF was bent on getting Uzoma Dozie out, harping on the need to strengthen the bank’s leadership.
“A key shareholder CSSAF DBN Holdings demanded an immediate removal of management principally the CEO but the Board favored a less drastic approach to minimize disruption and also enable the Board secure new leadership,” Bickerstheth wrote.
“After several discussions, the CEO of the Bank, who is also a representative of the second largest shareholder Kunoch Ltd agreed to resign effective January 3, 2019 but would not tender his letter to confirm his verbal notification.
“In response, the representative of CSSAF DBN Holdings therefore at the Board meeting held on October 18, 2018 put forward a motion for the removal of the CEO with immediate effect. This was despite continuous negotiations and attempts by members of the Board, to provide an amicable solution to this impending shareholder fight and reaching several tentative agreements, which were frustrated by both parties.”
“On Friday October 19, 2018, due to the lack of clarity on the motion for immediate removal of the CEO, the representative of CSSAF DBN Holdings informed board members that as a majority shareholder CSSAF DBN Holdings, [he] would call for an Extraordinary General Meeting to remove the CEO since the board had not voted on the matter. The 4 NEDs then decided that it was becoming a shareholder fight, which they felt could have been averted either by the CEO tendering a letter indicating his resignation effective January 3, 2019 or by CSSAF DBN Holdings accepting to give the Board the responsibility of ensuring the issue is resolved amicably. Purely on this basis, the 4 NEDs wrote to resign their appointments immediately by emails to the Company Secretary to allow the 2 shareholders resolve the impasse.”
2. He is still chairman
Bickerstheth claims he is still Diamond Bank chairman. While he admitted having resigned once in an email to the Company Secretary, it was only meant to force the key shareholders, with the intervention of the CBN, to resolve the impasse. It worked. Uzoma Dozie eventually wrote a letter backing up his earlier verbal promise of resignation. He addressed the letter to the CBN Governor and forwarded to the Bickerstheth, who had been reported to have resigned at the time.
“With the letter and the substantive matter seemingly resolved, the 4 NEDs, after tremendous pressure by all parties concerned to rescind their resignation including the representatives of CSSAF DBN Holdings, Kunoch Limited and the CEO himself, on Sunday October 21 2018 sent emails to the Company Secretary notifying her of their decision to rescind their resignation given that the impasse had been resolved,” the chairman wroye
However, until his letter referenced above became public, most people believed Bickerstheth, Rotimi Oyekanmi, Juliet Anammah and Aisha Oyebode had all resigned and were yet to be replaced. We also speculated that Dele Babade who currently represents the CSSAF on the Diamond Bank Board may be appointed chairman.
The chairman explained further: “Indeed, the said resignation of the 4 NEDs never came into effect in law and the Bank through its Board at the meeting of October 22 2018 continued to hold them out as Directors with no dissent from any director. The 4 NEDs remain on the board of Diamond Bank unless and until they have tendered their valid letters of resignations and the Board has accepted same.”
“Further, according to CAMA and SEC Rules, only the Board can accept/approve the resignation of a director.”
3. Weak corporate governance
“The Diamond Bank Board has 5 “independent” NEDs and the action of the CEO in now attempting to remove 4 of these 5 NEDs, after the fact, was prejudiced and selectively done to undermine the independence of the NEDs. The insertions and “acceptance” of their purported resignation, contrary to the decision of the full board in a meeting, to rescind the decision, was in bad faith and is ultra vires and of no consequence and effect.
“This attitude of the CEO in fact aligns with the CBN examiners’ observation regarding corporate governance where the management takes actions either without notifying the Board or without securing Board approval as has been seen even in matters concerning the investment vehicle of the CEO’s family.”
The CBN examiners had found out that Diamond Bank’s new corporate head office currently being built was not captured in any board minutes and indeed was not discussed nor was any budget approval for cost increase discussed or presented to the board.
Also, “the CEO, at an October 18 2018 meeting, had a financial adviser appointed by the executive management without reference to the board to present to the board various strategic options for recapitalization either through an internal rights issue or possible merger with other Tier 1 banks.”
At an emergency meeting on 22 October, Uzoma Dozie’s resignation letter was, among other things, discussed and the CEO asked that the letter be “regarded as a private letter and excluded from board minutes”. Despite efforts by the chairman to ensure the letter was included in the minutes, it is unclear whether the company secretariat obliged as the minutes of the meeting have not been circulated. Our investigations also show that the Nigeria Stock Exchange has not been formally notified that the MD plans to leave in January.
4. Uzoma Dozie favoured acquisition by Access Bank
When news of a proposed acquisition of Diamond Bank by Access Bank broke, they both issued official statements denying it.
Diamond Bank’s chief executive Uzoma Dozie had on the 22 October meeting, “vigorously sought exclusive powers to negotiate and conclude the terms for the alleged acquisition of Diamond Bank by Access Bank, a development that had never been tabled before the Board, and which, (if and whenever received) like other expressions of interest, should be subjected to objective evaluation by the Board and its Advisers.”
“For emphasis, the Board has never received any expression of interest by Access Bank for any form of merger or acquisition involving both Diamond Bank and Access Bank. If and when that is received, our principled position remains that the criteria must be defined by the Board; all valid and competent interests objectively assessed, and a determination made in the transparent and fiduciary cause of protecting and preserving the legitimate interests of the shareholders, depositors, staff, and other stakeholders of the bank,” the chairman wrote in his letter to The Committee of Governors of the CBN.
Uzoma Dozie is believed to have pushed for the acquisition option to avoid being forced out of a Bank his father founded for reasons highlighted by CSSAF. “It’d be a shame,” a source familiar with the matter told The Nerve Africa.
The chairman noted that his letter was written due to the seeming lack of regulatory/procedural clarity regarding his purported resignation and that of three other directors. He added that his letter was also written to maintain corporate governance in the bank and protect the interest of all its shareholders.
Diamond Bank’s shares have recovered in recent days, gaining about 59 percent over the last seven days. However, it may take a hit against due to the latest revelation.