By Michael S. Olympios
Chief Consultant
Allied Consultants
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Ramping up the power struggle at Laiki and throwing into question the valuation of the bank, its former Chairman Kikis Lazarides accused banking baron Andreas Vgenopoulos of allegedly trying to offer him a kick-back in the form of success fee for pushing through the deal. The second largest bank has been ravaged by controversy and internal disputes. All told, three Laiki directors and its chairman have quit since last summer. Although their departure was long-overdue, it brought to the surface some rather disturbing allegations fired from both sides. In all likelihood these allegations will invite a Securities and Exchange Commission investigation, which for the time being appears to be an “innocent bystander.”
Have we entered an era in which directors routinely clash, pitting governance headlocks against special-investigation slams? Boardroom experts hope that isn’t so. They don’t always agree on how to avoid future debacles, but one theme is constant: unity among directors is crucial. This unity however has been badly shaken by allegations from Mr. Vgenopoulos of abusive self-dealing of the bank’s former chief. According to some sources Mr. Lazarides was earning excessive compensation. But Mr. Vgenopoulos blasted the former chairman for some abusive lending practices that allegedly benefited friends and relatives. In addition, he challenged Lazarides to back in public the allegations he made against him. Though these allegations have been refuted by Mr. Lazarides they are still hanging over his head. Both men vowed to settle their differences in court.
But Mr. Vgenopoulos emerged triumphant after declaring that “small shareholders will get the rights and respect they deserve.” His sincerity was not just with words but with deeds as his proposal to allow shareholders one more week to review documents and other merger related material including independent fairness reports conducted by two highly respected international firms. Data rooms will be available for the next five working days to provide each investor with information and answers.
At issue is whether the board and the audit committee in particular had the opportunity and the material to make informed decisions. Due to the nature of the transaction, two independent firms should be hired to do the job, thus giving the audit committee a comprehensive and objective view of the deal and help the board make appropriate recommendations to the shareholders. Both the Chairman and the CEO of Laiki maintained that they did all that. The board including the largest and longest shareholder (Lanitis family) stood by the deal and that’s what counts.
In the end shareholders should also think how Marfin Group added value and raised the stakes of their holding at a time when HSBC dumped the stock at a discount earlier this year. What’s more, Laiki shareholders can count on more democracy and transparency now. Shareholder activism is beginning to pay off.
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