How did it get past internal and external auditors?

NCB’s former top executives Patrick Hylton and Dennis Cohen will be expecting to collect the J$13.8 billion worth of shares they say was promised to them.

Anything less is likely to be rejected and the speculated $3 billion each to walk away will not do.

The question is when Hylton and Cohen return from leave and are ready to negotiate, is there a document they can point to with the Board signing off on that agreement?

This is where it gets sticky. There has been no admission on NCB’s part that such an arrangement was in place. This leads one to assume perhaps it was a gentleman’s agreement neither party fully understood.

The former NCB CEO, Patrick Hylton has said that both himself and the Group CFO, Dennis Cohen held 95.1 million shares valued at $13.8 billion. This was the position as of July 2021.

The decision was taken to surrender those shares with the understanding that, over time, they would recoup that value . No specific date was set as to when they would get those sums. After several revised proposed compensatory packages were proffered, a negotiated approval was arrived at.

The way Hylton sees it, that $13.8 billion would become an asset on NCB’s books.

It is heartening that NCB saw fit to tie compensation to the growth of the bank and was willing to pay its top executives for their work in making NCB the top financial institution in the country, surpassing BNS.

The train came off the rails with no declaration of dividends for more than two years and the share price dropping like a lead balloon.

A certain introspection was called for and a strategy employed to win back favourability. The optics drew pursed lips and furrowed brows – top executives raking it in yet shareholders having to go without dividends. That narrative even today has been hard to dispel.

Patrick Hylton has proclaimed that both he and his top general are asking for respect and dignity from the public at large, the Board and ownership.

There can be no question that respect is due. What Hylton and Cohen accomplished is legendary and should go done in the annals of Jamaica’s corporate history. The Board and ownership will not forget that in negotiating their severance deal.

There is no reason to assume they will be truculent and obstinate here, rather they will look at all the relevant documentation to arrive at an honourable settlement.

Reflecting on his tenure at NCB, Hylton said: “ I found tremendous joy leading this institution over the last 20 years, accomplishing all the great things we did, growing the institution, record performances on a consistent basis – not only in terms of financial performance but also in terms of growth. We set an example for other Jamaicans who aspire to achieve great things.”

He is right and should be applauded.

But all parties concerned have now arrived at a vexatious situation, with Hylton and Cohen being asked to leave and their jobs already filled as new executives look under the hood to discover what is really going on.

Naturally, they will be looking to see if NCB can be held to the agreement as outlined by Hylton. Does it have validity?

An obligation for that sum of money, far in excess of what was last paid out to shareholders – whether real or contingent would be on the balance sheet. It would have to be disclosed in the notes particularly as it would be regarded as a related party obligation.

I am not an auditor and do not possess the requisite knowledge or skill set to make a determination as to where exactly this agreement would present itself on financial reports. I have spent many years as a journalist and media manager so hoping not to make a complete fool of myself I sought insight from a former luminary of the Institute of Chartered Accountants of Jamaica(ICAJ) to enlighten me here.

I was told to pay attention to International Accounting Standard 24 (Related Party Disclosures).

So it transpires that stock options, shares and such would be disclosed on the income statement as a liability.

Now the CFO, Dennis Cohen, in this case, would present the financial statements and as a related party here would have to make full disclosure.

If this obligation exists it would have to manifest itself to be determined as an asset or liability. 

Did the auditors and Board have full knowledge of this arrangement?  Because it begs the question were parties complicit in making this up or is it simply not true? Someone has to step forward and say full disclosure of this was made and should be accordingly honoured.

If the arrangement was not paid out then it would be a liability on the balance sheet. If management is paid per agreed, it becomes an expense. 

That arrangement is everything and its existence will have to be proved and recorded – somewhere.

An obligation of that magnitude would have to therefore be on the statements. Is it? Where is it? 

There should be no ambiguity here, none where it can be said there was misrepresentation on the notes and a failure to review. 

It has been a hot summer so far and Hylton and Cohen returning from leave to gather around the negotiating table to settle this, will have everyone’s attention and may even set a new standard for compensation packages in Corporate Jamaica.