Boeing strips CEO of Chairman's post
US aerospace major Boeing has stripped CEO Dennis Muilenburg of his dual role as Chairman in an unexpected shake-up at the highest ranks of the company amid the prolonged crisis of its 737 MAX aircraft that has been globally grounded following two fatal crashes.
 
Boeing on Friday said that it took the action to allow Muilenburg to focus on running the company as it returns the MAX fleet to service after it was grounded in March the crashes that took place in less than five months, Efe news reported.
 
The leadership change came hours after a panel or air-safety experts sharply criticized Boeing and the US Federal Aviation Administration for mis-steps that led to the crashes, which killed a total of 346 people.
 
David Calhoun, a senior Blackstone Group Inc. executive who has been the Boeing board's lead director, will become its chairman. 
 
The board has "full confidence in Dennis as CEO and believes this division of labour will enable maximum focus on running the business with the board playing an active oversight role", Calhoun said in a statement.
 
Getting control of the crisis proved challenging for Muilenburg, who is slated to testify before a House committee at the end of the month.
 
The prolonged grounding of the MAX, the Chicago-based aerospace giant's best-selling jet, has disrupted the plans of airlines and passengers around the world. Boeing is considering additional cuts to production or temporarily shutting down MAX assembly at the Renton, Washington, plant where the airplane is built.
 
The manufacturer has faced repeated setbacks in getting the MAX flying again. An update to the MAX flight-control software to fix problems with the jet had previously been expected to gain FAA approval as early as April. 
 
The discovery of another potential safety risk has added to delays.
 
Three US operators of the MAX - United Airlines Holdings Inc., American Airlines Group Inc. and Southwest Airlines Co. - don't expect to resume flying passengers on the aircraft until early next year.
 
Muilenburg said he fully supported the board's move and that the team was focused on returning the 737 MAX safely to service.
 
He will remain a director on the board. 
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    COMMENTS

    Umadevi

    5 days ago

    He has covered up the aerodynamic instability issue and supressed the technical audit report jeopardising passenger safety. This is a severe crime. Done to stay ahead of Airbus in competition.

    Madras HC issues notice to SEBI, MCA, ED in NSE co-location case
    The Madras High Court while admitting a Public Interest Litigation (PIL) filed by the Chennai Financial Markets and Accountability (CFMA) in the National Stock Exchange (NSE) co-location case and issued notices to the SEBI, the Ministry of Corporate Affairs (MCA), the CBI, Enforcement Directorate (ED) and the NSE.
     
    It has also issued notices to the Serious Fraud Investigation Office (SFIO) and the Financial Intelligence Unit (FIU). The High Court has directed the noticees to respond on November 11.
     
    The colocation or algo scam came to light in mid-2015, when Moneylife wrote about it for the first time, following multiple letters from a whistleblower. The whistleblower worte to Moneylife and SEBI alleging NSE was giving a few high-frequency traders and brokers preferential access to its trading platform, which benefited both the parties at the cost of others.
     
    The whistleblower had alleged that some trading member of NSE in collusion of employees or management of the exchange, gave preferential treatment to certain trading members for obtaining faster access to market trade data.
     
    The petition in Madras HC stated that NSE has violated fundamental objects of trading and thereby, in the process, given illegal preferential access to NSE trade data to certain trading members.
     
    The PIL says SEBI has not taken any effective steps to unearth the scam, which according to the petitioners is "one of the biggest financial frauds ever taken place".
     
    The order copy dated September 27 also said that the PIL brought to the knowledge of the court that the third respondent, the Central Bureau of Investigation (CBI) filed the first investigation report bearing "No.RC AC1 2018 A0011" on 28 May 2018, in the NSE co-location scam and there appears to be a slow progress in the said investigation.
     
    "We state that the NSE Colo Scam have tarnished reputation of a major market infrastructure institute and severely challenged integrity of the securities market. Millions of investors, mostly retail investors, would have suffered huge losses due to relatively delayed dissemination of order-book data to them and in the absence of the awareness that some select TM's were able to access the order book data ahead of them," the PIL said.
     
    It further said that the terms of reference (TOR) for SEBI approved auditor and NSE approved internal auditor for the data centre and also the broker "OPG" must be investigated to see if they were adequate to unearth the illegalities and complicity and whether cognizance of all the findings of these auditors was taken by the authorities.
     
    "Surprisingly this was not done by the 1st respondent SEBI at all," it said. It also noted a slow progress in the CBI investigation into NSE co-location scam.
     
    The PIL further said: "It is shocking that the 1st Respondent (SEBI) had absolved the 7th respondent NSE and its officials of all allegations under the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 2003 ("PFUTP Regulations") in the relevant SCNs."
     
    "It is submitted that when there is a serious fraud and misdemeanors committed by the top officials of the NSE who were acting hand in glove with the TMs towards manipulating the market and providing unfair trade access, NSE cannot be allowed to go scot free."
     
     
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    Cooperative Governance in the Melting Pot
    Yester years they were: Madhavapura Bank in Gujarat, Krushi Bank and Charminar Bank in Andhra Pradesh and many small urban cooperative banks (UCBs) in other states.
     
    Liquidators appointed by the state governments are still to sell the assets for more than two decades. The latest is Punjab and Maharashtra Cooperative Bank (PMC Bank) with thousands of crores rupees down the drain right under the regular watch of the Reserve Bank of India (RBI). Although RBI has appointed a high-level committee headed by Madhava Das, Marathe and Madhava Rao, several of the recommendations are begging implementation.  
     
    Structure 
     
    Urban cooperative banks or UCBs have their origins in the primary cooperative credit societies and sectarian or community interests in having an independent financial assets market that would allow leveraging resources for higher and stable returns to the depositors and investors. The provisions of Section 5 (CCV) of Banking Regulation Act, 1949 defines the UCB as applicable to cooperative societies. 
     
    Following the recommendations of the high power committee on UCBs, the RBI revised entry norms for these institutions. The Banking Regulation Act, interestingly, does not recognise the term UCBs and defines them only as primary cooperative banks indicating that they are at the primary level in a three-tier structure. Historically, these sprang up in the semi-urban, urban and metropolitan areas.  
     
    It is the level of owned funds that distinguishes the UCB from the primary credit society. Basically, UCB clientele are small- and medium-sized industrialists, traders and professionals and people mostly belonging to middle class.The staff working in these institutions are mostly related to the promoters, directors and sometimes large depositors.These UCBs have to follow the principles of democratic management, voluntary prescription, self-help and mutuality, and equal treatment to all members.  
     
    Being cooperative entities, these institutions should comply with the regulatory provisions under the respective State Cooperative Act and after they attain the status of a scheduled bank, those of the Central Registrar of Cooperative Societies.  Therefore, these are banking institutions having dual control. 
     
    Magnitude of Business
     
    Business volume of these UCBs is close to 10% of the aggregate commercial banking business in the country. About 80% of the UCBs with roughly 75% of total business are in five states: Maharashtra, Gujarat, Karnataka, Tamil Nadu and Andhra Pradesh due to the emergence of strong cooperative leadership in these areas. 
     
    These are mostly localised institutions, although a few have opened branches across the states to expand their business by taking advantage of the provisions of the Multi-State Cooperative Societies Act, 1984.  
     
    In the financial architecture of Indian banking, UCBs, therefore occupy too significant place to be ignored. As globalisation and weak financial structures can never coexist, the recent failures have become a serious cause of concern. The most plausible way to address this concern is to look at the way they are managed and governed.  
     
    CEO, Management and Governance
     
    The chief executive officer (CEO) of an UCB is somewhat different from the CEO of a commercial bank.  He has to be watchdog of the systems; comply with the local state cooperative laws with the same alacrity as that of the regulations of the RBI.  The CEO should also run business of banking on commercial lines in a highly competitive environment.  
     
    UCBs, being cooperative entities, are member-centered, member-administered and member-directed entities. How one defines this member is what that matters.  The boards are normally filled as per the will of the promoters. Most of the UCBs are no different from the traditional family run companies where the control rests with the promoter.  
     
    Any person or organisation wanting to borrow from the UCB should necessarily become a nominal member without voting rights. Although the board of directors should be elected by the members, in most banks, they are at the will of the ‘promoters’. This, in turn, sacrificed professionalism among the boards. 
     
    While some stipulations of RBI will be discussed later regarding the composition of the board, some of the observations of the Madhavarao Committee are worth noting.  
     
    “Democratic spirit is the quintessential trait of cooperative societies. But a state, which happens to be a cradle ground for cooperative movement in India, superseded the boards of managements of all cooperative societies, including UCBs, with a stroke of pen on the pretext of reorganising and strengthening the cooperative sector. It is needless to add that the said decision was a fall out of change in political dispensation rather than a desire to bring any substantial improvement in the development of cooperative institutions. …Even after democratic process was restored, the state government appoints cooperative department officials as managing directors (MDs) of the UCBs.”  
     
    In many a state, the general body or managing committee cannot perform its legitimate functions without the concurrence of the registrar of cooperative societies whose knowledge and wisdom either in banking or management is suspect. In order that the eligibility for being on the board falls in the hands of proper persons, the quantitative ceilings on the individual shareholdings is sought to be removed with the proviso that no individual member together with his immediate relatives and Hindu undivided family (HUF) in which he is a member or a firm in which he is a partner or a company (in which he and his immediate family holds more than 10% of the capital), should be allowed to hold more than 5% of the capital of the UCB.  
     
    While the audit of the UCBs shifted to chartered accountants (CAs) following the recommendations of Madhavarao Committee several of them could be unaware of the state cooperative act provisions that might be having a bearing on the accounting function. 
     
    Duality of control is made out as a big issue which according to me is a non-issue. All the new generation private commercial banks have more than one boss like Securities and Exchange Board of India (SEBI), Registrar of Companies (RoC) and the RBI.  The players and the umpire should not be the same person.  
     
    In so far as the appointment of directors to the board is concerned, it is imperative that these should be cleared by RBI after carrying out the due diligence exercise as is done for a private commercial bank or the local area bank.  It is time that RBI reviews its norms for anybody to be on the UCB’s board.  
     
    To equalise the director’s positions of all banking entities on the same platform for selection would be not proper. “Good corporate governance is critical to the efficient functioning of an entity and more so for a banking entity. The Committee feels that irrespective of the size of operations, banks need to run on professional lines and UCBs are no exception to this rule. It therefore suggests that at least two directors with suitable banking experience or relevant professional background should be present on the board of UCBs and the promoters should not be defaulters to any financial institution or banks and should not have any association with a chit fund, non-banking finance company (NBFC) or cooperative bank or commercial bank in the capacity of director on the board.”  
     
    It is not enough to say that the UCB should have two professional and independent directors.  It is equally important to ensure that these professional directors carry worthy enough capabilities and credentials. It is worthwhile to insist on a 300-word write-up on what they would do to the bank after they join the board at the pre-screening stage.  
     
    A number of UCBs have cross-holding of deposits artificially boosting the total resource base of the UCB sector.  In a sense, the sum of the parts is not equal to the whole. These banks also have poor asset-liability management and risk management. The UCBs should also have on board the asset and liability management (ALM) committee and risk management committee apart from the audit committee whose agenda should be clear.
     
    Clear and unambiguous specification of the role and functions of the regulators and the rights and obligations of the member shareholders carrying voting rights equivalent to the shareholding right would not brook any further delay. Most banks have multiple regulatory compliances to attend. As long as there is clarity of roles of the regulators and the regulators perform their roles effectively there should not be any problem. 
     
    While there has been some improvement in coordination between the regulators—the state cooperative registrar and the RBI through state level task force on cooperative urban banks (TAFCUB), vulnerabilities that surfaced in the PMC Bank clearly point the finger to the lapses on the part of RBI and accountability of the regulator cannot go unheeded.
     
    Sacrifice of the 'fit and proper' criteria in directors’ selection, undetected fraud and diverting public funds for private purposes are in the domain of RBI.
     
    When cooperative governance is in the melting pot, mere assurance of the RBI governor in his latest monetary policy statement, that no cooperative bank would be closed, has no assurance to the lakhs of depositors reposing trust in such banks. Moral hazard is not unlikely. Legal and regulatory remedies brook no delay. 
     
    (The author is an economist and risk management specialist. He can be accessed at www.yerramraju1.com)
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    COMMENTS

    Ranbir Lamba

    5 days ago

    Co-op Banks are mostly mismanaged & are in big loan frauds . Merge all and make it one public bank . Cancel their license. Backward integration will help save customers money

    sundar

    1 week ago

    Author has conveniently omitted mentioning who are the promoters for these cooperative banks and what are the normal business activities of these banks.

    REPLY

    S Balakrishnan

    In Reply to sundar 1 week ago

    Author is by no means defending the current system.

    B. Yerram Raju

    In Reply to sundar 1 week ago

    Quite a few of the promoters came out of the failed chit funds and failed NBFCs of the bygone past.

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