Governance And Aviation

Unfortunate events in aviation
Exposes poor governance situation?

Civil aviation in recent months has been subject of news items for its sloppy management. News of a collision between two aircrafts inside a hangar at Shahjalal International Airport on April 11 went viral two weeks ago. A Boeing 777 was parked inside a hangar.As another 737 was steered towards that hangar it hit the parked 777 and both sustained slight damages¹. Images of damaged aircrafts caused much worries. Luckily,engineers of Biman Bangladesh Airlines repaired the damaged aircrafts and put them into operation pretty quickly. One even carried passengers to Saudi Arabia².

Earlier in March, two scanners inside Shahjalal International Airport had remained out of operation for two weeks costing vegetable exporters loss of millions of Taka. In 2020-21,Bangladesh exported vegetables worth more than Tk 10 billion³.

There is more. On November 30,last year a plane of Biman Bangladesh Airlines hit and killed cows while it was taking off at Cox's Bazar International Airport⁴.

These are the stories of clumsy management inside the airport. Deteriorating management in civil aviation perhaps manifests in too many unfortunate incidents. Though I did not work to find any link between civil aviation and governance,I attempted to see whether governance has any impact on combat aircraft inventory.

Back in April 2019,I wrote “Combat Aircraft Loss And Governance” to see how governance situation influences loss of BAF aircrafts⁵. Sharing it again:

Recently I have come across a very interesting stat posted on the social media page of a defense lover group. It is about the crash record of Bangladesh Air Force since Bangladesh came into being. With one or two minor omissions it includes all the crash data of BAF. BAF suffered 90 aircrafts loss in 48 years.Suddenly the idea of finding the link between governance and crash record came to my mind. Common perception is that under "representative regime" , there would be better governance in every sector and they would run smoothly. There would be better maintenance of aircrafts, better storage facility and better training.

BAF lost 11 aircrafts in 2013-2018, a period many described as "hybrid regime".Having a closer look at the breakdown of crash incidents reveals that crashes under a "representative government" (27) surpasses that(19) under a "non-representative government".

But I hold the common perception and did a statistical analysis. Though the result is a bit contradictory, it is interesting. The 48 years of Bangladesh is divided into 9 distinct periods. Depending on the nature of the government, the regime is dubbed as "representative" or "not representative". The representative regime, which is assigned to value 1, is assumed to come to power through free and fair poll. I did not decide the type of regime , rather its recognition by local and international bodies decided its type.

Since there are too many regime changes in the 70s, I termed 1972-80 as one distinct period. Then I counted the crash incidents took place in that period. BAF's worst moment came in 1991 when tidal wave rendered 40 fighter jets and 4 helicopters useless.Aircraft loss due to war or natural disaster however was not taken into consideration. For this reason, I ignored the 1971 trainer crash and loss of BAF 44 aircrafts in 1991 cyclone.

To test my conviction that "representative regime" has lower crash record, I ran a Poisson regression. For that, I first tried to find out the total number of combat aircrafts at BAF's disposal at the end of the respective period and proportion of crashed aircrafts to the total number of aircrafts in that period, which I called "fraction" here. Since it is difficult to get the exact number of BAF inventory, I took assistance of Wikipedia to get an approximate number of aircrafts in 2018 and then scaled down the total to glean information for earlier periods.Another thing to note is that I also took into consideration the aircrafts of Army Aviation Group but discarded the ones operated by the Navy while counting the total. Proportion of crashed aircraft to total aircrafts will give a better reading because loss of 1 aircraft from a total of 2 means a loss of 50%. Similarly, a loss of 1 aircraft from 20 means a 5% loss. Absolute number of loss could lead to misleading information. That is why I rest my trust on proportion, "the fraction" in this case.

While running the regression I dropped the observation for 1986-90, because no crash took place during that period. And exposure does not count any zero.

I first ran the regression with exposure( ) and then without the exposure( ) but including the variable that would normalize exposure.

The first run says combat aircraft crash under "representative regime" is 1.185 times larger than that of "non-representative regime". However, since it falls within the 95%confidence interval, I cannot reject the hypothesis that "representative regime" has lower crash records. The second run, without exposure, yields similar results. It is still 1.185 times larger and I cannot rule out that crash record under "representative regime" is lower. Due to the results from regression, I cannot draw a definitive conclusion between BAF aircraft crash and governance.

Notes And References:

1 “Collision Between Two Biman Planes At Shahjalal International Airport “,UNB,April 11,2022. For more read at https://www.unb.com.bd/m/category/Bangladesh/collision-between-two-biman-planes-at-shahjalal-intl-airport/90970

2 “Biman's Boeing 777 Flies To Saudi After Collision In Dhaka Airport Hangar”,The Financial Express,April 15,2022. For more read at https://thefinancialexpress.com.bd/national/bimans-boeing-777-flies-to-saudi-after-collision-in-dhaka-airport-hangar-1649991039

3 “Scanner Ochol : Noshto Hocchey Shobji'r Roptani Bazar(Scanner Out-Of-Work: Costing Loosing The Export Market)”,Abu Sayeem,News Bangla24.com,March27,2022. For more read at https://www.newsbangla24.com/news/185106/Scanner-obsolete-Vegetable-export-market-is-being-ruined

4 “Plane Hits Cows: Four Ansar Guards Suspended At Cox’s Bazar Airport”,UNB,December 01,2022. For more read at https://www.unb.com.bd/m/category/Bangladesh/plane-hits-cows-four-ansar-guards-suspended-at-coxs-bazar-airport/83351

5 “Combat Aircraft Loss And Governance”,Rezaul Hoque,https://hoquestake.blogspot.com,April 04,2019. For more read at https://hoquestake.blogspot.com/2019/04/combat-aircraft-loss-and-governance.html?m=1

Need For A Corporate Governance Index

As Bangladeshis we are not unknown to various indices propagated by local and international bodies to detect and gauge inveterate issues prevailing in our societies. Some of them are intended to really make a difference in our life, some are to capture gravity of the situation. Time has come to introduce another one: Corporate Governance Index. It will be an index that will trace governance in our corporate sector and will help understand what can be done here.

Before spelling out the core, let us loiter over the prelude a bit more. On too many occasions, we hear people repining over the corporate governance. It is infested with bad lots, our conglomerates do not last long, worker-management relations is not in good shape. Many big groups that faced odds and grew strong in favorable times could not even stand still in the face of the wind of change in adverse conditions. Deteriorating conditions in our big groups are often put our policy makers in quandary as to which side to take. Knavery soiled reputation of corporate sector. Far too many corrupt practices are being detected in recent times. Often powerful political patrons abetted the wrongdoers. Reneging on agreed terms has become commonplace.

Few that eschewed the political influence and achieved a state  of beatitude by getting closer to Men-in-Fatigue also made a mark in the corporate world. And now we see the shadow of the blessed groups transcends the boundary of corporate affairs. Now we can feel their presence in public offices and in professional bodies. 

Often we hold a view that corporate world should be free from any kind of leverage. In a country where business mingled with politics, this kind of view sounds like utopian. But even if we try to achieve or get closer to that undisturbed state of corporate governance, that will be a great leap forward to make things better. A barren land requires rain to rejuvenate its top soil so that microorganism could play their role to make it fertile. Similarly, a Corporate Governance Index (CGI) for Bangladesh will actuate the business groups to act independently and lawfully . It will force the government to act responsibly by restraining ruling party stalwarts.

CGI can be composed of bevy of indicators: ownership, decision making process, dispute settlement, CSR activities, R&D commitments, closeness to political groups, closeness to security establishments, information etc.

Ownership indicator will assay the owners, how they form the company and the percentage of stakes they hold in the company. Political ownership will fetch a low score.

Decision Making Process will try to measure participation of all the stakeholders in decision making, taking into account minority shareholders' opinions, reflections of opinions shared by employees, consumers, influence of outside quarters in the decision making process and respecting minority shareholders' rights.

Dispute Settlement indicator will look into how the company settles its differences with vendors, subsidiaries and employees. Is there any fair representation of stakeholders in the dispute settlement body? Did the aggrieved party acquiesce in the decision made by the board or move to the Higher Court for justice?

CSR Activities will try to fathom the company’s commitment to make lives, society better by patronizing social initiatives and individual campaigns to fight an evil or a social problem. It will also evaluate company’s commitment towards other sectors like arts and literature, sports etc.

R&D Commitments will evaluate a company in terms of its willingness to undertake research and innovation programs within the company and its support for research works at tertiary institutions.

Links With Political Groups will try to measure how far and at what length it supports and finances political activities. What percentage of political activists constitutes its active workforce.  Does the company dole out regular payments to some party workers? Did the company try to take political assistance to get favor over its rivals at any stage of its operation?

Links With Defense Establishment will try to find out company’s milking of senior and influential military/police bureaucrats to get some favor in doing business in Bangladesh. It will also look into involvement of serving officials in a company and business dealings between a defense-run company and a private company. Since such companies are insulated from tribulations from various quarters, it is not just to consider them on a par with companies who face this kind of troubles. So, they will get a low score if there is this kind of tie.

Audit And Tax will assay company’s ability to conduct regular audit and put the recommendation into action . It will also judge tax commitment of the company.

Information will try to find out how willing a company is to divulge critical and sensitive information to shareholders and the press.

Finally, the CGI will be made by adding all the individual scores. High score means better ranking in corporate governance.

A dedicated organization, headed by a retired university professor or banker, can be formed to  create the CGI and publish an annual corporate governance report.  The initiative can be supported by professional bodies of bankers, businessmen, economic and business reporters and business editors. Researchers, revenue bureau and other organizations can throw their lots with this newly created organization. Individuals and philanthropic institutions can pool money for its creation. A year or two later , sponsors and donors will pitch in.

Now come to the crux of the matter: how this CGI will make a difference.  As soon as news of CGI report suffuses  the country, people will look down upon the companies who will perch on the lower rung of CGI ranking. Bankers will think twice to endorse investment/loan proposal of companies who do not have good scores in the CGI. Press will not give them the space and consumers will be cautious about them. This, in turn, will make parties and defense establishment to hide their footprints  in the corporate world , leading to an intervention-free corporate environment.