Caribbean Connect – A High Level Symposium on the CARICOM Single Market and Economy (CSME). ____________________________________ Corporate Governance in the Caribbean Environment Christopher Ram - June 30, 2006. Introduction . Definition of corporate governance (CG)
Corporate Governance in the Caribbean Environment
Christopher Ram - June 30, 2006
Definition of corporate governance (CG)
“Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals… the aim is to align as nearly as possible the interests of individuals, corporations and society” – Sir Adrian Cadbury: Corporate Governance Overview, 1999 World Bank Report
Is not a compound noun but descriptive term and an integral part of governance. Governance applies to all entities government, public and private entities quasi bodies and civil society.
Level One - Traditional View
Responsibility limited to the maximisation of profits and meeting the legal obligations – the minimalist approach.
Level Two – First phase of CG
Emphasis on Responsibility; Accountability; Fairness; Transparency.
Level Three – Corporate Social responsibility
Emphasis on Level 2 Plus issues of contribution to society, the use of resources and the environment.
Across the region, most companies are levels 1 and 2 but some energy companies in Trinidad are rapidly moving into level 3.
The challenge for the region is to rapidly move all our entities into level 3.
Does not alter the statutory and fiduciary obligations of directors or their responsibility to add value
Principles seem more relevant to players in different markets or stock exchanges.
Need to start looking at other pools such as civil society, the public sector and academia.
This should be on the agenda of the regional Business Council announced by the Prime Minister of Barbados.
Company’s policy on the training and assessment of directors and how that policy operated during the reporting period should be included in the Directors’ annual report.
Need to remove unwarranted challenges by the regulated. Finding an alternative to litigation?
The abuse of the 51% control by the person who:
- identifies and appoints all the directors;
- makes all the rules including not unusually directing the entity to make all purchases from other group companies;
- determines inter-company charges.
The minority shareholders are no more than rubber stamp whose vote at the AGM merely adds a legal gloss.
Does not appear that this issue has received any consideration in the region where the pyramid structure is prevalent and the issue both relevant ad sore. Can fan insularity and resentment.
The concept of the ‘public interest company’ commends itself to countries in the region. It is about those companies whose operations have an economic, social or other benefit being subject to the high standards of accountability, audit, reporting and governance expected of the traditional public and regulated companies.
Entities and industries to which this concept applies would include banks, insurance companies, significant utilities, resource-based entities and others whose operations affect the environment.
The Jamaican Public Bodies and Management Accountability Act and the provisions on rotating auditors and restricting them from performing non-audit audit services in the Guyana Audit Act as a good basis for developing a model code for public bodies.
Potentially major influence but their role appears extremely modest. Possible causes include:
The nature and structure of the business form in the region means that these are often part of the same group;
Other common interests such as cross holdings a tool for staving off take-overs. Recent example where a Guyana company rushed into a deal for share exchange with a Barbados company to preempt a suspected takeover by a Trinidad company.
The business culture does not allow for ‘rocking of the boat’.
There seems to be a need for the Caribbean media through supplements or a periodical dedicated to business and economic issues including companies and stock exchange performance.
CG rules should require public and public interest companies to meet with the press prior to the release of company information.
1. Variety of tax and corporate legislation;
2. The failure of the profession to deal with the issue of peer review;
3. The need for accounting standards for SME’s; and
4. The need for professional indemnity insurance
In addition to addressing these, legislation should be introduced to allow the public access to all information submitted to regulators.
CG is not about techniques and theories. It is a sub-set of governance now recognised as vital to success, progress and development. In business, its benefits lie in the likelihood of higher profits, lower cost of capital and greater contribution to society.
CG is not a matter for the private sector alone, nor should it be pronouncements from on high. The entire society should be involved – governments, academia, the business community, the professionals and the regulators. It should be promoted conceptually as well as by example. It should be embedded in our laws, rooted in our culture and reflected in our practices.
It is impossible to put a money value on CG but research is conclusive that CG has a trickle down effect. That the standards and performance at the board level become the benchmark for those at the reception desk and on the shop floor.
Good CG gives the private sector the expertise and the moral authority to challenge governments, public sector entities and regional bodies when they fall short in areas of governance