THE ISSUE: Steps in the right direction
Is enough attention being given to corporate governance issues?
Accountability, transparence and integrity are words that are frequently in conversations about how organisations are managed.
But just how much attention are corporations giving to such issues, which broadly fall under the term corporate governance? Investopedia.com defined corporate governance as “the system of rules, practices and processes by which a company is directed and controlled”.
“Corporate governance essentially involves balancing the interests of the many stakeholders in a company – these include its shareholders, management, customers, suppliers, financiers, government and the community. Since corporate governance also provides the framework for attainting a company’s objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure,” it said.
In recent years both the Central Bank and Barbados Stock Exchange (BSE) have issued new governance guidelines for their various constituents, and a number of companies operating in Barbados and the region have also updated their procedures in this regard. Many of them have corporate governance committees.
From as far back as 2005, the Caribbean Trade & Investment Report said “corporate governance issues in the Caribbean must inevitably take into account developments in the rest of the world and the lessons to be learnt”.
“Nevertheless there are certain problems peculiar to small and micro states and relatively small companies relating inter alia, to issues such as the rights of shareholders, equitable treatment of majority and minority shareholders, and the role of the various stakeholders, bearing in mind that there might be conflict of interest,” it stated.
The region’s increased focus on corporate governance was demonstrated in 2013 when the Caribbean Corporate Governance Institute (CCGI) was officially launched. The CCGI is “a non-profit membership-based organisation dedicated to strengthening principles of good corporate governance across the Caribbean”. It is based in Port of Spain Trinidad.
Speaking when the organisation was launched, PricewaterhouseCoopers Trinidad corporate governance lead Nadia Mohammed said the region was “witnessing unprecedented change in the corporate governance world: new perspectives on boardroom composition, higher levels of stakeholder engagement, more emphasis on emerging risks and strategies, and the increasing velocity of change even in the digital world”.
She added that “effective corporate governance policies will be the bar that sets the tone for our country’s future development”.
BSE chief executive officer Marlon Yarde is a major advocate of corporate governance. BSE has held annual seminars on the issue, and Yarde is a board member of CCGI.
In the past he has identified “very strong links” between a company’s corporate governance policies and its ability to remain profitable during challenging economic times”. He said such policies helped businesses to manage their operations more effectively and “take stock” of the economy.
In terms of what is likely to be in store for corporate governance this year, Canadian law professor Richard Leblanc, in an article published by Huffingtonpost Canada, said “2015 is shaping up to be a year where boards, once again, will be under intense pressure and scrutiny to get it right”.
The trends he highlighted included greater director and advisor independence, better board composition and diversity, risk governance, compensation governance, greater shareholder accountability, a focus on strategy and value creation focus, information technology governance, and board performance audits.
“There have been more governance changes occurring in the last five years than in a generation. There is a regulatory and investor appetite for broad and deep governance change. Boards and management teams are only about 40 per cent through digesting reforms, and there are more to come in 2015,” he said.