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April 2017
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We regularly hear about the importance of corporate governance. Government officials and politicians proffer it as the means through which citizens will receive improved services and better accountability from State-owned enterprises. The beauty of corporate governance is in its simplicity. It is the system of rules, practices and processes by which a company is directed and controlled. Though basic in its meaning, proper systems and practices can stymie the onslaught of problems that often infect a State organisation, since corruption breeds in an environment of lax regulations and poor internal controls. “A country that implements a strong corporate governance policy can experience increased performance and efficiency, greater accountability and transparency to the public as well as a reduction in negative public perception of corruption,” says Dr. Vindel Kerr, an internationally recognised scholar and practitioner in the field of corporate governance. Of his 24 years’ corporate experience, he has spent 15 at the senior management level and the last decade improving the effectiveness of corporate boards through learning and development, management consulting and advisory services. Currently, he is an Assistant Professor at UWI's Department of Management Studies, Faculty of Social Sciences, where he teaches Business Ethics and supervises and mentors students. Dr. Kerr says that a country that has established a strong corporate governance framework can expect to enjoy an enhanced international reputation, which facilitates increased investor confidence. This translates tangibly into high levels of Foreign Direct Investment (FDI), increased access to international financing, higher ratings from credit rating agencies and the reduced likelihood of being sanctioned or placed on a negative list. He argues that the importance of corporate governance rests in that it builds trust between the country and international donors, investors and agencies. According to Dr. Kerr, one of the major elements for a successful corporate governance framework is that it must originate as a national policy imperative. “Without a policy crafted and implemented by the Government, Trinidad and Tobago’s corporate governance goals will remain elusive.” He argues that all relevant stakeholders must be part of the creation of this policy, stressing that it must be administered by a state institution that has the ability to carry out and enforce its provisions. Back in 2014, in an interview with a local newspaper, Dr. Kerr listed the failures and gaps in local corporate governance. Three years later, in 2017, Prime Minister Keith Rowley opened a symposium on corporate governance on January 18. However, Dr. Kerr insists that the situation remains the same. He argues that the code in Trinidad and Tobago did not emerge as a national policy, but was initiated from private individuals with good intentions, who had an interest in this area. “The Government of Trinidad and Tobago did not lead this initiative and therefore this code does not touch on key areas that corporate governance should cover,” he says, pointing out that local corporate governance codes has been largely borrowed from developed countries with different legal systems. Dr. Kerr elaborated on other elements necessary for a strong corporate governance policy. It should focus on issues regarding the formulation of good governance, which include the understanding of the roles of the directors of the board, the management and corporate secretary. The seeds of corruption are planted when there is a lack of understanding of the critical roles played by members of the board. Many issues of impropriety and inefficiency stem from the composition and dysfunctionality of some State boards. Dr. Kerr explained that some of these frequent pitfalls include directors’ too frequent involvement in the day-to-day activities of the organisation and inappropriate channels of communications. Corporate governance should also address a critical error that occurs among the composition of a board; lack of a board containing the right mix of skills and competence among their membership. Many boards are selected with little attention paid to ensuring that its members possess required skills such as auditing, financial, legal and business-specific training and experience. Corruption breeds freely in such environments where directors act in matters they should not and usurp authority to conduct activities outside of their duties. Delving into the history of the formation of the corporate framework in Jamaica, Dr. Kerr noted that one of the main catalysts that forced Jamaica into the strong position that it holds today with regard to corporate governance, is that Jamaica survived a severe financial crisis that devastated over 100 of its financial institutions. Such a crisis led Jamaica to the international financial institutions that mandated the country implement strong corporate governance policies. Trinidad and Tobago, by comparison, has not endured such a burden, which may explain why we have not been driven to create a national policy. “The failure of CL Financial and the Hindu Credit Union do not count as a financial crisis,” he says. It's a grim thought. Although no one wishes for a financial crisis, it may very well take one to ensure that Trinidad and Tobago can forge a national corporate governance policy that will once and for all rid our county of the unnecessary burdens of corruption. Kirk Francois is a freelance writer. |
In Trinidad and Tobago, we have frequently read about billions of dollars lost by compromised or ineffective agencies and lax regulatory officials. A potent example of this is the controversial LifeSport programme, as well as the ongoing financial burden on the Government because of the failure of CL Financial. The wear and tear upon the economy of Trinidad and Tobago by these episodes and their political fall-out has taken a financial and moral toll on the country. How do we stop it? An increasing number of policymakers and academics point to corporate governance.