SUNDAY 23 APRIL, 2017 – UWI TODAY
5
UWI IN SOCIETY
ABOVE BOARD
Why to be effective ‘T&T’s corporate governance Code’ must be a national policy
B Y K I R K F R A N C O I S
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.
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.
Dr. Vindel Kerr
PHOTO: ANEEL KARIM
