ExpertSpeak: Corporate governance goes far beyond a ‘tick box’ approach
Compliance with the spirit rather than a ‘tick the box’ approach is of utmost importance for good corporate governance in Mauritius, said Catherine McIlraith, the first lady to chair the Mauritius Institute of Directors, in an interview with AfricaMoney. (Image: Company)
Catherine McIlraith, the first lady to chair the Mauritius Institute of Directors (MIoD), spoke to AfricaMoney on how good corporate governance is far more about ‘intellectual honesty’ than just a ‘tick the box’ approach to rules and regulations. She noted that, for Mauritius, an essential step in the way forward is the review of the National Code of Corporate Governance which is currently in progress.
Edited excerpts from an exclusive interview:
With your recent appointment as chairperson of the Mauritius Institute of Directors (MIoD), on what factors will you be focusing your attention?
The priority for me is to ensure that the MIoD continues to respond to our members’ needs and to ensure clear benefits for each category. It is also important to remain relevant through regular stakeholder engagement and capitalise on important global trends in corporate governance, business and Mauritius corporate strategy.
As the first lady to chair the MIoD, what fresh perspective do you plan to bring to the MIoD?
There is the need to continue increasing the membership and diversifying the revenue streams to ensure a full range of corporate services which therefore demonstrates there is good scope for the MIoD to continue to develop its membership and services and to establish itself as the preferred professional organization for current and aspiring Directors, business leaders and young professionals in Mauritius. Yet it is also important to widen the scope of services beyond corporate governance.
As the MIoD seeks to be the preferred professional organisation for directors and aspiring directors as well as business leaders and young professionals actively participating in the revision of the National Code of Corporate Governance, is an important focus which I acknowledge and support. It is also crucial to differentiate the MIoD from other professional organisations through our area of focus and specialisation that is: best business practices, corporate governance and leadership and professional development and also by the quality and sustained focus of our training.
Recently, the MIoD organised a workshop on disclosure and transparency. Can you give us your views on the importance of disclosure and transparency in corporate governance?
Transparency in a company is a good governance mechanism because it allows external partners, including investors, to judge the quality of management and take appropriate action. The Organization for Economic Cooperation and Development, the OECD quotes, in “Principles of Corporate OECD 2004 government” guidelines on transparency and dissemination of information to ensure good corporate governance : “The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company.”
As per the relevant OECD principles, disclosure should include, but should not be limited to, material information on: the financial and operating results of the company, the company objectives, major share ownership and voting rights, remuneration policy for members of the board and key executives, information about board members, including their qualifications, the selection process, other company directorships and whether they are regarded as independent by the board, related party transactions, foreseeable risk factors. Issues regarding employees and other stakeholders, governance structures and policies, in particular, the content of any corporate governance code or policy and the process by which it is implemented should also be disclosed according to these same OECD principles.
One of the MIoD’s core values is integrity. As mentioned during the workshop, advocacy, self-interest, self-review, and familiarity are the threats that may adversely impact the independence of auditors. Are there any other issues that may crop up, and how would you advise Mauritian corporations to avoid these pitfalls?
The Audit Committee must play a critical role including the review and monitoring of the auditor’s independence and objectivity, taking into consideration relevant statutory and regulatory requirement. Among the most encountered issues reported by the International Finance Corporation (IFC) in the Issue 4 of their Global Corporate Governance Forum Publication, are conflicts of interest that can arise out of commercial relationships as well as ethical challenges. Auditors must be meticulous in investigating if the interests of the company are being placed above the interests of the client. Auditors play a significant role in monitoring the conflict of interest implied in relationships between shareholders and management. As for the ethical challenging situations, there are global ethical standards that auditors have to abide to and these have to remain the best practices.
How do you plan to set about achieving MIoD’s mission, which is to champion the best international business practices and effective corporate governance, supporting Mauritius as a regional leader?
This is certainly a plan on which we are working on at the MIoD and through training and development, we aim to promote excellence, ethics and integrity amongst directors and prospective directors of all organisations and improve their skills and knowledge on such matters as their rights, duties and responsibilities and of global best practices in corporate governance;
We are also seek to promote the highest standards of business and ethical conduct of directors serving on the boards of companies and state-owned enterprises, including parastatal bodies; as well as co-operate with the Financial Reporting Council of Mauritius, the National Committee on Corporate Governance and with other institutions and organisations having similar objectives to those of the Mauritius Institute of Directors. We also assess the needs of directors in Mauritius, and seek to improve their skills and knowledge by organising conferences, seminars, workshops, training courses and such other events for members of the MIoD.
Another main objective is to promote the study, research and development of the practice of corporate governance, and to publish, disseminate the results of such study or research; we seek to represent the interests of all members of the MIoD in the business community in all public fora and to provide facilities and services of all kinds to any interested person including members of the MIoD, and to organise conferences, seminars and other events.
The MIoD collaborated with KPMG to launch best practice guidance notes for members of audit committees and boards of directors this year. In what ways are these best practice guidance notes expected to help the audit committees to strengthen corporate governance?
The “Best Practice Guidance Notes for Audit Committees” includes the requirements which each audit committee must comply with, in accordance with the National Code of Good Governance. It also provides best practices that complement those requirements. Companies and audit committees seeking to strengthen good governance are recommended to adopt these best practices of their audit committee. However, some flexibility should be given to committees so they can adapt the best solutions according to company size and significance. It is therefore necessary to create a “tailor-made” solution for each business. However, basic principles exist and must be respected during the development stages and evaluation.
The “Best Practice Guidance Notes for Audit Committees” also provides methodologies to help better define the terms of reference, duties and responsibilities of the committee, the need for regular meetings and communication with assurance providers. Finally, the guide recommends that audit committees predominantly consist of independent directors.
The “Best Practice Guidance Notes for Audit Committees” is intended to provide members of boards of directors and more specifically audit committee members with the basics of best practices. It is available in electronic format on the website of MIoD and KPMG, and will be followed by other important guides.
Finally, could you please provide your views on the way forward for good corporate governance in Mauritius?
An important step on the way forward is the review of the National Code of Corporate Governance which is currently in progress.
However, compliance with the spirit rather than a “tick the box” approach is of utmost importance for good corporate governance in Mauritius. Mervyn King, who chaired the King Committee on Corporate Governance, which issued three comprehensive reports said “Good corporate governance is about ‘intellectual honesty’ and not just sticking to rules and regulations.”