Globalisation is leading more and more towards having global standards for corporate governance, the practice of corporate governance becoming a prerequisite for any corporate to manage effectively in the globalised market. Corporate Governance basically denotes rule of law, transparency, accountability and protection of public interest in the management of a company’s affairs in the prevailing global, competitive environment. Companies are called upon to conduct business within certain regulatory regimes so as to protect the rights of investors.
Furthermore improved productivity and profitability should be achieved within certain parameters of ethic, moral and regulatory framework. In Mauritius all the listed companies have to conform to regulatory framework and company laws. But do all our companies not listed on the stock exchange necessarily apply good practices of corporate governance in their day to day business?
In order to have good governance in place, a company should first of all have a well structured Board of Directors. That is, it must have a well balance representation in terms of executive and non-executive directors. Furthermore its role consists mainly of directing the company by formulating and reviewing company’s policies, strategies, risk policy, annual budgets. It also has to oversee major capital expenditure, compliance with applicable law among others.
All these decisions are taken, taking into account the interest of stakeholders. It is also accountable to the shareholders for creating, protecting and enhancing wealth and resource for the company and reporting to them on the performance in a timely and transparent manner. However it is not involved in the day to day management of the company, which is the responsibility of the management.
In order to have an efficient Board, the directors should play their role fully. The independent director should be independent in every sense of the term such that the only transaction it should have with a company is limited to the remuneration he/she perceived for attending Board or sub-committees of the Board.
Any other transaction with the company may affect the independence of the director in any decision being taken. The main role of an independent director can be summarized as follows:
- To give support for investment proposal that serves the interest of the company and shareholders.
- To give adequate warning and cautions in those cases in which investments and decisions are not beneficial to the company and its stakeholders.
- Independent Directors should be frank and forthright in giving views and give valuable suggestions to help in decision making.
- They should be aware of their fiduciary obligations to the shareholders and moral obligations to operate the company in a legal and ethically responsible manner.
And for the directors to be able to take the right decision which will be in the interest of the company, the right information should be placed before the Board. Such information is the annual recurrent and capital budgets and regular updates, quarterly accounts of different divisions.
In addition all decisions taken at sub-committees level should be reported at Board level, the two main committees, being the Audit and Risk Committee, the Corporate Governance Committee and the Recruitment Committee among others.
In addition to the Board being run efficiently, all other policies such as recruitment and procurement should be clear and transparent. Furthermore there should be in place sufficient internal control to ensure that the company is being run in the most effective manner.
The adoption of the good practices of corporate governance will mean doing business on an equal footing and interacting with other companies having same values and respecting certain principles.
Finance and Administrative division