Earlier in 2018, Dr Chris Pierce, consultant and CEO of Global Governance Services Ltd in the UK, met with Rogers’ executive team and senior managers to present them with insights on the new Code of Corporate Governance. We asked him to explain how corporate governance sets values for a company and impacts on its overall performance.
Why is implementation of the revised code important for the business community in Mauritius?
For an organisation to be effective, efficient and successful, it needs to be well managed and well governed. This must start with the board of directors, which must have clear responsibilities, duties and roles. A board must define its role in its charter and in turn cascade a framework of responsibilities and accountabilities down through the organisation. These governance mechanisms provide important drivers for profit and long-term prosperity for any organisation.
Do organisations in Mauritius play by this rule, i.e. follow the guidelines that have been defined, or is there still room for improvement?
No organisation, anywhere in the world, is perfectly governed. The code is meant to be inspirational, to be developmental and to encourage board members to look at the eight areas of governance for which the National Committee on Corporate Governance has developed principles (see box) and to think of the way in which these can best be applied to their respective organisations for their own benefit.
You mention the “inspirational” nature of the code. What do these words encompass for you? Setting the example?
Absolutely, and often, this inspirational content then forms the basis for further discussion at group level and then at subsidiary level. So, what we are saying is that the board should each and every year look at their responsibilities for, let’s say, risk or reporting. And if they are not doing that, they should be reflecting on the reasons that underlie that and explaining that to their shareholders and other stakeholders. The Code is more a series of recommendations and good practices that basically enhance transparency and accountability.
What in your view are the two or three most important dimensions that need attention from local businesses?
The first area, in my opinion, is the composition of the board. Is the composition of the board an appropriate one? Is it made up of an appropriate mix of non-executive, executive and independent directors? And within that composition, we should see whether there is there an appropriate mix of attributes in terms of technical knowledge, experience and diversity. And by diversity, we also refer to the number of women on the board or whether there are directors who are ready to challenge any dominant group that may exist within the board.
If you were to comment on the diversity of boards in Mauritius in the public and private sectors…
In terms of corporate governance as a whole, Mauritius is doing very well. The Mo Ibrahim Index that measures and monitors governance performance in African countries has, for this year again, identified Mauritius as the best governed country in Africa, and this has been the case for the last twelve years. The same goes for competitiveness: the World Economic Forum has produced statistics on national competitiveness, wherein Mauritius is the top African country. In the World Bank’s “Ease of Doing Business” statistics, again, Mauritius ranks first in Africa, which means that Mauritius is starting from a very strong base. However, many other countries are striving to improve themselves, so to maintain its position within these league tables, Mauritius must continuously improve its governance standards and that’s what exactly the Code is doing.
Thanks to the work of the Akademi Kreol Morisien, Mauritian Creole now has an official orthography, which is now also taught at school.
Is that a good enough benchmark for doing business with Europe and America?
Yes. According, according to the latest 2019 World Bank Doing Business statistics, Mauritius is 20th out of 190 countries. This top quartile benchmark means that the country is starting from a strong base. There already was a code of corporate governance published in 2003 and the country has good legislation, in the form of the Companies Act and the Financial Reporting Act. But of course, countries must always strive to improve.
Are there any quick wins that you can suggest for Mauritius to step up from worldwide rankings and perceptions?
There is no “one size fits all” solution. It depends on how companies adopt the code. One organisation may for example, as a result of the code, focus on improving their risk management systems, another may look at its appointment processes in terms of nomination of directors and another one may lay emphasis on the diversity of the board. Others may on the other hand choose to focus on integrated reporting or sustainability reporting.
What would you have to say on governance within the Rogers Group?
The company has always been very interested in Corporate Governance. Aruna Radhakeesoon is the current chairperson of the National Committee on Corporate Governance. The focus for Rogers is likely to be to maintain highest levels of compliance with the Code. The company is doing the right thing by having meetings with board members, the top senior management, the directors of the subsidiaries and they are coming together and talking about the application of the principles contained within the Code. Its is to be remembered that what we are talking about here is not a law; the code is merely requiring companies to apply good practice principles.
Do environment and sustainable development policies form part of the notion of modern Corporate Governance, and how?
In their annual report, all companies should be thinking about, not only their financial performance – whether they are making a profit, or creating and maintaining adequate solvency and liquidity. They should also be focusing on whatever they are doing within society, how they are governing themselves, and what the impact of their decision and activities will be upon the environment… This is where integrated reporting and sustainability reporting come into play, and the code wholly supports organisations that are looking at such areas of public interest. For example, there is a recommendation regarding political contributions; for transparency and openness to prevail, it is recommended that the board should approve and should state in their annual report any political contribution that they may make.
The corporate governance dimension has successfully provided structure across multiple complex business issues. Do you see application of these principles across other multidimensional issues such as environmental protection and sustainable development?
Basically, Principle 6 is associated with reporting with integrity, which also encompasses issues such as environmental and social impacts, the company behaving in a responsible way with integrity and honesty so that they can be trusted. In this respect, this code is totally aligned with all the modern initiatives that are taking place across the world associated with companies behaving in a responsible manner.
Do you think that Mauritius is ready for such a liberal code?
The Code is a result of extensive consultation with all parts of the business community. The design of the new Code started with research in 2013 that included meetings and surveys. Most of the people said that there was a need for a review of governance practices in Mauritius particularly after the British American Investment crisis and also to a certain extent to reflect the impact of the global financial crises on Mauritius.
The 2003 code had been successful but it needed updating to include risk management or some of the strategies or other methodologies that were not around fifteen years ago…
And to address issues and financial scandals that have been cropping up during the last few years?
Even the new code will probably not stop another scandal from taking place and if and when these scandals do take place, the code states that the law should come into operation. The code is more a series of recommendations associated with good practices which will reduce the chances of a company having to go to law. For example, with the code, there are job statements or descriptions that must be very clearly laid out and which explain what the CEO, the Chief Finance Officer or the Risk manager does. It is then fairly clear who is responsible for what and if something goes wrong, we can easily determine whose responsibility it is. The code, basically tells us what a good company should be doing. Countries usually take some time getting used to a system like this, but I am sure that this is the right way forward.
A “principle-based” code
Eight principles have been developed for the new Mauritian Code of Corporate Governance. The Principles have been designed to be applicable to all organisations covered by the code and have been designed to be non-contentious. Furthermore, the Code allows flexibility: each board decides how to apply its principles.
- In a nutshell, the document covers
- The Role of the Board;
- The Structure of the Board and its Committees;
- Appointment Procedures;
- Director Duties, Remuneration and Performance;
- Risk Governance and Internal Control;
- Reporting with Integrity;
- Audit; and
- Relations with Shareholders and other key Stakeholders.
Chief Executive Officer of Global Governance Services Ltd. based in London, Dr Chris Pierce is internationally recognized authority on International Corporate Governance and has authored many books and journal articles on the subject. He is the author of the National Code of Corporate Governance for Mauritius (2016) that was implemented in July 2017.