During the last week, the issue of poor governance has been on the front covers of all the national newspapers. Rarely has a country gone from one bad governance story to another in such a short space of time. For someone like myself who believes in good governance, I ought to be delighted that this issue is being discussed on the front pages of the newspapers. However, this couldn’t be further from the truth.
Governance in its original meaning is from the word to govern. Can we say at the moment that we feel governed when our Prime Minister in response to a question about the sacking of the Megh Pillay replies: “Mo pas kone”? It is incomprehensible that the PMO did not know about this issue so it has either failed to brief the Prime Minister or it didn’t understand the seriousness of the situation. Both are worrying symptoms.
The most worrying symptom of the whole Megh Pillay situation is the no-one has actually voiced an opinion on the lapses of corporate governance that this represents. Where were the directors in all this other than Marc Hein? The silence has been deafening.
The directors of Air Mauritius cannot hide. They cannot blame others. All are culpable. In the words of their 2004 Report on Corporate Governance, the National Committee of Corporate Governance stated: “Where there is pressure on directors to take decisions which are not obviously in the interests of the company, the directors must have the moral integrity and courage to voice and register their dissent and to act in the best interests of the company.”
The directors’ responsibilities could not be clearer as set out in the Companies Act as well. Their duty is to act in the best interests of the company. The shareholders who lost Rs 123 M in share value on Monday 31 October might take issue with the directors on that one. Air Mauritius is a listed company; so the continuing obligations under the Listing Rules have to be complied with. That is before you get into the grey areas of shadow directors, breaches of fiduciary duties, etc.
This article was originally meant to be on the matter of the World Bank who published their updated ranking of 190 countries in the Doing Business Report 2017. In the year since its last comparison, Mauritius has dropped from 32nd place to 49th place. A bad indicator in anyone’s mind. The government can blame the revised criteria, as the World Bank have taken additional factors into account when compiling the score, but you could argue that the revised criteria merely masks an artificial score from 2016. The activities that fared worse in the 2017 report are things that Mauritius ought to excel in as they are all activities undertaken by govern-ment agencies or state-owned enterprises and despite government commitments to improve in areas such as digitisation, we are seeing our country move back not forward. If anyone has recently tried to export a live animal or buy a second hand car or register for a driving test will testify – Mauritius is a haven for bureaucratic complexity designed not to make it easier to do business but to make it harder. But this is only part of the picture.
Mauritius lives in a world of global capital movements and to attract global capital, a country needs stability and for the private sector and government to be working together to create the right atmosphere to encourage investment, thus creating jobs and boosting the economy. In this arena, good corporate governance practices matter. If there is a lack of good corporate governance in a market, capital will leave that market with the click of a mouse. As the former Chairperson of the US Securities and Exchange Commission stated: “If a country does not have a reputation for strong corporate governance practices, capital will flow elsewhere. If investors are not confident with the level of disclosure, capital will flow elsewhere.”
Tim Taylor in his capacity as Chairman of the National Committee of Corporate Governance in his introduction to the 2004 Code for Corporate Governance observed good governance is about trust and stewardship in and by corporate leaders. He also used a quote attributed to the President of the World Bank, Jim Wolfensohn, that “the proper governance of companies will become as crucial to the world economy as the proper governing of counties”.
Whilst I leave the commentary on the latter to other commentators, the matter of good governance does concern all business people like myself, in particular the failure by the government to adopt the draft revisions to the Code to Corporate Governance put forward by the National Committee of Corporate Governance in early 2016 (the revised Code).
To put this in context. In 2010, the World Bank issued its report into the state of corporate governance in Mauritius and observed that “while significant progress has been made with governance of private sector companies, the governance of state-owned enterprises lags. Several market participants see the performance of publicly owned companies as a hindrance to general economic progress”. They also made several recommendations including embedding the Code into the legal and regulatory framework, reforming the state-owned enterprises, impro-ving disclosure and increasing public sector enforcement and building regulatory capacity. They observed that this would help all stakeholders engage with the companies in which they invest and improve the effectiveness of the state-owned enterprises.
Thus in 2014, the National Committee of Corporate Go-vernance commenced a review of the 2004 Code not only to incorporate the recommendations from the World Bank but also to align governance with international standards and for Mauritius to take the opportunity to learn from the corporate governance lessons from the collapse of the BAI and Bramer Bank.
Following extensive consultation and feedback from stakeholders, the revised Code was published by the NCCG in early 2016 and yet it is still to be approved by the Cabinet and by the Minister.
The revised Code is an opportunity for Mauritius to lead by example. While the revised Code builds on the heritage of the previous Code, it aims at bringing Mauritius to go-vernance levels on a par with global standards. It will provide a significant step towards protecting minority sharehol-ders, enhance the quality of information investors receive from listed companies and will strengthen transparency in our capital markets.
The adoption of the revised Code is an important moment for both corporates and stakeholders in Mauritius. Corporate governance should never be about “one-size-fits-all” and the new Code provides room for companies to show how they have applied the Code and to adopt disclosures and processes that fit their business model.
A significant inflow of fo-reign capital will only take place if companies in Mauritius are seen to be subject to good corporate governance. It is essential that Mauritius maintains its reputation as a leader in the field of Corporate Governance and keeps its place in the Mo Ibrahim Index for Governance in Africa.
And so we wait… for the next governance failure or for the new Code to be adopted. Which one do you think will come first?
*Cet article a été publié dans l’édition de Business Mag de ce mercredi 9 novembre.