1. I thank the organisers of this Workshop namely the newly instituted Office of Public Sector Governance for bestowing on me this great opportunity to launch this workshop and share with you some of my own views and experience relating to corporate governance, particularly in the Mauritian context.
This very topical and challenging Workshop will certainly help to heighten awareness among participants on the latest developments in Corporate Governance and on efforts at further strengthening corporate governance standards and the dissemination of some of best practices to stakeholders. I also commend all those who have been involved in making this event successful.2. I wish at the outset to acknowledge the efforts that have been made by successive Governments to respond to the heightened risks of globalization by ensuring compliance with internationally recognized financial and corporate standards. While the global financial markets were being rocked by corporate scandals, such as Enron and World.com, that revealed the cracks in the foundation of financial markets and provoked a determined push for corporate governance standards worldwide to prevent recurrence of such scandals, fortunately, we in Mauritius were having a peaceful sleep as we were to a large extent insulated from corporate scandals. We, however, had our own case of corporate malfeasance , namely the NPF-MCB debacle but we did not contract any contagion effect of the overseas corporate governance scandals though the Mauritian economy is substantially integrated and well plugged into the global financial and trade networks.
3. This is largely due to the pro-active stand that Government took in putting in place robust corporate governance standards and practices and related institutions. Indeed, we had an early go at corrective measures and policies to strengthen the corporate governance framework and make it fair and transparent. Several reforms have been initiated to improve financial market infrastructure. Accounting and auditing, corporate governance, and creditor rights were the main areas addressed. The accounting and auditing reform provided professionals with regulatory and technical decision powers over financial reporting, enshrining the framework in the 2004 FRA. Disclosure by listed companies was enhanced. Government also established principles and standards based on best industry practices worldwide; raised awareness on governance issues; and adopted a Code of Corporate Governance. This Code provides a roadmap for our enterprises to raise their corporate governance structure to international levels of best practice and ushers in a radical transformation of our corporate image. Amongst other things, the Code introduces a radically different concept of director independence for a sound and proper administration of banks and financial institutions. Not only directors, but auditors, too, need to bolster their responsibilities in improving transparency and in the observance of corporate governance principles in financial institutions.
4. This is to some extent reflected by the recent governance rating of Mauritius by the Mo Ibrahim Index (First in Africa). The 2008 Mauritius: Financial System Stability Assessment—an Update also bears out the progress we have made- Quote “The Code of Corporate Governance launched in 2003 has improved private sector governance, particularly in listed companies. The code is based on the OECD principles adapted for Mauritian circumstances. Compliance is voluntary, but the code requires that designated companies (comprising listed, large public and private companies, financial institutions, and state-owned enterprises (SOEs)) explain reasons for noncompliance. While there is market consensus that governance has improved in private companies, the governance of SOEs still requires upgrading.” Unquote
5. We must keep the good work going. But let me add that some of the findings from a Survey carried out in November 2009 on Compliance with the Code of Corporate Governance since 2003 can be somewhat disturbing. That only 30 percent of companies surveyed comply with the code indicates that there is a major weakness that should be addressed urgently. The other worrying findings are that boards still lack diversity, that the role of boards is not well understood, and that there are mixed views on the performance of independent directors. It is crucial that these weaknesses are addressed and that we continue our progress on building the kind of business environment that will stimulate private investments both local and foreign. Let us not overlook the fact that governance is a core element of our doing business environment, especially as we seek to foster joint ventures and interact with and provide services to the world class businesses we seek to attract to Mauritius. What we want to achieve with our Code is to encourage our business community to be more innovative responsible by adopting higher standards of corporate behaviour. We also wish to add value to the Boards by enlisting more Independent Directors and by strengthening their performance standards. Given the concentrated and pyramiding ownership structure of economic assets, the unlocking of shareholder value and protection of minority shareholders is yet another objective of the Code. Stakeholders should also find a role for exercising better oversight in their companies' affairs and forge a strong and lasting relationship based on equity and trust. We must thus set our eyes on 100 percent compliance with the Code and I hope that we will be able to achieve this within a reasonable delay.
6. We have also been proactive in promoting Public Sector Governance which was spelled out in the Government Programme. Public Entreprise reform is moving forward. The process is still in its early stages, but is on track to achieve the necessary progress before the end of this Government’s mandate. This new role of public administration in improving overall governance is being carried out in the context of and in response to local, national, regional and global pressures, as well as challenges for survival, development and change. These pressures—globalization, outcome-oriented service delivery to restore faith in government’s capacity to deliver, accelerated economic development with equity, and environmental protection—are reflected in the policy packages and reform initiatives. The big challenge for governance in the years ahead is to reinvent a framework for society that transcends the government structure, and moves towards a more inclusive and organic linkage of the roles of government, business and civil society.
7. The potential impact of SOE reform on our economy can thus not be overstated. Improving their corporate governance could potentially lead to significant efficiency gains, improvement in the quality of public services, a decrease in the fiscal burden and public debt, and ultimately contribute to overall growth. Expected benefits will also include better valuation of state assets and/or easier access to capital, both debt and equity, therefore facilitating and securing their international expansion . In addition, it will in many cases improve overall public governance, including greater transparency. Last but not least, it will redynamise the Public Private Partnerships and level the playing field in terms of best practices for both the private and public sector.
8. However, translating this paradigm into reality is not easy, which is where the comments and recommendations of the Director of Audit on some of the flaws in the SOEs can help as a start. Quote. “Studies carried out on state-owned enterprises in Mauritius have found that the main cause of poor performance of many of these government enterprises is the conflicting relationship between the chairperson and the chief executive officer”. UnQuote. He had a series of recommendations that could be essential building blocks for the OPSG in furthering good public sector governance- for example the recommendation that the board should have an appropriate balance of executive and non-executive independent directors such that no individual or small group of individuals can dominate the board’s decision taking while ensuring that the board has the right matrix of competencies.
9. To conclude please allow me to provide rapidly some grist to your intellectual mill by borrowing some leafs from a 2010 OECD Publication titled “ POLICY BRIEF ON CORPORATE GOVERNANCE OF STATE-OWNED ENTERPRISES IN ASIA -RECOMMENDATIONS FOR REFORM which I have found very relevant to the Mauritian context . The following recommendations, among others, to
· Develop structured and transparent board nomination process for SOE boards
· Increase the independence of SOE boards and improve the transparency of their nomination process.
· Ensure an Effective Legal and Regulatory Framework for state-Owned Enterprises
· Make specific obligations and related costs transparent
· Ensure arm’s length relationships between SOEs and financial institutions
· reassess SOE’s stakeholder engagements and develop a strategic approach vis-à-vis stakeholder relations and
· develop mechanisms to allow and encourage stakeholders to exercise their voice.
10. This Workshop is a laudable initiative of the “Office of Public Sector Governance” in the right direction to ensure that the Principles of Corporate Governance for Mauritius is not a mere listing of aspirations. It seeks to bring about a new mindset or attitude that all our business partners should cultivate. On the other hand, we are aware that governance principles are evolutionary in nature and business operators and stakeholders have to continuously informed of the latest developments. The Government’s goal is simple: ensuring stronger and better governance and a supportive business environment that includes robust education and infrastructure that will bring more investment and improve the development prospects for the country as a whole.
Thank You
