T&T CHAM­BER OF IN­DUS­TRY & COM­MERCE

Ef­fec­tive cor­po­rate gov­er­nance is the cor­ner­stone for the suc­cess of every pub­lic and pri­vate en­ti­ty. Cor­po­rate gov­er­nance is cur­rent­ly in the fore­front in­ter­na­tion­al­ly, and is es­pe­cial­ly rel­e­vant in T&T, giv­en the neg­a­tive eco­nom­ic and so­cial im­pacts be­ing ex­pe­ri­enced at present. Re­cent cas­es, such as the Stan­ford In­vest­ment Group, and the col­lapse of CL Fi­nan­cial and the Hin­du Cred­it Union, all bear out the need for ef­fec­tive cor­po­rate gov­er­nance. To ad­dress this na­tion­al is­sue, the T&T Cham­ber of In­dus­try and Com­merce, T&T Stock Ex­change (TTSE) and the re­cent­ly-formed Caribbean Cor­po­rate Gov­er­nance In­sti­tute (CC­GI) have come to­geth­er to lead a project whose task it is to de­vel­op the T&T cor­po­rate gov­er­nance code.

Many coun­tries around the world have na­tion­al cor­po­rate gov­er­nance codes, each with the aim of mak­ing their coun­try's cor­po­rate gov­er­nance sys­tem more trans­par­ent, uni­form and un­der­stand­able. Its pur­pose is to pro­mote the trust of all stake­hold­ers, in­clud­ing in­ter­na­tion­al and na­tion­al in­vestors, em­ploy­ers, em­ploy­ees, cus­tomers and the pub­lic in the man­age­ment and su­per­vi­sion of list­ed com­pa­nies. In the Caribbean, Ja­maica was the first, and is so far the on­ly coun­try to in­tro­duce such a code. In 2006 the code was in­tro­duced out of a project was lead by the Pri­vate Sec­tor Or­gan­i­sa­tion of Ja­maica, with the Ja­maican Stock Ex­change as a close part­ner. The cham­ber, TTSE and the CC­GI be­lieve that the same ini­tia­tive can be de­vel­oped in T&T, as this cor­po­rate gov­er­nance code ini­tia­tive will ul­ti­mate­ly lead to bet­ter man­age­ment of the na­tion­al pat­ri­mo­ny and a stronger civ­il so­ci­ety. Be­fore we sum­marise the crit­i­cal role played by cor­po­rate gov­er­nance for suc­cess of busi­ness op­er­a­tions and the na­tion­al com­mu­ni­ty, let us ex­am­ine the is­sues from a more prac­ti­cal per­spec­tive.

Over the years the di­ver­si­ty of com­pa­nies op­er­at­ing in T&T has in­creased tremen­dous­ly. What do they all have in com­mon? What de­ci­sions does every com­pa­ny board or the board of every legal­ly con­sti­tut­ed non-gov­ern­men­tal or­gan­i­sa­tion, or every statu­to­ry board need to make? And what guid­ance can the T&T cor­po­rate gov­er­nance code pro­vide for them? Ac­cord­ing to Lord Adri­an Cad­bury and Ira Mill­stein, well-known in­ter­na­tion­al­ly for their work on cor­po­rate gov­er­nance, the fol­low­ing are the uni­ver­sal de­ci­sions that need to be made by every sin­gle board. In T&T, there is very lit­tle guid­ance and cer­tain­ly no na­tion­al­ly agreed stan­dard for these.

Crit­i­cal look at gov­er­nance prin­ci­ples

In or­der to see the ben­e­fits of a code of gov­er­nance, cor­po­rate lead­ers should con­sid­er what prin­ci­ples are cur­rent­ly in place, and how sat­is­fied they are with the way their boards cur­rent­ly make de­ci­sions; how trans­par­ent the process­es are for their share­hold­ers, in­vestors, and oth­er par­ties af­fect­ed by the com­pa­ny or NGO:

1. What is the pur­pose of your or­gan­i­sa­tion and what strat­e­gy for achiev­ing the pur­pose has been agreed up­on?

2. What is the best man­age­ment team that can be found to turn the strat­e­gy in­to ac­tion? How their per­for­mance can be mon­i­tored in a way that gives as­sur­ance that busi­ness and na­tion­al laws and val­ues and prin­ci­ples are not vi­o­lat­ed but at the same time avoid mi­cro-man­age­ment. How, there­fore, can the man­age­ment team be giv­en suf­fi­cient free­dom to be in­no­v­a­tive while at the same time be­ing held ac­count­able? What method and lev­el of com­pen­sa­tion for the ex­ec­u­tive is ap­pro­pri­ate? When and how do we re­place them if that should be­come nec­es­sary?

3. What are the re­quire­ments for a strong and in­de­pen­dent leader to guide the ac­tiv­i­ties of the board? How do we choose the board mem­bers, eval­u­ate their per­for­mance and that of the board, de­vel­op their ca­pac­i­ties and hold them ac­count­able?

4. What are the range of mea­sures that can be tak­en to pro­tect share­hold­ers from man­age­ment's ten­den­cy to max­imise its own self-in­ter­est?

5. What are the range of mea­sures which can be tak­en to pro­tect share­hold­ers and in­vestors from pos­si­ble ten­den­cies to self-in­ter­est of in­di­vid­ual board mem­bers?

6. What can be done to pro­tect share­hold­ers from un­fair tac­tics by dom­i­nant share­hold­ers.

7. What should be dis­closed so as to pro­vide trans­paren­cy about the ?nan­cial, en­vi­ron­men­tal, so­cial per­for­mance, own­er­ship and man­age­ment struc­ture, and oth­er key as­pects of the cor­po­ra­tion with­out dis­clos­ing mat­ters that could dam­age com­pet­i­tive­ness?

8. What are the com­pa­ny val­ues, prin­ci­ples, and ethics with which it is ex­pect­ed that every­one who is part of the com­pa­ny, as well as key sup­pli­ers, will com­ply? How to prac­ti­cal­ly en­sure com­pli­ance?

9. Di­rec­tors have a le­gal du­ty to act in the best in­ter­est of the com­pa­ny, al­so tak­ing in­to con­sid­er­a­tion the em­ploy­ees of the com­pa­ny in gen­er­al, and the in­ter­ests of the share­hold­ers (Sec­tion 99 of the Com­pa­nies Act). If em­ploy­ees and share­hold­ers are di­verse, with di­verse in­ter­ests, how to de­ter­mine their best in­ter­ests, when each em­ploy­ee and share­hold­er val­ues dif­fer­ent things and have dif­fer­ent time­frames-the bot­tom line, so­ci­etal in­ter­est, the in­ter­ests of con­stituents, or a mix of these?

10. How to keep abreast with and make the best de­ci­sions with­in the reg­u­la­to­ry and le­gal con­text in which the com­pa­ny ex­ists?

Ben­e­fits for com­pa­nies

High­er per­form­ing or­gan­i­sa­tions as a re­sult of:

1. Low­er cost of cap­i­tal

2. Low­er risk of fail­ure and scan­dal

3. Stronger lead­er­ship and bet­ter op­er­a­tions

Ben­e­fits to so­ci­ety:

1. Stronger busi­ness sec­tor and state-owned en­ter­pris­es

2. Greater ben­e­fits from bet­ter man­age­ment of na­tion­al wealth

3. Greater in­vestor con­fi­dence

4. Stronger civ­il so­ci­ety

5. Low­er risk of cor­po­rate fail­ures

Con­clu­sion

These are just some of the main is­sues that a na­tion­al cor­po­rate gov­er­nance code will seek to ad­dress, and pro­vide a stan­dard so­lu­tion for good and re­spon­si­ble cor­po­rate gov­er­nance. The cham­ber has de­cid­ed to lead the way in this im­por­tant ini­tia­tive, and cur­rent­ly chairs the re­cent­ly formed steer­ing com­mit­tee. A soon to be de­vel­oped draft­ing com­mit­tee, chaired by Jus­tice Roger Hamel-Smith, will be in charge of the ini­tial com­pi­la­tion and pub­lish­ing of the Code in 2013. Once de­vel­oped, this na­tion­al stan­dard will pro­vide guid­ing prin­ci­ples for each one of the de­ci­sions men­tioned above, it will ref­er­ence in­ter­na­tion­al best prac­tice, and it will al­so pro­vide guid­ance that is spe­cif­ic for T&T. In do­ing so, the cham­ber and its part­ners are com­mit­ted to bring­ing about the fol­low­ing ben­e­fits for com­pa­nies and so­ci­ety through lead­ing the na­tion­al re­form and de­vel­op­ment in cor­po­rate gov­er­nance.