Against the backdrop of the Clico debacle, which has become the new handbook of what corporate governance should not be, a study on corporate governance among companies in T&T was made public two Wednesdays ago.Not surprisingly, T&T ranked low when compared to other emerging market economies.
Dr Axel Kravatzky, chairman and corporate governance consultant, Syntegra Change Architects Ltd, said T&T rank lower than most countries in the world in its disclosure practices.Based at 14 Alcazar Street, St Clair, Syntegra Change Architects provides advice and support to boards, chief executives, permanent secretaries, directors, senior managers, and to leaders of faith-based and voluntary organisations.
"We found that T&T has the lowest disclosure requirement among 45 countries reviewed. Off 61 possible disclosure items, T&T has five disclosure items, Kuwait and Lebanon has six, and everyone else is significantly higher. For example, South Africa has 51."
Kravatsky, who's German and married to a Trinidadian, was speaking at a press conference two Wednesdays at the T&T Stock Exchange (TTSE), Nicholas Tower, Port-of-Spain, where the results of the study were released.The study, Corporate Governance Disclosure in T&T, was carried out by Syntegra in collaboration with the United Nations Conference on Trade and Development (UNCTAD). Conducted between July and October 2011, the study surveyed 31 companies listed on the TTSE to examine their disclosure practices.
The Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) has been working in the area of good corporate governance since 1989. This study used ISAR benchmarks.
Central Bank guidelines
In its revised May 2007 Corporate Governance Guideline, the Central Bank offered this definition of the term:
"Corporate governance refers to the framework by which the board and senior management of organisations are held accountable for the operations of the institutions they oversee. This framework encompasses the mechanisms, structures and processes that enable the board of directors to set the objectives and strategies of the institution, monitor and evaluate its performance, and take corrective action promptly. Good corporate governance, therefore, requires that the relationships among management, the board, shareholders, regulators and other stakeholders are transparent, fair and well balanced."
The bank stated in its introduction: "Financial institutions play a crucial role in the development and stability of every economy. They are responsible for the efficient transfer of funds from consumers/savers to productive sectors of the economy via loans and investments. To remain competitive in an increasingly global environment, financial institutions have embarked on expansion initiatives, often outside their home jurisdiction.
"The significance of these expansionary activities is that failure of financial institutions may create systemic problems in both domestic and foreign jurisdictions. In addition, financial institutions, quite unlike other corporate entities that rely on shareholder equity, depend on deposits in the case of the banking sector and policyholders' funds in the case of insurance companies as major sources of funding. These characteristics underscore the importance of strong corporate governance in financial institutions."
