The re­cent an­nounce­ment of the pos­si­ble pur­chase by Ca­ble & Wire­less Com­mu­ni­ca­tions Ltd of Colum­bus In­ter­na­tion­al Inc and the ap­point­ment of a new board of di­rec­tors at Trinidad Ce­ment Ltd (TCL) have each cre­at­ed chal­lenges for the boards of Telecom­mu­ni­ca­tions Ser­vices of T&T (TSTT) and TCL; the prin­ci­pal chal­lenge of the boards is to as­sure the re­spec­tive share­hold­ers, em­ploy­ees and oth­er stake­hold­ers that the di­rec­tors, con­sis­tent with their fidu­cia­ry du­ties pur­suant to sec­tion 99 (1) and (2) of the Com­pa­nies Act Chap­ter 81:01 are look­ing af­ter the best in­ter­est of the com­pa­nies.

This state­ment by the Caribbean Cor­po­rate Gov­er­nance In­sti­tute (the In­sti­tute) ad­dress­es the cor­po­rate gov­er­nance is­sues in a gen­er­al and not in any com­pa­ny spe­cif­ic man­ner con­sis­tent with the en­abling leg­is­la­tion and in­ter­na­tion­al best prac­tice.

It is now al­most one year that the T&T Cor­po­rate Gov­er­nance Code 2013 ("the code") was launched by the In­sti­tute and its Part­ners, the T&T Cham­ber of In­dus­try & Com­merce and the T&T Stock Ex­change. It is sub­mit­ted that the code un­der­scores and pro­vides guid­ance in re­spect of the cor­po­rate gov­er­nance is­sues, in par­tic­u­lar, as in the present cas­es where a board of di­rec­tors has, or might be fac­ing the po­ten­tial of hav­ing, di­rec­tors nom­i­nat­ed by com­peti­tors on their board.

There are three spe­cif­ic cor­po­rate gov­er­nance is­sues name­ly:

(i) en­sur­ing that the all di­rec­tors in­di­vid­u­al­ly and col­lec­tive­ly sat­is­fy their fidu­cia­ry du­ties to the com­pa­ny of which they are di­rec­tors,

(ii) en­sur­ing that all po­ten­tial con­flicts of in­ter­est are dis­closed by di­rec­tors and

(iii) en­sur­ing that con­fi­den­tial and strate­gic in­for­ma­tion in re­la­tion to the com­pa­nies re­main con­fi­den­tial.

The code iden­ti­fies five prin­ci­ples and con­tain 24 rec­om­men­da­tions (down­load for free at CC­GI: www.caribbean­gover­nance.org); this state­ment fo­cus­es on the prac­ti­cal im­ple­men­ta­tion of the rec­om­men­da­tions.

This is in the con­text that the code is de­signed to be a re­port on the ap­pli­ca­tion of the prin­ci­ples and rec­om­men­da­tions. Or, to put it an­oth­er way, it ex­plains why and what you have done oth­er­wise.

Prin­ci­ple 1 is con­cerned with the es­tab­lish­ment of a frame­work for ef­fec­tive gov­er­nance and states:

�2 Every com­pa­ny should be head­ed by an ef­fec­tive board, which is col­lec­tive­ly re­spon­si­ble for the long-term suc­cess of the com­pa­ny.

�2 In gen­er­al, no di­rec­tor should have any doubt about the fact that the law and best prac­tice re­quires that every di­rec­tor is a fidu­cia­ry on­ly to the com­pa­ny on whose board he serves ir­re­spec­tive of who nom­i­nat­ed him and how he was vot­ed on­to the board.

Rec­om­men­da­tion 1.1 states that the board should es­tab­lish and make pub­licly avail­able a clear out­line of its roles and re­spon­si­bil­i­ties, in­clud­ing any for­mal del­e­ga­tion to man­age­ment. The guid­ance on this rec­om­men­da­tion states that every board should have a for­mal char­ter. The board should ful­fill cer­tain func­tions, in­clud­ing: (i) mon­i­tor­ing and man­ag­ing po­ten­tial con­flicts of in­ter­est of man­age­ment and board mem­bers.

There­fore, the first thing that the board should es­tab­lish is a char­ter; the char­ter should in­clude (but not be lim­it­ed to) how re­lat­ed par­ty trans­ac­tions are han­dled, the process of dis­clo­sure and com­mu­ni­ca­tions with share­hold­ers and stake­hold­ers and a risk man­age­ment frame­work; the char­ter should al­so ad­dress the process of re­view and ap­proval of cor­po­rate strat­e­gy.These are all im­por­tant con­sid­er­a­tions for the cas­es re­ferred to above.

Rec­om­men­da­tion 1.3 states that the board should demon­strate eth­i­cal lead­er­ship, which in­cludes com­mit­ment to high eth­i­cal stan­dards and re­spon­si­ble de­ci­sion-mak­ing. In the guid­ance for this rec­om­men­da­tion it then states that every com­pa­ny should adopt a writ­ten code of con­duct that clar­i­fies the stan­dards of eth­i­cal be­hav­ior re­quired of the board, man­age­ment and em­ploy­ees.

Rec­om­men­da­tion 1.5 states that the board should take in­to ac­count the le­git­i­mate in­ter­ests and ex­pec­ta­tions of all stake­hold­ers. The guid­ance is that the board should for­malise its strate­gies for achiev­ing trans­paren­cy, bal­ance and eq­ui­ty in stake­hold­er en­gage­ment.

The gen­er­al thrust, there­fore, of the best prac­tice rec­om­men­da­tions in the code is for the board to be clear on its pur­pose and where its loy­al­ty lies and then to de­sign, for­malise and pub­lish its ap­proach to gov­er­nance con­sis­tent with this pur­pose.

Such an ap­proach cre­ates clar­i­ty and trans­paren­cy and avoids po­ten­tial con­flicts of in­ter­ests and builds con­fi­dence amongst all stake­hold­ers; more­over com­pa­nies which adopt these pro­gres­sive gov­er­nance and dis­clo­sure poli­cies are more at­trac­tive to in­vestors and are like­ly to at­tract a pre­mi­um on their share val­ue.

Oth­er prin­ci­ples iden­ti­fied in the code have im­pli­ca­tions with re­spect to the is­sues that are be­ing dis­cussed and on the ba­sis that the code is a holis­tic doc­u­ment It is note­wor­thy that there are in­ter­re­la­tion­ships be­tween the re­spec­tive prin­ci­ples. We will now briefly re­fer to these prin­ci­ples.

Prin­ci­ple 2: there should be a bal­ance of in­de­pen­dence and di­ver­si­ty of skills, knowl­edge, ex­pe­ri­ence, per­spec­tives and gen­der among di­rec­tors so that the board works ef­fec­tive­ly. The main thrust here is that when com­pos­ing the board, the prin­ci­pal con­sid­er­a­tion should be the skills, per­spec­tives, in­de­pen­dence and knowl­edge that adds val­ue to the board's de­lib­er­a­tions.

The board's work is com­ple­ment­ed by its var­i­ous com­mit­tees in­clud­ing the au­dit com­mit­tee and the nom­i­na­tions com­mit­tee; in re­spect of the lat­ter, the ma­jor­i­ty of its mem­bers should be in­de­pen­dent as de­fined in the code. There must al­so be a rig­or­ous, trans­par­ent, and for­mal an­nu­al eval­u­a­tion of (the boards) own per­for­mance and that of its com­mit­tees and the in­di­vid­ual di­rec­tors.

Prin­ci­ple 3: All di­rec­tors should act hon­est­ly and in good faith in the best in­ter­est of the com­pa­ny, ahead of any oth­er in­ter­ests. The code of­fers a de­f­i­n­i­tion of in­de­pen­dence in the guid­ance to rec­om­men­da­tion 3.1. More­over the board should un­der­take an as­sess­ment of its in­de­pen­dence on an an­nu­al ba­sis and dis­close in the an­nu­al re­port each non-ex­ec­u­tive di­rec­tor it con­sid­ers to be in­de­pen­dent.

The guid­ance is that a di­rec­tor is not in­de­pen­dent if he rep­re­sents a sig­nif­i­cant share­hold­er, to be con­sid­ered as a per­son who ei­ther alone or with one or more af­fil­i­ates or con­nect­ed par­ties is en­ti­tled to ex­er­cise 20 per cent (or such oth­er per­cent­age as may be de­ter­mined rel­e­vant on a case by case ba­sis) or more of the vot­ing pow­er at any gen­er­al meet­ing of the com­pa­ny.

Rec­om­men­da­tion 3.3 states that mem­bers of the board and se­nior man­age­ment should dis­close to the board whether they, di­rect­ly or in­di­rect­ly or on be­half of third par­ties, have a ma­te­r­i­al in­ter­est in any trans­ac­tion or mat­ter di­rect­ly af­fect­ing the com­pa­ny.

Prin­ci­ple 4: the board should present an ac­cu­rate, time­ly, bal­anced and un­der­stand­able as­sess­ment of the com­pa­ny's per­for­mance, po­si­tion and prospects. The key here is dis­clo­sure, au­dit, the ap­proach tak­en to man­age all the risks of the or­gan­i­sa­tion and re­port­ing on the ap­pli­ca­tion of the code, its prin­ci­ples and rec­om­men­da­tions.

Prin­ci­ple 5: the board should pro­mote con­struc­tive re­la­tion­ships with all share­hold­ers that fa­cil­i­tate the ex­er­cise of their own­er­ship rights and en­cour­age their en­gage­ment with the com­pa­ny. The key here is that all share­hold­er rights, in­clud­ing mi­nor­i­ty share­hold­ers rights, are re­spect­ed.

This state­ment rep­re­sents the views of the In­sti­tute and not nec­es­sar­i­ly those of its in­di­vid­ual mem­bers or part­ners and it is be­ing is­sued con­sis­tent with the In­sti­tutes' man­date to com­ment on cor­po­rate gov­er­nance is­sues in the Caribbean.

The Caribbean Cor­po­rate Gov­er­nance In­sti­tute (CC­GI) is a non-prof­it, pro­fes­sion­al mem­ber­ship-based or­gan­i­sa­tion serv­ing di­rec­tors, in­vestors and oth­er cor­po­rate gov­er­nance stake­hold­ers through­out the Caribbean.