T&T’s corporate governance disclosure practices are below the average of emerging market economies, said Dr Axel Kravatsky, chairman, the Caribbean Corporate Governance Institute (CCGI).
“In terms of corporate governance disclosure practices, the global standards have 61, Jamaica has 35 disclosure requirements in law, while in T&T, there are five disclosure requirements that are mandatory. Some companies already disclose higher than others, particularly those that are listed on stock exchange,” he said at a media briefing on Monday at the T&T Chamber of Industry and Commerce, Westmoorings.
According to a CCGI statement, a 2011 report by Syntegra Change Architects Ltd found the average enterprise in T&T discloses less than half of the items suggested by the International Standards of Accounting and Reporting, which is less than half for other emerging and frontier markets.
In the corporate governance “eco-system”, there are three main partners, he said.
“On one hand, you have the owners who, by law, must appoint directors and directors appoint managers, and this is the relationship among all partners. There are crucial weaknesses and room for improvement in the relationship. The current laws do not require companies to disclose very much to the owners,” he said.
Corporate governance code
The code, when fully established, is intended to be used as a guide, primarily by listed companies.
Kravatsky said the problem of corporate governance is not a short-term fix, but a long-term effort and the CCGI is playing its role in this.
“Current projects include the T&T corporate governance code, together with the T&T Stock Exchange and T&T Chamber of Commerce. In June there is a corporate governance event with experience speakers from Latin America, and in September, a certificate in corporate directorship,” he said.
He said one challenge is defining the scope as to how it relates to existing Central Bank laws and regulations.
“T&T is not a leader in the environment and there are many other countries that have established codes. Codes are developed on the basis of other codes, company practices and laws and regulations,” he said.
He said there are many benefits for companies of having a corporate governance code and “money flows with best practices.”
“Companies that perform better because of this code have lower cost of capital, lower risks of failure and scandal and stronger leadership and operations.”
Good corporate governance also has benefits for the country.
“There are stronger private businesses as well as state-owned enterprises, there is greater benefits from the management of national wealth and there is also greater investor confidence,” he said.
Information provided by the CCGI, showed that a 2002 survey by McKinsey and Company determined that global institutional investors are prepared to pay a premium of up to 40 per cent for companies with superior corporate governance practices.
Roger Hamel-Smith, chairman of the CCGI working group and former Justice of Appeal, in a CCGI statement said: “Recent events in the T&T economy have highlighted the need for companies to recognise the importance of quality oversight with a high degree of accountability. There is no substitute for good judgement. However, institutionalising a set of best practices to which leaders can strive towards and measure against is a critical and meaningful pursuit.”
Wainwright Iton, chief executive officer, T&T Stock Exchange (TTSE), who also spoke at the press conference, said the TTSE has heavily invested in good governance as it results in increased profits, increased transparency and greater opportunities for investors.
The TTSE has 32 listed members and is a project partner with the CCGI in developing a corporate governance code.
“Shareholders, manager, members of the board all benefits from this; also the population at large. Anything we can do to build trust and confidence in the economy, we will,” Iton said.
Iton compared the corporate governance code to a “manual” that companies can use as a guide.
“If you buy a specific machinery or gadget and you want to know how it performs, you need a manual. If we look at the code in that sense, it will guide listed companies and unlisted companies as to how to conduct business in terms of good governance,” he said.
Catherine Kumar, chief executive officer, T&T Chamber of Industry and Commerce, said the code will not be mandatory, but is optimistic T&T companies are “mature” enough to follow the code once developed.
“When you look at companies following ISO 9000, a lot of these things are voluntary as far as compliance, so we expect companies that want to get on the stock exchange and through the chamber’s members, there will be a certain degree of compliance,” she said.
Kumar said the code will develop a new culture in business practices.
“As a developing nation, if we had to put everything into law, it would not be practical. At the moment, we have challenges enforcing the laws that already exist. So this is about encouraging a culture of what is best,” she said.