The New Code of Corporate Governance was the highlight of a one-day workshop in February 2018 lead by Dr Chris Pierce, CEO of Global Governance Services Ltd in the UK, who has been working with policymakers, directors and boards all over the world. Fully committed to the highest standards of business integrity, transparency and professionalism in all its endeavours and to the highest principles of corporate governance, Harel Mallac had the privilege to get some valuable input from this global consultant on how to achieve continuing prosperity for the organisation while embracing both performance and compliance.
Connexion: Dr Pierce, what is your definition of Corporate Governance?
Dr Chris Pierce: “Corporate governance can be defined in many different ways. Many definitions focus upon legal compliance and the role of the regulators but my focus has always been to see governance as a fundamental driver for business success and prosperity. The new Code of Corporate Governance for Mauritius defines corporate governance as an organisational framework of processes and attitudes that focuses on long-term continuity and success to add value to the organisation and build its reputation. All companies should want to improve their corporate governance because it is in their best interests rather than simply because the law requires it.”
"This is the eleventh year in a row that Mauritius has been in the number one position in its league table for well-governed countries out of 34 African countries.”
Connexion: How is Mauritius placed in terms of Corporate Governance and how does a country like ours benefit from it?
Dr Chris Pierce: “ Mauritius has a very good reputation for corporate governance internationally. In 2017 the Mo Ibrahim Foundation Index of African Governance placed Mauritius as number one in its league table for well governed countries out of 34 African countries. This is the eleventh year in a row that Mauritius has been in the number one position! However, there are many countries that would like to replace Mauritius at the top of the league table so Mauritius must continue to improve its corporate governance each year in order to stay at the top!”
Connexion: Why was it important to create a new code of Corporate Governance in Mauritius ?
Dr Chris Pierce: “The first Code of Corporate Governance for Mauritius was published in 2003. The original code was held in high regard by both the national and the international business community. A survey that I conducted in 2014 identified that 100 per cent of public interest entities respondents had used the Code in their accounting and auditing activities, and four out of every five respondents found the original code to be clear and understandable.
However, the Code was published 15 years ago and on many occasions the business community informed me that the original code needed to be revised. Also a National Committee of Corporate Governance survey identified that businesses wanted changes to be made to the code. The main reasons for revisions cited included the need to align the Code with new laws and guidelines (such as the Bank of Mauritius Guidelines); to recognise, learn and apply governance lessons from the global financial crisis and from the BAI and Bramer Bank collapses in 2015; and to identify and apply international best practices”.
“All companies should want to improve their corporate governance because it is in their best interests rather than simply because the law requires it.”
Connexion: What are the differences between the new code and the old one?
Dr Chris Pierce: “The main difference between the old and the new code is that the new code uses an “apply and explain” methodology. This means that all organisations covered by the Code including Harel Mallac should have their board discuss, on an annual basis, the 8 principles contained in the Code and ensure that the principles are being applied within the organisation. The new Code aims to encourage high-quality corporate governance with inbuilt flexibility that would allows organisations such as Harel Mallac to adapt their practices to their particular circumstances rather than focusing solely upon mandatory regulations and rules”.
Connexion: How does a company benefit from Corporate Governance ?
Dr Chris Pierce: Companies that have good corporate governance systems are normally associated with improving company performance. In my opinion, sustainable wealth creation by Harel Mallac can only be brought about through good management, entrepreneurship, innovation, and better allocation of resources. Better corporate governance adds value by improving the performance of companies through more efficient management, better asset allocation, and improvements in productivity. Therefore, improving corporate governance has a very positive impact upon key stakeholders that include staff and employees, customers, suppliers and the local community.
“The new Code aims to encourage high-quality corporate governance with inbuilt flexibility that would allow organisations such as Harel Mallac to adapt their practices to their particular circumstances rather than focusing solely upon mandatory regulations and rules.”
Connexion: Harel Mallac Group is embarking on a review of its risk management framework. Any advice on its implementation?
Dr Chris Pierce: All companies with good corporate governance practices have effective risk-management systems which are more able to cope with adverse business conditions than those with poor governance. These systems will include enterprise risk-management, disaster recovery systems, media management techniques, and business continuity procedures. The risk management system within Harel Mallac should include the reporting, the consideration and the taking of appropriate action on the risk appetite and risk exposure of the organisation in areas of risk that include: strategic risks, financial risks, operational risks and compliance risks. A risk committee with appropriately knowledgeable members that have the right skill set for reviewing the risk management processes may need to be formed separate from the audit committee. The role of this risk committee is to regularly advise on the total process of risk management and risk governance within the organisation and to support management in the continuous management of risk.
The risk team within Harel Mallac should consider risk management frameworks set by internationally recognised bodies (such as the Committee of Sponsoring Organisations of the Treadway Commission, known as COSO which has recently aligned risk management with strategy). In addition, Harel Mallac needs to ensure that its information is secure and that the information technology is robust particularly against the threat of cyber hacking and associated business disruption which is a growing risk facing all organisations in Mauritius.
For Harel Mallac to have effective governance, all parts of the organisation need to be involved. It is the board that is responsible for the tone at the top. The culture and values of the organisation should be set by the board and should lead and control the organisation and be collectively responsible for its long-term success, reputation and governance. The Code recommends that the boards of all companies should publish a board charter, a code of ethics job descriptions or position statements of key governance officers, an organisational chart and a statement of accountabilities. The management and staff of the organisation are then expected to operate within these frameworks and policy guidelines”.
Dr Chris Pierce is the Chief Executive Officer of Global Governance Services Ltd. based in London. He works with policy makers, directors and boards in Asia, the Middle East, Europe, Africa, the US and South America. Chris has been involved in developing executive and non-executive directors in some of the largest listed companies, family controlled businesses, State Owned Enterprises, National Investment Authorities, Sovereign Wealth Funds around the World. He is the author of the National Code of Corporate Governance for Mauritius (2016) that became operational in July 2017.