The state sector (defined as including any entity that requires taxpayers’ money to meet the cost of its core activities), is not immune to the current harsh realities facing the country. The foreseeable economic climate, should be forcing organisations to critically examine their business model, cost structure and the way they do business. Good corporate governance can make a critically important contribution by ensuring that “the way business is conducted” drives value for money, value creation and minimises risk. In the state sector, adherence to good governance, provides a platform for maximising the impact of every taxpayer dollar spent, as well as heightening the standards of accountability and transparency, which will enable citizens to judge the performance, as well as the rhetoric of those in office.
What is this magic pill called good governance you may well ask, why is it important and what can it do for the economy? In a nutshell, practicing good governance will improve the competiveness of the economy and enable organisations, in both the private and public sector, to weather downturns in the economy much better than those that do not practice good governance.
Due to the size (as defined by the proportion of the workforce it employs and spending power) and circle of influence of the state sector is it ideally positioned to lead the good governance charge and set a benchmark. There are a few very simple steps that can be taken to improve your corporate governance.
These are firstly ensuring that all appointees to state boards have been exposed to training in governance, no matter how experienced they are, as this is a developing field, where the lessons from each scandal become reflected in best practice. Secondly, ensuring that the Boards, within a prescribed timescale, demonstrate that they have developed and implemented all of the codes, terms of reference and charters that are the lynchpins of good governance. For instance, codes that address ethical business conduct and conflict of interest; terms of reference for each committee that clearly define the membership, remit and decision-making authority of the committee; and charter(s), that govern how business is conducted. The most critical being the Board Charter which will include, managing the entity’s relationship with critical external power brokers, defining the role of the Board and its focus on policy making as opposed to operational matters, what decisions are reserved for the Board, ensuring a strategic plan is in place and holding the executive accountable for delivering the plan.
Thirdly, ensuring roles and relationships are clearly defined especially for the Chairman, CEO, Board members and the executive team. Where the organisation can benefit from particular skills or expertise of the Board, there would be a need to maintain a clear separation of roles. Fourthly, ensuring that the Chairman has established a robust process for measuring and evaluating the performance of the Board. To undertake this task in a meaningful way, best practice suggests that the Chairman should engage external assistance.
Fifthly, ensuring that staff are encouraged and motivated both to adhere to and police the governance framework established by the leadership of the organisation. Having an effective and robust approach to protecting whistleblowers will increase and encourage reporting.
The steps above, and many more, are thoroughly explored and detailed in the Corporate Governance Maturity Framework which can be accessed via the Energy Chamber’s website www.corpgov.energy.tt. In 2011, the Energy Chamber anticipated that strengthening good governance would play a critical role in improving the competitiveness of the Trinidad & Tobago economy. To this end, the Energy Chamber secured funding from the Inter-American Development bank (IADB) and successfully completed a project aimed at improving corporate governance in T&T. Activities within the project included one day workshops and the creation of a corporate governance toolkit.
The Energy Chamber’s Corporate Governance Initiative has created the platform to improve the overall standard of corporate governance practice in Trinidad & Tobago. The ultimate goal being to facilitate the creation of an ethical, non-corrupt business environment thereby promoting a less risky competitive business environment.
In a country such as ours where the state sector contribution to GDP is so significant, what tangible steps will we take as a country to improve Trinidad and Tobago’s ranking as a stable and attractive destination for capital investment? Moreover, can we afford to ignore the opportunity to improve corporate governance standards and practices in state owned enterprises?