Published:
Thursday, September 17, 2015
Within the next two months, over 1,000 individuals will be appointed to the governing boards of more than 200 public bodies in T&T following the election and change in government last week.
These newly appointed directors will influence a significant part of the economy, affecting the daily lives of us all. Water, electricity, rice, flour, cooking oil, telecommunications, garbage, gasoline, buses, ferries, airlines, banking, television, postal-mail, mortgages, university, crude oil, natural gas, grass-cutting, road-cleaning are all managed by state boards and the total equity of these enterprises was valued at approximately $8.5billion in 2013.
Duties of directors:
Duty of care
The duty of care is an obligation imposed on the board that the directors act on and take decisions on a fully informed basis and with due diligence. The duty of care is embodied in law (section 99 (1) (b) of the Companies Act Chapter 81:01) and frequently also in the company’s articles, bye-laws and board charter.
Duty of loyalty
The duty of loyalty means that directors act exclusively in the interest of the company. In deciding what is in the best interest of the company, the law specifies that they are to consider the interests of the company’s employees and its shareholders (Companies Act, Section 99(2)). However, directors shall not allow their personal, or any other singular interest to prevail. Sometimes referred to as a director’s “fiduciary duty” this responsibility assumes the director takes the role of
i) an agent acting on the company’s behalf and
ii) a steward who controls the company assets
In the case of directors on public bodies, more specifically—all persons in public life—are required to comply with the conflict of interest provisions at Section 29 of the Integrity in Public Life Act (IPLA) Chapter 22:01 and the Code of Conduct as articulated in Sections 23-31. The IPLA states that a conflict of interest is deemed to arise if a person in public life or any person exercising a public function were to make or participate in the making of a decision in the execution of his office and at the same time knows or ought reasonably to have known, that in the making of the decision, there is an opportunity either directly or indirectly to further his private interests or that of a member of his family or of any other person.
A breach by any director or the board of their fiduciary duties exposes the individual director as well as the board to liability.
Responsibilities
State owned enterprises and government mechanisms must create an appropriate process for selecting and constituting a board that is professional and transparent, while ensuring that boards have the competencies and objectivity needed to carry out their duties. Public sector board members should carry out their duties in a professional way and so they are entitled to receive adequate training and other support.
When appointing directors to a state board, nine questions must be answered (See box).
There must be a rigorous and formal process for selecting and appointing board members. These nine questions raise a number of important issues that the Caribbean Corporate Governance Institute (CCGI) will comment upon and offer best practice considerations over the coming weeks and months in this column.
The code
In 2013, the Caribbean Corporate Governance Institute (CCGI), the T&T Stock Exchange and the T&T Chamber of Industry of Commerce worked in partnership to publish the T&T Corporate Governance Code. This important code applies to all organisations within T&T “with a public accountability”. Readers may be surprised to learn that the provisions in the code apply to all of the 59 organisations in T&T in which the government currently holds shares.
The recommendations in the code concerning the selection and appointment of board members are listed in the box.
New government ministers, permanent secretaries, CEOs, corporate secretaries, directors and other officers of public bodies all have a role to play in applying the code.
The CCGI works as a regional, non-profit, independent, professional membership organisation, whose mandate is to create effective organisations and efficient markets through board directors that can be trusted (based on their training, continuous development, and professional values that they formally commit to as professional members), and the research, publication, and monitoring of corporate governance best practice standards appropriate for the Caribbean that are consistent with international good corporate governance principles and standards.
As part of its programme aimed at public directorships, the institute aims to support government ministers, permanent secretaries, CEOs, corporate secretaries, directors and other officers of Public Bodies in improving governance in the public sector within T&T.
The CCGI is a regional, independent, non-profit, professional membership organisation registered with the Accreditation Council of T&T. CCGI is the award body that provides the certificate and diploma in corporate governance and the chartered director qualification throughout the Caribbean. CCGI welcomes membership applications and participation in its courses and events throughout the region. +1 (868) 221-8707 www.caribbeangovernance.org
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