Published:
Thursday, September 24, 2015
Over the last fortnight, a lot of opinions regarding the decision making process for choosing the numerous appointees to State Boards have been aired from the nation’s public, business community and varied political interest groups. As you read these words, it is week 3 of the new Government’s tenure and in the first 10 days, there have been 15 Board appointments to 4 major State companies – a Board of 4 at the combined Caribbean News Media Group (CNMG) and Government Information Services Limited (GISL), a Board of 5 at the National Gas Company (NGC) and a Board of 6 at Petrotrin.
This newspaper’s editorial on Saturday, September 19, applauded the speed with which these key appointments were made to institutions which should be at the top of the priority list, and the high quality of candidates posted to the roles of Chairman. The editorial applauded what appeared to be pre-planning for this process evidenced by finding suitable, willing candidates who agreed to shoulder the immense responsibilities, time commitment and energy outlay associated with these posts.
Even with such a positive assessment, the current reality is that over 50 to 80 Enterprises remain, depending on whose data you use, with over 900 Board roles left to be filled. That sizeable number of appointees with the right and necessary credentials, from a very small pool of qualified candidates highlight the challenges facing the new administration. These are to find, assess, select and appoint a large number of qualified people in a very short period of time to some very important, impactful and influential positions.
1000 positions in 100 days means 70 appointments per week without taking weekends off. Is this realistic or even necessary and how can this be judged? What is clear through the cloud of emotions surrounding this topic, is that no agreed set of rules, criteria or guide exists to govern the identification, vetting, selection and appointment of Directors to these critical institutions. We experience this confused reality in the example of whether an incumbent Director should relinquish his or her appointment in order to allow the new administration to fill their posts.
The TT Chamber of Commerce commented on exactly this during its weekly Radio programme of September 15th. “It is essential that the new government does not allow this (selection) process to interfere with the smooth conduct of the country’s business. All too often we have witnessed the tactic of allowing certain boards to lapse, to the detriment of the work of that enterprise. The trickle-down effect can be significant – projects stalled or slowed, tendering processes delayed, and negotiations aborted. All of this translates into a massive run on the public coffers.”
Moreover, while it is important for changes in board composition on the basis that government appointed directors are most motivated to align their respective companies’ medium and long term strategic objectives with the macro policy formulations of the new government, this urgency must be seen in the context that the incumbents are statutorily required to act in the best interest of the company. This generally means that the incumbents are not stop gaps or holding on while new directors are appointed. The business of the company continues notwithstanding the changes in (the identity of) Corporation Sole and the line Ministers who may be required to provide general or specific policy directions.
To address why there is not yet a standard, tried and tested routine for the appointment process we must first take some step backs to understand what the Government is trying to accomplish and then design or ascribe a process to achieve the best outcome. While this appears to be a very complicated problem, it should not be if some very simple and fundamental questions are asked.
In its simplest form, a State Enterprise should either exist to promote public policy objectives or to manage the State’s economic or cultural assets in the most viable way available. However, challenges arise in ensuring that the role of the state as majority owner is sufficiently involved to ensure that the Enterprise is fulfilling its purpose. Also there needs to be structures in place to protect against excessive state intervention and any abuse associated with the provision of monopolistic goods or services.
To improve this situation, the sector must develop its Governance Model to so that the State Enterprises are headed by an effective Board, which is collectively responsible for the long-term success of the company. This is the prevailing and most accepted global model for Corporate Governance which is recognised in Trinidad and Tobago through the OECD guidelines on which the Trinidad & Tobago Corporate Governance Code (TTCGC) 2013 was developed.
This means that best practice requires a new government to not simply give instructions to existing directors that they are not authorized to execute contracts (as presently occurs) but for the line Minister to determine who his/her new chairs will be and to make the appointments as soon as possible on the basis that the new chairs will assess the competence of the existing directors and, if necessary, make recommendations for substitutions. This will also enable the boards to continue operating so that the companies’ business will not be hamstrung and the intervening period will allow for a measured and dispassionate analysis of competence and loyalty to be carried out.
The Code
In 2013, the Caribbean Corporate Governance Institute (CCGI), the Trinidad & Tobago Stock Exchange and the Trinidad & Tobago Chamber of Industry of Commerce worked in partnership to publish the Trinidad & Tobago Corporate Governance Code. This important Code applies to all organizations within Trinidad & Tobago “with a public accountability”. Readers may be surprised to learn that the provisions in the Code apply to all of the 59 organizations in Trinidad & Tobago that 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 Caribbean Corporate Governance Institute (CCGI) has a mandate to create effective organizations 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. As part of CCGI’s programme aimed at public directorships, the CCGI 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 Trinidad & Tobago.
The CCGI is a regional, independent, non-profit, professional membership organization 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
5 Basic Questions on why State Boards exist and the need for Directors:
•What do these State Enterprises do?
All state enterprises should define what their purpose or mission is and this statement should be published on their website and in their annual report.
•Is there really a need for a Board?
Yes. All state enterprises should be headed by an effective Board, which is collectively responsible for the long-term success of the company.
• How many and what type of people are needed on a Board?
Too few or too many directors can pose problems for effective decision-making. A board with too few members may not allow the Enterprise to benefit from an appropriate mix of skills and experience. A larger board, on the other hand, is typically more difficult to manage, and can make consensus-building both time-consuming and difficult. The challenge in selecting the correct board size is striking an appropriate balance. All state enterprises should choose a board size that will enable them to: hold productive, constructive discussions; make prompt, rational decisions and efficiently organize the board committees’ work.
• Who decides that someone can become a Board member?
In most cases, the appointment of board members to state enterprises is defined by Statute with the Government Ministry normally playing the lead role in the appointment process. However, many commentators argue that the chairman of the board and the board nominations committee can play a very useful part in this process.
• What criteria and assessment process should be used?
In the ideal situation, the Ministry and the board should together identify the knowledge, competencies, and expertise that the board needs and subsequently they should develop a person specification which identifies the knowledge, skills, and personal attributes that a director would need to possess to fill this need. A suitable candidate that fits these attributes should then be selected.
What is the expectation of the Board regarding Corporate Governance
Trinidad & Tobago Corporate Governance Code (TTCGC) 2013
Principle One
Establish a Framework for Effective Governance:
Every company should be headed by an effective Board, which is collectively responsible for the long-term success of the company.
Recommendation 1.2
The chairperson of the Board should be a non-executive Director and preferably an independent Director. Where the chairperson of the Board is not an independent non-executive Director, the Board should appoint a lead independent Director.
Recommendation 1.3
The Board should demonstrate ethical leadership, which includes commitment to high ethical standards and responsible decision-making.
Recommendation 1.5
The Board should take into account the legitimate interests and expectations of all stakeholders. There should be active co-operation between corporations and stakeholders in creating wealth, employment, and the sustainability of financially sound enterprises
Source: https://caribbeangovernance.org/T&T-Corporate-Governance-Code-2013-(TTCGC-2013)
Business Guardian