In this day and age, should we still struggle to determine whether corporate governance (CG) is a myth or a reality?
The word governance is derived from the Latin word Guvernare which means to direct or control. The importance of CG in today’s era can no longer be questioned. The professional body Institute of Chartered Secretaries and Administrators (ICSA) in the UK is now known as the Chartered Governance Institute of UK and Ireland (CGI); Chartered Secretaries are now known as Chartered Governance Professionals. This in itself demonstrates the level of importance attributed to CG globally and in fact CG has now mutated into ESG with an expanded scope to also cover environmental and social aspects of doing business in addition of governance, and which are now very much on the agenda. the top of the CG landscape.
According to the CGI, good governance is essential to how organizations in all sectors achieve their purpose. It is equally essential that this purpose be commercial, charitable or the provision of public services.
Organizations that have good governance use clear decision-making processes, behave openly and accountable for their activities, actively engage with their stakeholders, effectively manage the risks they face, and take responsibility for monitoring and protecting of their assets, including their reputation. Each of these governance activity areas contributes to the success of an organization by making it responsible and accountable to the stakeholders and communities it serves. We also increasingly expect organizations to uphold high ethical standards, be good employers and be aware of their environmental impact. Governance supports the establishment of these organizations
standards and maintains the Board’s focus on their implementation and ensures that the management team operates according to these principles.
An effectively managed company that bases its structure and corporate culture on sound principles of corporate governance helps prevent major disasters like the downfall of Enron, Satyam, Cadbury, Wal-Mart and Xerox which proved catastrophic for these companies.
Maurice defends the value of CG to a large extent. There is a National CG Committee under whose responsibility a National Code of Corporate Governance (“the Code”) was first published in 2003 and revised in 2016 and which applies:
Other companies are also invited to give due consideration to the application of this code, insofar as the principles are applicable.
The code comprises a set of 8 principles and guidelines aimed at improving and guiding the governance practices of organizations in Mauritius and includes the following elements:
The Code is well regarded both locally and internationally and the Mo Ibrahim Foundation has recognized Mauritius as having one of the highest corporate governance standards in Africa, and the World Bank Group has commented favorably on the Code in its assessment of the country’s governance.
The recent trend is that more and more companies are putting increasing pressure on themselves to implement best practices for CG principles in their organizational framework. CG disclosures are now becoming a regular feature on websites and annual reports. This is not only due to the growing awareness of the importance of CG and by extension ESG, but also to meet the growing demand and expectations of investors and other stakeholders who are now assessing the viability and the sustainability of a company based on its governance structure. These factors are prompting a rethinking of board decision-making processes and challenging the traditional models of governance that have guided boards to date. Strong governance gets noticed by shareholders, stakeholders, employees and customers and has a strong impact on a company’s reputation. The strength of a company’s CG principles can potentially lead to a higher or lower valuation of a company.
Shareholder activism and a move towards public accountability have propelled the relationship between CG and social responsibility, sustainability and broader societal issues to the top of the agenda internationally.
The experience gained during the COVID-19 pandemic has also led to a change in the modus operandi of all organizations globally and accelerated the trend to integrate ESG factors into decision-making with an emphasis on time on the role of business in tackling broader societal and environmental issues. and the need for a strong CG. Board and annual meetings are no longer held exclusively in person, but also virtually, creating a new trend that is here to stay. This shift has brought major challenges as well as opportunities to the CG framework and landscape. Going virtual not only saves on travel and other incidental expenses, but also enables greater board member participation and allows the board to expand the network to include top international talent with the right exposure and the experience to join the board as well as being a catalyst for board diversity. Likewise, by offering investors the ability to attend remotely, it increases shareholder engagement and participation. The legislative framework has also been amended in many jurisdictions to allow virtual annual meetings of shareholders.
These emerging trends in CG have led to greater awareness of board priorities and direction, and the future is expected to be more collaborative and transparent, leading to better alignment and the creation of value for all stakeholders.
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