Good governance is key to how organisations in all sectors achieve their purpose. It is essential whether that purpose is commercial, charitable or to provide public services. Organisations that demonstrate good governance use transparent decision-making processes, behave openly by reporting on their activities, actively engage with their stakeholders, eectively manage the risks they face and take responsibility for controlling and protecting their assets, including their reputation.
Each of these areas of governance activity contributes to an organisation’s success by making the latter responsible and accountable to the stakeholders and communities they serve. We also increasingly expect organisations to uphold high ethical standards, be good employers and be mindful of their environmental impact. Governance supports setting these organisational standards, maintains the board's focus on implementing those, and ensures that the management team operates along these principles.
An effectively run company that bases its structure and corporate culture on good corporate governance principles help prevent major disasters like the fall of Enron, Satyam, Cadbury, Wal-Mart & Xerox, which proved catastrophic for those companies.
Mauritius upholds the values of governance to a great extent. The National Code of Corporate Governance (‘the Code’) was first published in 2003 and then revamped in 2016 and which applies to:
- Public Interest Entities (PIE) as defined by the Financial Reporting Act 2004
- Public Sector organisations including state-owned enterprises, statutory corporations and parastatal bodies
- Licensees of the Financial Services Commission who provide financial services.
Other companies are also encouraged to give due consideration to the application of this Code, insofar as the principles are applicable.
The Code comprises a set of eight principles and guidance aimed at improving and guiding the governance practices of organisations within Mauritius and encompasses the following:
- The governance structure
- The structure of the board and its committees
- Directors appointment procedures
- Directors' duties, remuneration and performance
- Risk governance and internal controls
- Reporting with integrity
- Audit
- Relationship with shareholders and other key stakeholders
The Code is well regarded both locally and internationally, and the Mo Ibrahim Foundation has recognised Mauritius as having one of the highest standards of corporate governance in Africa. The World Bank Group has commented favourably on the Code in its governance evaluation of the country.
The recent trend is that more and more companies are placing increasing pressure on themselves to implement best practices for governance principles in their organisational framework. Corporate governance disclosures are now becoming a regular feature on websites and annual reports. This is not only due to the increase in awareness of the importance of CG and, by extension, ESG but also to meet the increasing demand and expectations from investors and other stakeholders who are now assessing a company’s viability and sustainability based on its governance structure. These factors are provoking a rethinking of the boards’ decision-making processes and challenging the traditional models of governance that have guided boards until now.
Strong governance gets noticed by shareholders, stakeholders, employees and customers alike and has a strong bearing on a company's reputation. The strength of a company's corporate governance principles can potentially lead to a company's higher or lower valuation.
Shareholder activism and a move towards public accountability have moved the relationship between governance and social responsibility, sustainability and broader societal issues to the top of the agenda on an international scale.
The experience gathered during the COVID-19 pandemic has also brought about a change in the modus operandi of all organisations globally and accelerated the trend of integrating ESG factors into decision-making by bringing into focus both the role of business in confronting broader societal and environmental issues and the need for strong governance.
Board and annual meetings are now no longer held exclusively in person but also carried out virtually, setting a new trend which is here to stay. This shift brought major challenges and opportunities in the CG framework and landscape. Going virtual not only allows cost savings on travelling and other ancillary expenses but also allows for a higher attendance of board members and enables the board to spread the net wider to enable the best international talent with the right exposure and experience to join the board as well as being an enabler for corporate board diversity. Similarly, by oering a chance for investors to attend remotely, it increases shareholder engagement and attendance.
The legislative framework has also been amended in many jurisdictions to allow virtual annual shareholder meetings. These emerging trends in corporate governance have led to a greater awareness of where the priorities and focus from the board room should lie. The future is set to be more collaborative and transparent, leading to better alignment and value creation for all stakeholders.
Nigaar Abubaker Esmael
Company Secretary and Head of Projects, Axis Fiduciary Ltd.
Discover more about the Mauritius branch and how to get involved.
