1 AUGUST 2001
IoD welcomes Draft Code on Corporate Governance
- calls for quarterly statement of voluntary Code compliance
By David Lindsay
The Malta branch Institute of Directors yesterday welcomed the Malta Stock Exchange working groups Draft Code on Corporate Governance, aimed at encouraging further transparency public listed companies, while stressing that the Institute is currently working on governance issues that extend beyond publicly listed companies and encompasses all business types.
The IoD stated yesterday that requiring a formal induction process for Board members in publicly listed companies would reinforce the Draft Code, as this would more adequately address the key implications for the accountability of the board, and its collective and individual responsibilities and liabilities.
According to the IoD, as the Draft Code strongly recommends voluntary procedures and behaviours that boards should follow to improve shareholders understanding of and control over the companys finances, it has suggested that the extent to which companies have adopted the voluntary principles be reported quarterly rather than annually and that these quarterly statements of compliance with the Code accompany any published financial accounts or interim statements and press releases.
Through such measures, the IoD stresses that investor confidence may be improved.
The IoD states, "The 13 principles that constitute the Draft Code embody a set of benchmarks and areas for analysis by the financial community and business journalists who should begin to assess the degree to which various business types exemplify the spirit of the Codes principles.
The IoD further suggests that, "A review body consisting of the Regulator, MSE, FOI, Chamber of Commerce and the IoD examines the extent of voluntary compliance by listed boards and monitors the level of transparency and dynamism of these boards as a result of their compliance with the Code. This "review" body would be well placed to advise their respective members of the benefits flowing from good governance and for a gradual adoption of the Codes principles by non-listed companies."
The IOD has agreed in principle with the Malta Financial Services Centre and MSE that a list of available non-executive directors be maintained by the Exchange to create a pool of individuals who are willing to serve on boards and whose experience and standing in the business community is commensurate with the duties and responsibilities that they would be adopting.
The IOD believes this list would strengthen Principle Two as well as making the adoption of the other principles a more worthwhile process.
The accountability debate is bound to continue in Malta and overseas but the MSE has made a solid contribution to bringing in a number of key concepts to the governance arena that address not only issues such as remuneration but also maintains a healthy degree of attention on questions related to the functions of directors.
However, the IoD explains that the issue of ineffective corporate governance is not confined solely to listed companies and the IOD is increasingly being approached as a source of information by non-listed and family businesses keenly aware that globalisation requires a shift in working practices and approaches to survive, compete and profit.
As the IoD puts it, "Traditionally, small shareholders have often been fragmented and the only viable option they had to show their feelings about a board is to buy or sell their shares. With the Draft Code there is a tangible sense that the boards effectiveness is being assessed and concepts are being introduced to measure and improve board effectiveness to balance direction with shareholder value."
IoD is an association of members which forms a network reaching into every corner of the business community and has attracted a membership that spans the whole spectrum of business leadership in our country.
The IoD Maltas drive for corporate governance was reported on Monday in the IoDs global publication, IoD News, which reaches over 50,000 working directors around the world and focused on a recent corporate governance event held in Malta in collaboration with the MFSC.
Maltas profile as a place to do business has been substantially
bolstered in recent months with regular features appearing in IoD News
highlighting various aspects of IoD Maltas activities to lobby
for national change in business practices.