Corporate governance – by law or by principle?

I had the dubious pleasure to assist as a panel member in the interviews for board members this week. This introduction is purposefully vague, because of professionalism. The principle of transparency is not applicable here, because the purpose of today’s blog, is to educate, not to expose.

If I take it a step back, most of the candidates mentioned transparency and honesty as attributes of good board members. That certainly is true.

The best definition I could find for transparency, is that trusted “go to” site, Wikipedia.

“Transparency as used in science, engineering, business, the humanities and in other social contexts, is operating in such a way that it is easy for others to see what actions are performed.

Transparency implies openness, communication, and accountability”.

I have a need to communicate that the principle of corporate governance is poorly understood. To my surprise. I deal with the theory and practise of good corporate governance on a daily basis. Everybody deals with the principles on a daily basis, but they have not necessarily been formally introduced to the theoretical framework. I wish to change that. I wish for Namibians at all walks of life, to know it, to feel it, to practise it.

Fishrot se ma se……

An introduction to corporate governance.

1. The purpose of corporate governance

To paraphrase professor King, who I have had the pleasure to host on various occasions for a range of conferences and panel discussions:

Corporate Governance is akin to Steering a vessel across sometimes clear, but often stormy seas. The art of navigating and steering a ship through whatever conditions arise carries with it a grave responsibility to all on board, the cargo, the ship owners and all those affected by the ship in any manner.

The Chief Value Officer – Mervyn King (with Jill Atkins)

So some of the uncertainty in the world we live in today, can be faced with a sense of direction and preparation.

That is the best practical illustration, and I wont go into any further debate right now, other than to say: it is not about sitting fees, and those board members or potential board members for whom that is the first question, miss the point completely. PS – none of the interviewees asked that question, but I do know of other instances where board members ask that question as they leave the meeting.

1. The framework of corporate governance

There are several formal frameworks across the globe, that serve as a kind of manual to those steering ships of all shapes and sizes. The best known ones in our local context, are:

• The King code (versions I, II, II, IV)
• Namcode (which is based on the King code, and Namibianised for our context,

Others include the Cadbury code and so on.

These frameworks exist, and are mandatory for certain companies (such as entities listed on the stock exchange), and strongly recommended for all entities, whether private or public sector. It is not a law, gazetted or otherwise.

Here is the point that I most strongly feel about. I was asked once, I forget if it was a panel discussion or a radio interview, whether Namibia should have corporate governance legislation.

No matter whether you define corporate governance as a framework of rules and procedures by which decisions in an enterprise is made, or a collection of guidelines or values by which one can properly and dutifully discharge your obligations, what is at the essence of good corporate governance, is doing what is right. What is right for the company, and not “what is right for me”. Most of the interviewees were able to bring that message across. So why do we have such issues with fraud, corruption and Fishrot?

Corporate Governance will not work better if it is legislated. Corporate governance will only work better if the individuals accountable, believe and behave in a manner that is honest and transparent.

Talita B Horn

And to prove that point: Most of us are generally law abiding citizens, right? I certainly consider myself so. Yet, how many of us should by all accounts, have speeding tickets, or parking violations, or jumping the queue because I am so very busy and so very important, I can’t stand in the queue for my ID/passport/bank card/etc.

There are other complications in these examples, which complicates the example, but also serves the point very well. If I myself, expect to bend the rules to suit me, how can I point the finger at others who are not giving their best to their job.

Don’t even get me started on all those fireside stories, told by the culprits themselves, of a fifty dollar note in the ID when they were caught speeding.

Fortunately, I also have a few stories about some culprits admitting that they were wrong, and willing to face the music, adamant to not be baited into a bribe offering. Kudos!

Now if you are like me, and are always asking how things work, or how they are constructed, let me just list the chapter headings of the Namcode here. It is really principles driven, and just by looking at the headings, you will be able to impress upon any interview panel, that you understand good corporate governance as a principle, and therefore abide by the value, that as a board member, you will be on the lookout for the best sustainable outcome for the company, which includes the environment it operates in, and not just sitting there to collect sitting fees.

http://nsx.com.na/index.php/about/namcode/namcode-index

• Chapter 1 – Ethical leadership and corporate citizenship (my favourite chapter)

• Chapter 2 – Boards and Directors

• Chapter 3 – Audit committees (also my favourite chapter)

• Chapter 4 – The governance of risk (most interviews were on unfamiliar territory here)

• Chapter 5 – The governance of IT

• Chapter 6 – Compliance with laws, rules, codes and standards

• Chapter 7 – Internal audit (I wish to see more of this, and more meaningful functions throughout the corporate citizens on our economy)

• Chapter 8 – Governing stakeholder relationships

• Chapter 9 – Integrated reporting and disclosure

PS – as a board member, please prepare for your board meetings. If you are not receiving your board packs in time to prepare thoroughly, you have bigger problems that you don’t even know about yet.