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| Sunday, 13 October 2002 |
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| News Business Features Editorial
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Good governance Biz Buzz by IRIS & AVED Book stores are flooded with literature on Corporate Governance and management gurus have spun many new theories around the responsibilities of boards of directors and what constitutes good governance of companies. The interest in the subject was revived by the major corporate failures and scandals in the United States over the past year. The basic principles of good governance of business organisations include practices to separate the senior executive management from decisions involving the determination of their remuneration and appointment of auditors, practices to appoint non-executive and more importantly, independent directors to company boards and practices to improve the quality and integrity of financial and non-financial reporting of corporate performance. They also deal with the conduct of board meetings, corporate strategy and planning, internal control systems, compliance with laws and regulations, risk management, corporate social responsibility and much more. There is therefore, a need to summarise the recommendations for good governance to arrive at a simple set of easy to understand and easy to implement rules. Mr C.P. de Silva, a former chairman of the Aitken Spence Group and presently head of Lanka ORIX Leasing Company, had recently prepared a list of principles that should constitute a Code of Behaviour for committees of institutions, associations, societies and clubs. His statement, clear and precise, contains 10 points for observance by members of committees and a wrapping-up advice to the chairpersons of such organisations: (i)Every member of the committee should be aware of the objectives of the institution; (ii)His contribution to the deliberations of the committee should be designed to further those objectives; (iii) He should never let his personal interests take precedence over the needs of the institution; (iv)If ever there is a conflict of interest in connection with any proposal, he should inform the committee of it, and not be present when the matter is discussed. It is insufficient to merely not participate in the discussion. His presence at the meeting while the matter is being discussed would be a deterrent to a free and frank discussion of the matter; (v)He should express an independent, objective view on all matters that come up for discussion, especially when there is some disagreement. He should never sit on the fence in such a situation; (vi)He should not encourage factions and cabals within the committee; (vii)He should master the art of disagreeing without giving offence; (viii)Whenever he disagrees with any proposal, he should give reasons calmly and clearly; (ix)Under no circumstance should he become emotional or agitated; (x)The details of discussions that take place in committee should be kept confidential. The Chairman's role The Chairman's duty is to ensure that all committee members observe these standards of behaviour. On any matter where there is strong disagreement among some members, he should ensure that every member expresses his views. This is essential as otherwise an articulate minority can influence the final decision that may not reflect the true consensus of the committee. The De Silva Code of Behaviour needs little addition to make it equally well applicable to a Board of Directors of a business organisation. The Chamber and the Institute of Chartered Accountants were two institutions that produced a Guide on Corporate Governance. Mr de Silva is a respected past Chairman of the former and a past Vice President of the latter. He should be urged by the business community and encouraged by institutions to give of his time to produce a simple set of principles for Best Corporate Governance to clear the confusion caused by the overload of information on this subject. |
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