The following is a continuation of an interview conducted by Barbara Ellington, senior Gleaner writer, with Vindel Kerr. The first part appeared in yesterday's Gleaner.

'Any corporate governance programme of reform must first look at listing rule regime to cover a number of things in the JSE; there should be an overarching set of characteristics covering board characteristics, ownership and control patterns and a new set of rules guiding the practice in state-owned enterprises.'

BE: THAT is frightening, but return to the original question and share what else we ought to be doing to catch up with the developed world.

VK: The method of director selection in Jamaica begs questioning. If corporate governance is in a poor state in private companies, it is disastrous in public companies because a majority of public sector boards are selected at the wishes of the government in power. Even when a minister changes, the board is dissolved and new people appointed, most of whom are card-carrying party faithfuls. This is not always in the best interest of the public.

Any corporate governance programme of reform must first look at listing rule regime to cover a number of things in the Jamaica Stock Exchange (JSE); there should be an overarching set of characteristics covering board characteristics, ownership and control patterns and a new set of rules guiding the practice in state-owned enterprises. Key public sector areas to be addressed include director selection; detailed criteria and measures relating to their skills, qualifications, and experience. We need a higher level of adherence to the groundbreaking newly-released Public Bodies, Management and Accountability Act 2001, amended in 2003 to include all statutory bodies. Interestingly, this supercedes many aspects of the new Companies Act 2004, where giving substance to the regulatory aspects of things is concerned.

Unfortunately, of nearly 250, so far, only four public sector companies have complied with this act. It says something about enthusiasm and regard for regulations by the leaders who design it.

BE: What are the benefits of these practices, at the public and private sector levels, to the ordinary citizen?

VK: It means a positive reputation to any company. If people perceive your activities to be ethical, visible and you are seen as a good company, that positive image has immeasurable benefits. Also, the World Bank, International Monetary Fund (IMF) and the Organisation for Economic Cooperation and Development (OECD), in 1999, established a memorandum of understanding where the World Bank and OECD, put together a document listing best practices in corporate governance for member countries to comply with in order to obtain their benefits. These countries must establish codes for corporate governance strategies. So far, 53 countries have developed and adopted these codes.

BENCHMARK ATTRACTION

The Private Sector Organisation of Jamaica is doing this. I laud the effort ,but after three years, we could have done more. However, corporate governance practices have become a benchmark for attracting international and major global financing.

The only recourse for the ordinary investor is if they can influence the companies to implement best practices to safeguard against eventualities, such as the '90s financial meltdown or executives squandering funds. Simply ensuring that tax returns are filed and that statutory deductions are paid over are first steps. Ensure that managers do their jobs cognizant that they are paid by shareholders. They are hired hands who should be prudent and will keep the public informed thus giving them the opportunity to pull out ahead of problems.

Structures are in place but practices are key, so I think we need to look at who constitutes directorships, their history as outstanding citizens and more. All should have due diligence carried out before being fully nominated to boards.

BE: I am sure that in many instances, guidelines are in place to do just what you suggest, so why are companies not adhering to them. What is it about corporate governance practices that would be to these executives' detrement if they complied?

VK: When a company chairman can stop his chief executive officer from providing truthful information and is not made liable for imprisonment or face dire consequences, they do not have to comply. If a company can for years refuse to pay taxes and operate in such a way that leads to bankruptcy, and get away with it, they will. The buck stops with the integrity of corporate individuals.

BE: Can you name some private and public companies that are in compliance with corporate governance practices?

VK: Those are: GraceKennedy, who are at the forefront, as well as Capital and Credit Group, Jamaica National Building Society and Victoria Mutual Building Society. These are among the few now training management and making adjustments in their internal codes of ethics. One public sector company making some effort is the Bureau of Standards, the first public company in the Caribbean to obtain the relevant training for senior managers. Only a handful of Jamaican companies has made any deliberate effort to implement best practices in corporate governance.

BE: So, who is the watchdog/ advocacy group, who is in a position to speak out for this?

VK: That should be everyone but the PSOJ is building awareness and could be seen as such. The late Cliff Barrow was a small common shareholder who owned many diverse shares and attended all annual meetings, asking penetrating questions which effected change. We need more like him. Many people write articles on the subject and these have an impact.

This book (Effective Corporate Governance) is a tool for all shareholders to use to see good and bad examples in the world. It is also for business students at the tertiary level, attorneys (the law school will be introducing a a course on the subject soon), accountants, company chairmen and directors, and financial sector risk managers.

For more on the subject, visit www.caribbean-governance.com or email vkerrl@anngel.com.