Leighton McKnight, Contributed

Leighton McKnight, president of the Institute of Chartered Accountants of Jamaica. - Claudine Housen/Staff Photographer

In recent times, Jamaica has seen unprecedented demands by stakeholders for better management and accountability of our national resources. Locally, there are constant cries for the elimination of mismanagement, waste and corruption in our public sector, while, internationally, we must improve our image in this area, especially, with benchmark rankings such as the International Transparency Index.

Against this background, the Government has introduced a number of pieces of legislation with the potential to greatly assist in the proper managing of public entities. Unfortunately, however, in certain cases, ignorance by the 'would-be implementers' and inadequate enforcement are threatening to make these well-intentioned regulations a waste of time.

In this article, I wish to highlight one major piece of legislation in this regard, namely, the Public Bodies Management Accountability Act 2001(PBMA) and suggest that all directors of Jamaican public entities make it a point of his/her duty to become fully familiar with the requirements of this act, to facilitate the proper performance of their duties.

The PBMA came into effect on December 28, 2001 (amended effective 2003) and provides the framework for corporate governance, transparency and accountability in Jamaican public entities. As can be expected, the act places a lot of responsibilities on the directors of these bodies and is very explicit on certain matters, some of which are the subject of much public discussions. Section 6 of the act states that "Every board shall:

(a) Take such steps as are necessary -

(i) For the efficient and effective management of the public body;

(ii) To ensure the accountability of all persons who manage the resources of the public body;

(b) Develop adequate information, control, evaluation and reporting system within the body;

(c) Develop specific and measurable objectives and performance targets for that body.

These provisions clearly place the ultimate responsibility of management and accountability of the entities squarely on the directors. Directors must, therefore, be fully cognisant of their roles and ensure that they are in full control of the day-to-day management of the body placed under their watch. If anything goes wrong, they must be held accountable, unless they can demonstrate that they acted responsibly.

Part III of the act is entitled Duty of Care, Disclosures, etc. of Directors and Officers and section 17 (1), found in this part, states: "Every director and officer of a public body shall, in the exercise of his powers and performance of his duties -

(a) Act honestly and in good faith in the best interest of the pubic body; and

(b) Exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

Section 17 (2) clearly states: "A director who is directly or indirectly interested in any matter which is being dealt with by the board -

(a) Shall disclose the nature of the his interest at a board meeting ;

(b) Shall not take part in any deliberation of the board with respect to that matter."

These requirements clearly speak to disclosure and acting in good faith at all times and, as such, any director having any interest in any business undertakings with the public entity, on which board he serves, should be guided accordingly. Of note is the word "indirectly", which at times requires judgement. If you are in doubt, seek advice or otherwise disclose your concerns. It is better to be safe than sorry.

Interestingly, on another note, Section 18 states: "A director who is absent from a board meeting at which a resolution was passed or any action taken, shall be deemed to have consented thereto, unless , within seven days after becoming aware of that resolution or action, as the case may be, the director -

(a) Causes written notice of his dissent to be appended to the minutes of the meeting ; or

(b) Delivers such notice to the registered office of the body or sends such notice by registered mail addressed to that office.

This provision may be controversial but the fact is that, based on the current act, it is not good enough for a director to absolve him/herself of responsibility by simply being absent from a meeting when a crucial decision is taken. He must act, once he becomes aware of a decision that he thinks is detrimental to the public entity. Failure to do so makes him a party to the decision, even though he did not partake in the discussions.

The section that should be particularly interesting to directors of public entities is Section 25 (Enforcement) in which Subsection (1) States: "If the court is satisfied, on an application by the Attorney-General, that a person has contravened any of Sections 4, 5, 6,14,15,20, and 21, the court may exercise any powers referred to in subsection (2). Subsection (2) states that the court may -

(a) Order the person concerned to pay the Crown such pecuniary penalty not exceeding one million dollars (emphasis added); or

(b) Grant an injunction restraining that person from engaging in conduct described in Subsection (1).

There, provisions explicitly expose negligent directors to court action, financial penalties and serious damage to their reputations. Breaches, chargeable under this section, include failure of the entity to produce annual reports, inclusive of audited financial statements, within 120 days after the end of the financial year; acquiring shares or exercising borrowing powers without the consent of the relevant minister; failure to furnish auditors with information; and, paying emoluments to staff in contravention of guidelines issued by the minister responsible for the public service.

The PBMA is not too complex or lengthy and is fairly easy to read. While there are areas that require updating or improvement, the current provisions include many international best-practice recommendations for corporate governance. It also encourages the use of appropriately qualified professionals to aid good decision making and holds that a director should not be deemed negligent in any matter, if he can prove that he/she acted on reasonable professional advice.

Regardless of one's view, at the moment, this is an act that is in force and forms part of the laws of our country. It is, therefore, imperative that all those concerned, especially directors, study this document carefully and be guided by its stipulations. Failure to do so can be very costly to both individual directors and, ultimately, for our country. Remember the popular sayings "Prevention is better than cure" and "Ignorance is no excuse to break the law". Being a director of a public entity is serious business, please act accordingly.

Leighton McKnight is the president of the Institute of Chartered Accountants and chairman of the Government of Jamaica Audit Commission.