The issue of Corporate Governance has come to the fore in the business world, particularly so over the last decade (Enron, World Com etc). Since I do not want to steal the thunder of our presenters and facilitators, I will not venture into definitions and outlining principles. However, I would just like to say that if we scan the academic literature – economics and finance – on this subject, we will find volumes of material written and published by many academicians and practitioners over the last decade, seeking to explore the nexus between economic development and corporate governance, and more broadly political governance. The World Bank Group and its affiliate organizations have published several volumes on the subject, particularly over the last five years.
Leading experts and researchers on the subject have found a very strong positive correlation between good governance – corporate and political (while political governance and corporate governance are distinct, the two are related) and economic growth and development. (Claessens & Yourtoglu 2012 and) On the basis of empirical evidence, it is also indisputable that good governance at the corporate and political levels leads to economic growth and development – a causative effect. (Kurtz & Schrank 2006). At the level of the firm and also the country generally, the market (if it is still sane) awards a premium for good governance.
As a development bank, from the onset we have taken an interest in the subject, not merely out of the need to conduct our affairs properly as a statutory corporation, but moreover, in an attempt to be an exemplar in that respect, leading the charge in our mandate for promoting socio economic development – understanding the nexus between the two.
Hence the reason why, for a second time, we are collaborating with sister or brother (if you may) statutory (public sector) institutions in promoting good corporate governance. In fact, coming out of our first corporate governance training in 2009, it was our intention to arrange for such training annually among all statutory corporations in Saint Lucia, in order to engender some change in the corporate governance culture in our country, particularly among public sector institutions. But this has not happened and it is not entirely due to our fault.
I am convinced, and to say with greater effect, convicted that adopting good corporate governance practices in all institutions – business, political, civic and even religious – is fundamental for the peaceful and orderly development of modern human societies. As stewards of public sector agencies, if we accept that the absence of good corporate governance can lead to corruption – embezzlement, nepotism, cronyism, among several other tendencies which violate the tenets of a meritocracy and ethical conduct, we may well understand the implications of poor corporate governance in relation to the circle of poverty, crime and violence.
There is no doubt in my mind that the current economic and financial melt-down that has painfully engulfed the entire globe has its origin, and is directly related to lapses in corporate governance.
Notwithstanding the greed for commissions and bonuses that lead to the subprime mortgage crisis, which fundamentally spawned the current global financial and economic crisis, lapses in corporate governance at the level of individual financial institutions, lapses in governance at the level of the auditing firms; lapses in governance at the level of regulatory institutions are in my view responsible. Some fundamental principles of due diligence, transparency, accountability, avoidance of conflict of interest (real or perceived) were ignored to the detriment of the whole world.
A terrible dereliction of duty on the part of Senior Management and Boards of Directors!
And if we go further back and recall the origins and the effects of previous crises, like the Asian Financial Crisis, which stated in Thailand; and understanding the role of cronyism in that debacle, we can appreciate the need for good corporate governance, not only for financial institutions, but across all institutions and sectors.
Colleagues, on behalf of the SLDB, as I welcome you to this training session, and thank you for your participation, I would also like to invite you to partner with the SLDB in its attempts at fostering a culture of good corporate governance in our public institutions, as a start.
I think too often we underestimate the importance of building and nurturing solid institutions as part of the process of economic development; and our own Sir Arthur Lewis was a keen proponent of this, perhaps ahead of his time in that respect. There are huge costs – social and economic that we can save our poor country if we took care in building and nurturing institutions and conducting our affairs on the basis of sound corporate governance practices.
Again, welcome and thanks for your participation.