CORPORATE GOVERNANCE AND BAD HABITS

Letter to the editor of The Daily Herald

Dear Editor,

According to Leroy de Weever (DP), he doesn’t need a Corporate Governance Council to come tell him how to do his job. He wants to disband the Corporate Governance Council as soon as possible.

Corporate governance rules were designed to protect companies from politicians, in particular from the government. Government-owned companies should be kept out of the political sphere as much as possible, so that they may benefit from commercial, businesslike and market-oriented management. In doing so, they also run less of a risk of being milked or used as political toys.

One would expect the St. Maarten government and Members of Parliament to adhere to the principles of good corporate governance as laid down in the St. Maarten legislation and as promoted by the Organisation for Economic Cooperation and Development (OECD). In 2005, the OECD issued the “Guidelines on Corporate Governance of State owned Enterprises.” According to the OECD:

The State should act as an informed and active owner and establish a clear and consistent ownership policy, ensuring that the governance of the state-owned enterprises is carried out in a transparent and accountable manner, with the necessary degree of professionalism and effectiveness.

Not much to my surprise, several politicians announced that they are in favour of entirely disbanding the Corporate Governance Council (and related legislation), in order to be able to gain political control again. They want more, rather than less, political influence on state-owned entities. These politicians want to continue appointing their friends or other persons they consider loyal to their party instead of loyal to the public at large, without being supervised any longer. Bye-bye good corporate governance and hello to opportunities for misuse.

If the Council is to be disbanded, the people at least should demand full transparency and independent supervisory directors. The St. Maarten Corporate Code provides for two different kinds of boards of supervisory directors: a “regular” board of supervisory directors and the so-called “independent” board of supervisory directors (Section 2:139 Civil Code). Within this context, the word independent means that the supervisory directors are independent of the shareholders, interest groups and to a certain extent from the shareholders’ meeting.

An independent board of supervisory directors has its own responsibility and function without a mandate and/or without having to consult those who appointed them. They are appointed in the interest of the company, as such, and the associated companies, thus for the stakeholders in general.

According to the Explanatory Memorandum to the St. Maarten Corporate Code, an independent board of supervisory directors is well suited for application in the financial sector. An independent supervisory board is also usually opted for by large companies. It goes without saying that such an independent board should be mandatory for government-owned or government-controlled entities.

One of the central challenges is how to restore the government’s integrity. It has become a bad habit to replace managing directors and supervisory directors each time the island government changes party. That bad habit still exists. It must be changed!

Karel Frielink

(December 22, 2011)

See also Roeland Zwanikken (BZSE) on the same subject.

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