The new Code of Corporate Governance for Mauritius (2016)
The new Code of Corporate Governance for Mauritius was launched on 13 February 2017. The code comprises a set of principles and guidance aimed at improving and guiding the governance practices of organisations within Mauritius. It forms part of a larger body of existing laws, rules, regulations, principles and best practices that include:
- Laws of Mauritius (e.g., the Companies Act, 2001)
- Regulations
- Listing rules (e.g., the Listing Rules for the Stock Exchange of Mauritius)
- Standards, guidelines and codes of best practice (e.g., the Bank of Mauritius Guidelines)
- Corporate rules and provisions (e.g., bylaws)
- Formal documents within an organisation (e.g., board charters)
The Code recognises that scandals arising from poor governance that impact upon public interest entities should primarily be dealt with by legislation.
Using an “apply and explain” methodology, the Code aims to encourage high-quality corporate governance with inbuilt flexibility that allows organisations to adapt their practices to their particular circumstances. It emphasises the need for boards to focus on the effective performance of their key tasks. It is intended that the Code will:
- Advance corporate governance reforms in both the public and private sectors in Mauritius by creating a corporate governance framework of principles for business leaders to apply.
- Encourage change amongst the Mauritian business community by focusing on improving the effectiveness of governance practices.
- Provide maximum flexibility through a focus on principles rather than mandatory regulations and rules.
The following eight corporate governance principles have been designed to be applicable to all organisations covered by the Code.
Principle 1: Governance Structure
All organisations should be headed by an effective board. Responsibilities and accountabilities within the organisation should be clearly identified.
Principle 2: The Structure of the Board and Its Committees
The board should contain independently minded directors. It should include an appropriate combination of executive directors, independent directors and nonindependent nonexecutive directors to prevent one individual or a small group of individuals from dominating the board’s decision taking. The board should be of a size and level of diversity commensurate with the sophistication and scale of the organisation. Appropriate board committees may be formed to assist the board in the effective performance of its duties.
Principle 3: Director Appointment Procedures
There should be a formal, rigorous and transparent process for the appointment, election, induction and re-election of directors. The search for board candidates should be conducted, and appointments made, on merit, against objective criteria (to include skills, knowledge, experience, and independence and with due regard for the benefits of diversity on the board, including gender). The board should ensure that a formal, rigorous and transparent procedure be in place for planning the succession of all key officeholders.
Principle 4: Director Duties, Remuneration and Performance
Directors should be aware of their legal duties. Directors should observe and foster high ethical standards and a strong ethical culture in their organisation. Each director must be able to allocate sufficient time to discharge his or her duties effectively. Conflicts of interest should be disclosed and managed. The board is responsible for the governance of the organisation’s information, information technology and information security. The board, committees and individual directors should be supplied with information in a timely manner and in an appropriate form and quality in order to perform to required standards. The board, committees and individual directors should have their performance evaluated and be held accountable to appropriate stakeholders. The board should be transparent, fair and consistent in determining the remuneration policy for directors and senior executives.
Principle 5: Risk Governance and Internal Control
The board should be responsible for risk governance and should ensure that the organisation develop and execute a comprehensive and robust system of risk management. The board should ensure the maintenance of a sound internal control system.
Principle 6: Reporting with Integrity
The board should present a fair, balanced and understandable assessment of the organisation’s financial, environmental, social and governance position, performance and outlook in its annual report and on its website.
Principle 7: Audit
Organisations should consider having an effective and independent internal audit function that has the respect, confidence and co-operation of both the board and the management. The board should establish formal and transparent arrangements to maintain an appropriate relationship with the organisation’s auditors.
Principle 8: Relations with Shareholders and Other Key Stakeholders
The board should be responsible for ensuring that an appropriate dialogue take place among the organisation, its shareholders and other key stakeholders. The board should respect the interests of its shareholders and other key stakeholders within the context of its fundamental purpose.