Appendix B: Trinidad & Tobago Corporate Governance Code

• Pages: 211-233

APPENDIX B

FOREWORD

A MESSAGE FROM THE CHAIRMAN

The development of a Trinidad & Tobago Corporate Governance Code (“TTCGC”

or “the Code”) is a partnership initiative led by the Caribbean Corporate Governance

Institute, the Trinidad and Tobago Chamber of Industry and Commerce and the

Trinidad and Tobago Stock Exchange. It is the fi rst of its kind in the Republic and

directed primarily to those companies with public accountability.

A Working Group was established in January 2013, consisting of a diverse team of

industry stakeholders, to oversee the drafting and development of the Code, with the

Institute acting as the Secretariat. By November 2013, the Working Group, after many

drafts, meetings and consultations with external stakeholders, arrived at what is now

the Trinidad & Tobago Corporate Governance Code 2013.

The Code follows globally accepted best practices with specifi c consideration and

much customization for the local economy and dynamics of the business society of

Trinidad and Tobago. The objectives are to enhance business governance and perfor-

mance, strengthen transparency and e ciency in the market, and improve the overall

investment culture in Trinidad & Tobago. The Code is easy to understand, provid-

ing recommendations and guidelines for good corporate governance with a balance

between costs and benefi ts of implementation. In this way, it provides the structure

through which the company’s objectives are set along with the means of attaining

them and monitoring performance.

There is little doubt that strong corporate governance and transparency are critical

for the success of every organization. At the highest level, it provides many benefi ts

including:

1. Lower cost of capital:

i. In a well-governed company, performance targets, risks, and progress towards

the targets are assured and reported to investors. Risks to investors are there-

fore reduced signifi cantly and as a result capital can be obtained at lower costs.

2. Lower risk of scandals:

ii. Good corporate governance means that intentions of owners, the Board and

Management are aligned. Capacity for taking up the roles in directing, moni-

toring, and communicating are there. Appropriate systems and processes for

governance are in place, and the values of corporate governance, namely

transparency, accountability, fairness, and corporate responsibility are alive

throughout the organization. The end result is that risk of scandals is mini-

mized or avoided altogether.

212 Appendix B

3. Higher perfor mance of the organization. This is derived from:

i. The Board’s enhanced role as a strategic contributor to business planning and

risk management;

ii. decision-making authority being assigned at the right levels within the

organization;

iii. delegation of authority being matched by adequate controls;

iv. improved information fl ows within the organization, with shareholders and the

wider market;

v. alignment between shareholders, the Board, executives and employees in the

pursuit of company objectives; and

vi. Increased motivation, attraction and retention of talent as good cor porate gov-

ernance enables the development of value-based organizations.

The standardization of best practices may be approached in various ways. One

approach is on a statutory basis where companies comply or face legal sanctions. The

other approach, and probably the preferred one, is by way of a voluntary code of

principles and recommended practices where companies are asked to apply the recom-

mendations or explain their reasons for deviating from them. The Code embraces the

latter approach in the expectation that it will encourage voluntary adoption by those

institutions to which it is directed, namely companies with a public accountability,

while encouraging broader level acceptance of the spirit of each Principle and how it

may further the best interests of the company.

The objective of the Code is not to replace existing legislation or regulations but

rather to bolster those statutory directives and provide recommendations that are

meant to fi ll the knowledge gaps on how best to manage an organization. By striv-

ing towards these higher aims, organizations are better equipped to succeed in an

increasingly global playing fi eld, and overall market conditions rise to refl ect a more

competitive outlook.

In the 2013 World Economic Forum’s Global Competitive Index, Trinidad and

Tobago ranked 118 out of 148 in Ethical Behaviour of Firms, 116 out of 148 in

E cacy of Corporate Boards and 111 out of 148 in Protection of Minority Share-

holders’ Interests.

In 2011, a report by Syntegra Change Architects Ltd. found that the majority

of corporations in Trinidad and Tobago disclosed less than 40% of the items rec-

ommended by International Standards of Accounting and Reporting (ISAR). The

reporting requirements, even of regulated and listed companies, were the absolute

lowest of all emerging and frontier markets surveyed by UNCTAD in 2010; out of a

benchmark of fi fty-one items relating to corporate governance, only fi ve were required

to be disclosed. This is against the backdrop of a survey by McKinsey & Co. in 2002

that global institutional investors were prepared to pay a premium of up to 40% for

corporations that apply superior corporate best practices in countries where poor cor-

porate governance poses a high risk to investments.

The introduction of a Code of Corporate Governance is therefore long overdue.

Experience has shown that the more corporations are encouraged to have such

a structure in place the greater the opportunity to attract investment and increase its