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Matthew Vella
The Malta Financial Services Authority has received submissions from three associations and seven companies in its reactions to the revised code of Good Corporate Governance principles. The comments are currently being analysed by the authority.
The chairman of the MFSA, Prof. Joseph Bannister said he was satisfied with the response. “I wasn’t expecting any more. All those who are primarily involved in the issue gave their comments and there was a good participation overall. The views do not reflect those of a single company per se, but a general discussion between several players, including representatives of accountants, insurance brokers and stockbrokers.”
The aim of the guidelines is to assist enterprises in establishing “respect” towards not only shareholders but also the general public: the underpinning rationale is that the way company directors exercise their stewardship is a matter of public interest, and that better relations open up new business opportunities.
The code was introduced in 2001 but the rules were never mandatory. The MFSA intends to eventually make obligatory all the principles included in the revised code.
The MFSA’s guidelines encourage companies to set up boards of directors, with a chairman, and to undertake rigorous evaluations of their annual performance and of the companies individual directors.
The code also lays down that the board should monitor and record dealings by directors in any of the company’s securities. Interestingly, restrictions on dealings by directors in the company’s securities will be applicable to any dealings by the director’s spouse or on behalf of their infant child. The code lays down that directors and employees should not disclose price-sensitive confidential information unless authorised by the board and that such disclosure is made available to shareholders.
The code also includes a section on conflicts of interest, where directors are encouraged to refuse nominations which could give rise to a conflict of interest. All conflicts of interest should be disclosed in full, and any material interests conflicting with those of the company should be eliminated, or the director should resign.
Corporate governance codes have been developed in different countries. As a rule, compliance with these governance recommendations is not mandated by law. One of the most influential guidelines has been the 1999 OECD Principles of Corporate Governance.
McKiney’s Global Investor Opinion Survey in 2002 found that 80 per cent of the respondents would pay a premium for well-governed companies, defining a well governed company as one that had mostly outside directors, who had no management ties, undertook formal evaluation of its directors, and was responsive to investors’ requests for information on governance issues.
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