Dennis Chung, Contributor
CHUNG
A COMMON thread throughout the recently- completed Budget
presentations has been the issues of corruption and accountability.
The Opposition implied that there is a lack of accountability and spoke to the presence of
corruption while the Government rebutted this.
Over the past year, the Government and private sector have been promoting the idea of
corporate governance. Indeed, this is a worldwide concept and became even more important for Jamaica coming out of the
financial sector crisis.
The principles of corporate governance have been incorporated in the recently-passed
Companies Act and to ensure that corporate bodies (particularly the financial sector) comply with these principles, the Government has put in place greater
regulatory activity.
GOVERNMENT AND GOVERNANCE
This heightened corporate
governance awareness is very welcome. If we are to compete globally, then this is surely one way to ensure competitiveness.
Based on the Budget presentations, we also need to ask: Why not apply corporate governance principles to government? After all, government is the biggest employer and spender in the country and has the greatest number of stakeholders.
We also experience daily, the effects of reckless fiscal management over the years as we are stuck with a debt burden which will impact even our grandchildren. Should we not be insisting then not only that corporations adhere to corporate governance principles, but also Government?
Vindell Kerr recently launched a book on corporate governance.
He defines corporate governance via reference to several authors and looks at Jamaica in relation to global trends.
In all these definitions, the underlying principle of corporate governance is that the board (government) must put in place proper management structure, systems, policies and the environment to ensure that proper management, leadership and accountability exist.
The objective of doing this is to ensure that the goals of the company (country) are met and that this leads to greater value creation.
It is, therefore, appropriate that the Leader of the Opposition, Prime Minister and the Finance Minister all made reference to Jamaica as a corporation, where the Jamaican people are the shareholders and the Government the board of directors.
I would add that in this model, the Opposition must be the
regulator.
This relationship means that the Government (board) must ensure that the managers (civil service) are accountable to the shareholders (Jamaican people) in ensuring the prosperity of the company (Jamaica) in alignment with the objectives.
In all of this, the regulator (Opposition) has the responsibility of ensuring that the interests of the shareholders and investors are protected.
OPPOSITION'S RESPONSIBILITY
This means that the role of the Opposition is exceedingly important and it is their responsibility not only to ensure that
government promotes the
people's interests but as the Finance Minister has said, it is critical that any accusations made are accurate.
This point is fundamental as inaccurate information can cause rumours with an adverse effect on any programme and creates inefficiencies as it wastes time and money trying to disprove a false accusation.
Therefore, in the model of
corporate governance, the
Opposition must understand the importance of its role. They must not only be the 'regulatory body' but have a distinct responsibility to ensure that any information presented to the Jamaican people is accurate lest they, as
'regulators', end up losing the credibility needed to ensure proper accountability.
Kerr makes a very important distinction between governance and management.
He says: "If management is about running businesses, governance is about seeing that it is run properly".
This distinction is very important as it relates to an essential corporate governance practice, which is separation between governors and those managers.
The lesson to be learnt from a governmental view is that ministers and government members must not interfere in the running of ministries by the civil service.
This is the principle behind the call for the resignation of Vando Palmer as a result of his intention to run as a political representative.
RULES AND TRANSPARENCY
The idea of corporate governance also brings to the fore the need for rules to be put in place to ensure that management is kept in check. This highlights the issue of the capping of the debt.
I, for one, believe that it should be legislated so that the debt cannot exceed a specified debt/GDP ratio.
Whether it is in the Constitution or not, it must be present in our legislative framework to ensure that no future generation suffers the fate we have because of the fiscal irresponsibility that has been practised under both political parties.
The point is that accountability cannot be effective without rules and consequences restricting government indiscretion.
Corporate governance also implies transparency. This must be applied to Air Jamaica and Sandals Whitehouse.
I commend the Finance Minister on his call for an
investigation into the Whitehouse project and also for his cap on the amount of support for Air Jamaica.
He must ensure that as soon as any report on either is issued it is made public so that the shareholders (Jamaicans) are made aware of how their capital (taxes) is to be spent.
The Whitehouse project has been referred to as 'Scandal'.
Maybe if it was still to be Beaches then it would be called 'Breaches'.
Effective management means being proactive and not reactive. If proper monitoring systems are in place then we will uncover deficiencies before the monies are spent.
Another example is the way in which we monitor the budget, that is, after the fact. It is within the purview of the Government to ensure that effective management is in place to ensure proper monitoring.
GCT ON TOURISM
Finally, a comment on the increased general consumption tax (GCT) on tourism.
The minister stated that based on the earnings of the industry and the significant concessions it has received over the years, it should make a contribution towards balancing the Budget.
I agree that every sector should play a part in this process. What I would add is that this was one of the most vocal sectors for the continuance of Air Jamaica, despite significant costs to the tax payers.
Even more importantly, is that this sector will benefit the most from Air Jamaica and so,
consistent with that benefit, they should be asked to contribute a greater amount.
Corporate governance also implies that government must be fair in all its dealings irrespective of the strength of any particular voice.
Email: dra_chung@hotmail.com
