Caribbean Corporate Governance Legislation: Borrowed Laws
The Commonwealth Caribbean has fulfilled a number of corporate governance imperatives through companies’ legislation and much of it is a carbon copy of Canadian company law. These provisions also largely capture the spirit and intent behind the Organisation for Economic Co-operation and Development (OECD) Principles of Corporate Governance and the World Bank Principles of Corporate Governance.[232] These legislative provisions vary from territory to territory and in regards to directors and officers, include an increase in their duties and responsibilities,[233] the introduction of a duty to have regard to the interest of shareholders, employees and the community in which the company operates,[234] prohibition of certain loans to shareholders, directors, officers or employees of the company,[235] stringent disclosure requirements involving salaries, pensions, loans, interests in contracts, shareholding and service contracts,[236] prohibition of a director from voting on contracts in which he has an interest,[237] and the introduction of the concept of �shadow directors.’[238]
There are stricter rules regarding the role of the company secretary,[239] on the preparation of accounts and the information required,[240] and on the appointment and role of auditors.[241] Tools of redress for �Claimants,’ which can include current and former shareholders, current and former directors and current and former debenture-holders, and in some cases, any other person the court thinks fit, are available under the derivative action or oppression remedy.[242]
Mainly in securities, pensions and insurance legislation, there are now provisions for a â€?fit and proper’ test for dealers in securities or investment advisers,[243] criminal and civil liability for insider dealing,[244] audit committees for certain types of companies and, in some cases, a requirement for a conduct review committee,[245] protection of whistleÂblowers in prescribed circumstances,[246] and the appointment of actuaries in certain types of companies and rules regarding his or her conduct and responsibilities.[247]
Although the general goal of good governance involving greater transparency, accountability and shareholder empowerment are already well accepted in the region, the Commonwealth Caribbean as a whole tends to have a number of challenges to adherence to what appears to be prescribed corporate governance principles which have emerged mainly from the developed markets.[248] Even without the traditional box-ticking, the prescribed methods found in many principles embodied in the various codes, legislation and Stock Exchange Rules of developed economies, do not always accord with the corporate culture of the Commonwealth Caribbean.
The various codes, principles and legislation of the developed markets modelled in the Caribbean do not always take into account the predominance of closely-held companies, few listings of public companies on the local stock exchanges, the limited investment in shares by local and foreign investors, limited desire for shareholder involvement by the local shareholders; the limited involvement of institutional investors, the slow and limited supply of market information, and the predominance of debt financing as against equity financing.
Moreover, in the context of the global financial meltdown, Commonwealth Caribbean territories and other smaller emerging economies, as opposed to larger emerging economies such as China, India and Brazil, are faced with the challenge of the cost of assessing risk, the difficulty in accessing such information and the cost of enforcement of legislation and regulations. The adoption of the Canadian model for Caribbean corporate governance legislation and the United Kingdom Combined Code in the form of the PSOJ Draft Code have been problematic at best and ill-suited at worst for the corporate culture of the Commonwealth Caribbean region and by extension, the developing world.4.