Based on the analysis made in chapter 4, it can be presumed that uncertainty certainly exists as to the full compliance of the CG code application in listed companies of Mauritius. Numerous improvements need to been done to reconsider the approach to CG such as:
5.1 Compliance with the Code
Companies with board size below average are recommended to balance their board members comprising of a mix of executives, non executives and independent directors. The latter should ideally be appointed to avoid conflicts in areas where the interests of management, the company and shareholders may diverge. Evidence also suggests that the market tends to confer a premium to companies that include independent directors in their boards (Rosenstein and Wyatt, 1990).
5.2 Company secretary
It has been analysed that the Corporate Governance section in the ARs, most of them, is not signed by the CS. As such, the CS should be required to sign off on the CG section on the AR. Moreover the CS should be entrusted with the duty to ensure efficient and effective implementation of CG-in collaboration with the Board- will facilitate compliance.
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All firms listed on the stock market must have independent audit committees for maintaining the integrity and quality of the corporate financial reporting process. It is also recommended that auditors or audit partners must be rotated to provide clear independency in preparing financial statements. Companies should disclose in their annual report whether or not the Audit Committee has adopted formal terms of reference and, if so, whether or not the committee satisfied its responsibilities for the year in compliance with those terms. Furthermore, the Audit Committee's activities and effectiveness should be assessed periodically and reviewed with the board.
5.4 Internal Audit and Risk Management
The establishment of an internal audit function is recommended for evaluating risk management in a Company. The board of a company which does not have an internal audit function should review, at least annually, the need for one. Besides, it is recommended that internal auditors do not form part of the finance department but rather as a separate section in the organisation. This separation will stimulate proper internal controls and monitoring of the financial process.
Both positive and negative aspects of the activities of the company should be presented to give an open and transparent account thereof. The implementation of procedure to independently check and preserve the integrity of the company's financial reporting is advised. Companies should make effort to ensure that information is shared via a wide range of communication channels, including the Internet; having regard for its security and integrity.
5.6 Whistleblowing policy
Whistleblowing is a set of procedures which allows probable whistleblowers to raise complaints internally. However, whistleblowing as an organization also implies judicial initiatives to defend those who raised objection and were retaliated against. Cohan (2002) identifies solutions to improve whistleblower communications in companies, such as
including programs to encourage workers to expose illegal behavior without fear of retribution;
developing communication systems that enable essential information to move upward to the appropriate decision-maker without distortion;
providing adequate training for new directors; and
increasing the number of independent directors.
The whistle blowing policy is an effective way to prevent fund mismanagement and fraudulent activities. Employees should be adequately trained and persuaded to prevent any form of malpractices within the company.
5.7 Importance of Shareholders
Analysis of results from the study may have exposed an imbalance between the treatment of Shareholders and Stakeholder's interest. It is recommended that the board ensures that the interests and roles of the stakeholders are respected to serve the often conflicting interest of all stakeholders even though profitability of the company is at stake. Critical financial information should reach all shareholders simultaneously.
CG is an inevitable phenomenon of corporate businesses. Its efficiency is determined by the performance of its components. The purpose of this study was to examine the extent of compliance with the CG code by examining ARs of the listed companies while simultaneously performing the survey.
The analysis of the ARs first showed some compliance with some of the key requirements of the CG code but thereafter it was also perceived some deliberate instances of non-compliance such as actual level of independence, the number of independent non- executive directors appointed in corporate board, the establishment of an internal audit function, the fair treatment of stakeholder's interest and transparency.
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The overall conclusion founded indicates that the majority of listed companies (85%) have adopted the Code of Corporate Governance. Besides, the extent of compliance has been stated in their ARs as required by the Code. Conversely the minority implemented the CG Code selectively and figuratively in a quest of conveying an image of 'good' compliance with the Code. However it cannot be ignored that these companies provided reasons for areas of non-compliance, which is a requirement of the Code as reflected by their ARs.
Appropriate recommendations have been proposed one of them is the whistleblowing communication which is not a system in Mauritius but which is of upmost importance in the world of CG. It is also important to point out that not all aspects of the Code of CG of Mauritius have been discussed in this project due to word limitation and time.
The results got to be interpreted with caution because this study only involved a small population size and only focused on statistical based performance measure. Improved and more accurate matching criteria with a bigger sample size and market measure of performance could provide different results.