Monitoring And Evaluation Of The Effectiveness Of Board Accounting Essay

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As per the Code, the Board is responsible for the total process of risk management and should ensure that the company develop and execute a comprehensive and robust system of risk management. In addition, the Code (2004:34) states that the board must communicate its risk management policies to management and all other employees as appropriate to their roles within the organisation and must satisfy itself that communication has been effective and understood.

As for internal control, the Code (2004:35) specifies that the board is responsible for the system of internal control and must set appropriate policies to provide reasonable assurance that the control objectives are attained and that management is responsible for the design, implementation and monitoring of the internal control system.

From the analysis, it has been found that there is a low level of implementation with respect to the review and monitoring of the internal control system by management in most of the parastatal bodies. With respect to risk management, which is a means to preserve and create value, it is found that adequate attention is not being given to this issue in most organisations. As pointed out in the literature review, risk management is a process which involves identification, minimization and avoidance of risks and the Code clearly spells out that it is the responsibility of the board of directors to have an oversight on risk management.

5.2 Corporate Social Responsibility

Overall, it has been observed that most of the parastatal bodies are mostly involved in philanthropic activities rather than undertaking corporate social responsibility activities. This is expected in view of that these functions are being undertaken by specialist government agencies in the public sector e.g poverty alleviation, environmental protection, etc.

As for private enterprises, the Code recognises that they should move to a new level of responsibility as regards their duties to society. More so, they should not be perceived to be only profit oriented.

5.3 Monitoring and Evaluation of the Effectiveness of Board

The other area in which parastatal bodies are weak relate to the monitoring and evaluation of the performance of the Chairperson and directors. The Code (2004:22) states that one of the common core functions which should be performed by the chairperson is ensuring that monitoring and evaluating of board and director appraisals are carried out. Also, the Code (2004:27) recommends that directors should be assessed both individually and collectively as a Board. It should be pointed out that parastatal bodies have already implemented a Performance Management System (PMS) for employees only. As such, it can be considered that it is fair that PMS should not be applied only to employees but it should include the Chairpersons and directors who, among others, are responsible for giving strategic direction to the organisation.

5.4 Executive Directors

In addition to the above, the analysis shows that most parastatal bodies do not have two executive directors. According to the Code (2004:18), all boards should have a strong executive management presence with at least two executives as members. It should be pointed out that management structure of parastatal bodies is defined in their respective Acts and none of them require that the organisation should have at least two executive directors. As such, it can be concluded that this concept is no more applicable to the private sector organisations, as directors are also involved in the day to day management of their companies and at time, they are also shareholders in their companies.

5.5 Board Committees

The study also reveals that most parastatal bodies have not yet established a Corporate Governance Committee but some of them have already established an Audit Committee of the Board while the (Code 2004: 28) requires that all organisations should have, as a minimum, an audit committee and a corporate governance committee.

5.6 Awareness of the National Code including the Guidance Notes

Another important point that has come out from the analysis is that respondents are not fully conversant with the National Code of Corporate Governance (2004) including the Guidance Notes on Corporate Governance for State Owned Enterprises (2006). In addition, it is found out that the Code has not been fully implemented in all parastatal bodies. As regards planning its continuity and succession, it has been found that respondents have given a poor rating to this issue. This is explained by the fact that the composition of the Board has been codified in the respective legislation. Most of the board members are public officials who rotate between ministries and when they are transferred to other ministries, they are replaced by their colleagues to act as the official representative of the ministry. Another point is a few board members are nominees (member of the public) of the respective Minister and in case there is change in government, the new Minister will appoint his/her own nominees. As such all these factors do not ensure continuity of the Board and as such succession planning is made difficult in parasatatal bodies.

5.7 Positive Findings

Overall, it is noted that positive responses have been given to the need for the Chairperson of the Audit Committee to be an independent non-executive director (Code 2004:29), the need for directors to avoid conflict of interests (Code 2004:20), timely publication of Annual Reports (Code 2004:41), attendance at Board meeting (as per respective Act), etc. However, the analysis shows that the views expressed by the respondents are the same in all the sectors in which the organisations operate. In addition, variables such as the size of the Board, the age of the organisation, position of the respondents in their organisations, the sector in which they are operating, size of the organisations, are not factors which have a bearing on the responses received from the respondents.

5.9 Benefits of Adopting Good Governance Principles

In general, respondents have given a high rating in respect to the benefits achieved by an organisation which has adopted corporate governance principles There are no major difference in the responses between the two questionnaires with respect to the followings: contribution of good governance practices in the fulfillment of economic, environmental and social responsibilities, access to government funding and as a vehicle of efficiency of business operations.

5.10 Constraints to Good Governance

As regards the constraints faced by organisations, it is noted there is no major difference in opinions with respect to the factors that hinder the adoption and application of good corporate governance such as wide political interference in internal management, dictation of non beneficial policies by parent ministries, limited grant and funding for governance enhancement and the nomination of Chairperson and some directors solely on political basis.

5.11 Recommendations

This part makes recommendations in the light of the findings and the conclusion that have been reached.

5.11.1 Awareness Programme

The Office of Public Sector Governance (OPSG), a newly created division at the Prime Minister’s Office, should, in collaboration with the Mauritius Institute of Directors (MIOD), develop and implement a comprehensive training programme for all board members.

5.11.2 Board Committees

As already pointed out, some parastatal bodies have neither set up an audit nor a corporate governance committee. It is recommended that OPSG should assist these organisations to set up those committees. In addition, one officer of OPSG should be nominated to sit on these committees in the interest of independence as well as acting as financial expert to those committees. It should be pointed out that all staffs of the OPSG are professional accountants.

5.11.3 Changes to Legislation

In order to be in line with Code (2004) and the Guidance Notes (2006), it is recommended that all Chief Executive Officers (CEO) in parastatal bodies should become directors as executive directors. Although it is understood that the Code is not mandatory but a statement of good practices, it is thus recommended that relevant changes be made to legislation i.e. the CEO should become a director of the board and a Senior Manager be also promoted to the Board.

5.11.4 Succession Planning

In order to ensure that representatives of Ministries are conversant with the organisation, it is recommended that all Ministries should nominate an officer to act as alternate directors in the board of parastatal bodies and to replace their colleagues when the latter is unable to attend board meetings.

5.11.5 Corporate Social Responsibility (CSR)

As already mentioned, CSR is not fully applicable to parastatal bodies. However, it is recommended that all parastatal bodies should consider moving from the present philanthropic towards CSR activities within the next five years.

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