Mauritius is considered as an economic success story. The Mauritian economy has witnessed remarkable transformation ever since it gained independence, moving from a poor mono-crop economy into a well diversified economy in only a few decades. This remarkable transformation is due to a combination of political stability, strong institutional framework, low level of corruption and favourable regulatory environment in Mauritius. Thus, transformation was only possible due to a paradigm shift in the economic policies, resisting to the various shocks that the world is facing (Ali Zafar, 2011).
Furthermore, in contrast with other countries including developed countries, the stability of the Mauritian economy can be attributed to good governance. The democratic process, freedom of the press, an independent judiciary, the separation of powers between the executive and the legislative, all constitute the governance framework that has served to create the stable and enabling environment that made Mauritius one of the best places in the world to do business. As a result Mauritius has been ranked first out of 53 countries in Africa for three consecutive years by governance indices like the Mo Ibrahim Index (2008, 2009 and 2010). Also, Mauritius has emerged as a regional entrepot and tourism destination as the top ranked African country and 20th out of 183 countries in the World Bank Doing Business (2009) as well as being ranked first in Africa on the Fraser Institute's Economic Freedom. Thus, Mauritius has been consistently re-inventing itself and for this reason Mauritius has achieved so much in a relatively short period of time.
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Corporate governance has been a topic of great concern around the world including Mauritius for many years mainly as a result of financial scandals worldwide. Corporate governance, which refers to the manner in which an organisation is managed and controlled, is dependent on the efficacy of governance at institutional and state levels. The aim is to align as nearly as possible the interests of individuals, corporations and the society. More precisely, the interests of different stakeholders, employees, customers, suppliers and the society in general and Mauritius have been one of the rare countries which have succeeded in maintaining the delicate balance between sustained economic growth and social welfare.
In Mauritius, it is the Inclusive Approach of corporate governance that has been adopted. This approach requires that when developing the strategy of the company the key stakeholders such as the business environment in which the company operates, its employees, its customers and its suppliers should be taken into consideration. The inclusive approach also necessitates that the purpose of the company should be defined, and the values by which the company will carry out its daily activities should identified and communicated to all stakeholders. Thus, all these factors should be combined in developing the strategies to attain the company's goal and the relationship between the company and its stakeholders should be mutually beneficial. In addition, a number of evidence has established that this inclusive approach is the way to create sustained business success and long term growth in shareholder value.
Mauritius' path towards improved governance started in the year 2001. More precisely, in September 2001 to provide Mauritius with a well organised and efficient system of governance, the then Minister of Economic Development, Financial Services and Corporate Affairs, The Honourable Sushil Khushiram came forward with a number of initiatives that have largely contributed to a significant transformation in the regulatory and governance landscape in which Mauritian companies operate. Thus in 2001, a number of proposals were put into place with the aim to bring into line the practices of corporate Mauritius with world-wide best practice. As a result, a new Companies Act was voted for and International Accounting Standards (IAS) were introduced; the new listing rules for the companies listed on the stock exchange of Mauritius were put forward and a committee on corporate governance was set up. In addition, the Securities Act, the Insolvency Act, the Financial Reporting Act and the Insurance act were approved. Also, in 2001 the Financial Services Commission was put in place as well as the Mauritius Institute of Directors which was launched in 2009.
The committee for corporate governance had as part of its charge to reflect on the introduction of a Code of Best Practice in Mauritius. Thereby, the committee for corporate governance for Mauritius prepared the Code of Corporate Governance for Mauritius which was launched in 2003. In short, the Code of Corporate Governance requires that each board should consist of a proper balance of executive, non-executive and independent directors. The role of the chairman and the Chief Executive Officer (CEO) should also be different and separate so as to delegate powers and authority at different levels. Furthermore, the board which is responsible for the performance and affairs of the company should have at a minimum, an audit committee and corporate governance committee. The audit committee which should consist of at least three non-executive directors is responsible for matters such as the functioning of the internal control system, the company's compliance with legal and regulatory requirements with regard to financial matters and financial information to be published by the board. On the other hand, the responsibilities of the Corporate Governance Committee which should also be composed of a majority of non-executive directors include remuneration and nomination matters.
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The Code which puts greater importance on disclosure and communication requires a separate corporate governance section in the Annual Report and also the annual report should be presented in such a that all stakeholders can obtain a true and fair view of the company's performance. In addition, the Code requires that every company should adopt a Code of Ethics which should consider the principles, norms and standards that the company wants to promote.
Moreover, in 2009 the National Committee on Corporate Governance (NCCG) conducted a survey on the state of compliance with the Code of Corporate Governance in Mauritius. The key findings of the survey indicated the compliance with the Code of Corporate Governance is still not a norm in Mauritius and it indicated higher compliance among listed companies (83%) and lower compliance among State Owned Enterprises (44%). The survey also found that companies who are compliant with the Code of Corporate Governance have an audit committee and a corporate governance committee in place and the levels of disclosure of financial information and disclosure regarding conflicts of interest are higher among these companies. The survey also indicated that 72% of the companies consider that good governance has positively improved the performance and status of the respective companies.
However, the research also highlighted the need to reconsider the approach to corporate governance adopted by the companies in Mauritius. It stated that the Board of Directors should focus more on strategy, risk management, performance and sustainability which are important to the corporate governance process and also the need for more training of directors to improve their competence level. The survey also requires that effective Board Committees should be set up and strengthened much effort needed to improve the risk identification process and board committees to spend more time overseeing risk management. In addition, the survey also requires the setting up of an effective Nomination Committee and ensures that a proper assessment of the appointment of board members has been carried out with a view of improving the competence and diligence of board members.
As result of this survey, the NCCG decided that the code should be revised so as to increase awareness of corporate governance in Mauritius.