effective decision-making, and this may still be the case. In some instances the regulators were subject to potentially conflicting objectives of investor protection and maintaining the safety and soundness
of institutions. The analysis shows that jurisdictions need to regularly
review the capacity of their supervisory, regulatory and enforcement
authorities and to make sure they are sufficiently resourced, independent and empowered to deal with corporate governance weaknesses.
Forward looking capacity needs to be built and for new legislation full
use should be made of both ex ante and ex post regulatory impact
assessments. Where there is a corporate governance code, implementation should go beyond box-ticking, and it is important that an
independent body be charged with monitoring implementation and
facilitating timely updates.
Executive Remuneration: Executive remuneration/incentive systems still need to be addressed: Better governance of the executive
remuneration/incentive system is needed. Too often negotiations and
decisions are not carried out at arm’s length. Managers and others
have had too much influence over the process with boards unable
or incapable of exercising objective, independent judgment. What is
clear in my mind though, is that in many cases the link between performance and remuneration is very weak or difficult to establish. The goal
obviously is for reward systems to encourage long term performance
and this requires the design of instruments to reward executives once
the performance has been realised, and therein lies the challenge.
Good practice for banks is to defer a percentage of the executive’s
compensation for some years and link the deferred payment to the
performance of the loan portfolio over these years. Generally speaking
pay for performance should only be paid or accrued if the company
exceeds or meets measureable performance targets and not simply
due to the passage of time.
Management Culture: Management style and candour matter: A
management culture that encourages openness, freedom to challenge and intellectual curiosity, feeds innovation and can convert
seemingly insurmountable challenges into opportunities. Further,
senior executives should be conscious that the words and linguistic
patterns used in executive communications, such as in the CEO’s Report in the company’s Annual Report, provide valuable insights into
the company’s corporate culture – research has shown that the shares
of companies whose executives exhibit a high degree of candour have
outperformed shares of candour-deficient companies. Reports loaded
with FOG (acronym for Fact-deficient, obfuscating generalities) typically represent a leading indicator for miserable performance by the
entity.
Quite simply, a CEO who misleads others in public may eventually
mislead himself in private. Executives who lack a commitment to
candour will be handicapped in creating trusting relationships with
stakeholders. Without trust, the business cannot perform at optimal
levels. Executives with trust-deficient cultures can expect to create
confusion and even fear – internally and externally. These qualities
are toxic to creating sustainable shareholders wealth. When fear dominates a corporate culture, expect to find poor execution and thinking
and, ultimately substandard results. To crystallise the point here, words
reveal the integrity of leadership. They can signal the existence of fearbased corporate cultures or reveal creative problem-solving cultures.
Investors can learn a great deal about a company’s CEO by looking at
his or her vocabulary.
Regional Scale Ratings of Caribbean Corporates
Country
Regional Scale (Foreign Currency)
Barbados
CariAA-
Saint Lucia
CariBBB
Trinidad & Tobago
CariAA+
Barbados
CariBBB+
Point Lisas Industrial Port Development
Corporation Ltd.
Trinidad & Tobago
CariA+
National Helicopter Services Ltd.
Trinidad & Tobago
CariA-
National Flour Mills Ltd.
Trinidad & Tobago
CariA-
Endeavour Holdings Ltd.
Trinidad & Tobago
CariA+
The Vehicle Management Corporation of Trinidad
& Tobago Ltd.
Trinidad & Tobago
CariB
Massy Holdings Ltd.
Trinidad & Tobago
CariAA+
Gulf City Ltd.
Trinidad & Tobago
CariA+
Corporate
Goddard’s Enterprises Ltd.
Saint Lucia Electricity Services Ltd.
National Gas Company of Trinidad & Tobago
Millennium Invest-ments Ltd.
19