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Presentation to the 3 rd PAN AFRICAN CONSULTATIVE FORUM ON CORPORATE GOVERNANCE Elaborating a Presentation to the 3 rd PAN AFRICAN CONSULTATIVE FORUM ON CORPORATE GOVERNANCE Elaborating a Corporate Governance Code The Mauritian Experience by Marc Lagesse

Agenda l Timeline and key players l Elaborating the Code l l Overview of Agenda l Timeline and key players l Elaborating the Code l l Overview of the Mauritian Code Other Corporate Governance initiatives l Public Reaction & Key to Success

Timeline and Key Players Elaborating the Code of Corporate Governance for Mauritius l Sep Timeline and Key Players Elaborating the Code of Corporate Governance for Mauritius l Sep 2001 Governance Establishment of Committee on Corporate by Cabinet with very wide brief l Feb 2002 issues - Institute of International Finance (Washington) policy paper for Corporate Governance and Transparency in Emerging Markets l Oct 2002 joint World - Corporate Governance ROSC issued (under Bank / IMF Program) l Oct 2003 Workshops principles. Code of Corporate Governance published. with stakeholders to explain Code and main

Timeline and Key Players Elaborating the Code of Corporate Governance for Mauritius l Jan Timeline and Key Players Elaborating the Code of Corporate Governance for Mauritius l Jan 2005 Financial Reporting Act 2004 proclaimed establishing National Committee on Corporate Governance and Mauritius Institute of Directors l May 2005 officially - Code of Corporate Governance for Mauritius issued in Government Gazette l Jun 2005 explain’ disclose in - Designated institutions expected to ‘comply or on corporate governance practices and annual report.

Elaboration of the Code l Cabinet appointed 10 -member committee l Strong political support Elaboration of the Code l Cabinet appointed 10 -member committee l Strong political support from Government, particularly Financial Services Minister l Significant financial and human resources made available l Mervyn King (South Africa) appointed as Consultant/ Advisor l Wide consultation process - seminars, plenary sessions, conferences l 5 task teams constituted, each with 10 influential members from the Private and Public sectors, media, unions etc… l 1 st Key task to identify ‘Mauritian Special Circumstances’ (MSC)

Elaboration of the Code Mauritian Special Circumstances (non exhaustive list) l l Many family Elaboration of the Code Mauritian Special Circumstances (non exhaustive list) l l Many family controlled companies l Complex control structures l Secretive shareholder agreements l Severe potential conflicts of interest Nominee Directors l Membership of Board ‘honorific’ l Few independent directors (distrust of ‘independence’) l Few executive directors (‘managers manage, the board decides’) Little communication or shareholder relations l Cultural ‘Us v/s Them’ approach l Very poor disclosure Very poor public perception l Small elite business community l Recruitment not always meritocratic l Little visible concern for wider social or environmental issuers

Elaboration of the Code Separated into nine sections dealing with: l Compliance and Enforcement Elaboration of the Code Separated into nine sections dealing with: l Compliance and Enforcement (to whom it applies etc. . . ) l Board and Directors – Roles and responsibilities, composition, conflicts, Chair and CEO, nomination and director training and appraisal l Board Committees – Audit, Corporate Governance, Nomination, Remuneration, Risk, Others (including terms of reference) l Role and function of Company Secretary l Risk Management, Internal Control and Internal Auditing and Accounting l Integrated Sustainability Reporting l Communication and Disclosure l Relationship with Shareholders

The Code’s Key Requirements l l l l The roles of the Chair and The Code’s Key Requirements l l l l The roles of the Chair and CEO must be separate Require at least 2 independent directors Require at least 2 executive directors Require an Audit Committee (including risk & internal control) Risk Management is a board responsibility Require a Corporate Governance Committee (including nomination and remuneration matters) Maximum emphasis on disclosure and communication (new corporate governance section in the Annual Report) Auditor independence must be assured Guiding Principle “The Board must act with Courage and Intellectual Honesty”

Corporate Governance Section in Annual Report (main disclosures) l l l l Holding structure Corporate Governance Section in Annual Report (main disclosures) l l l l Holding structure Dividend policy Directors and Senior Management profiles Related party transactions Directors dealings Material clauses of M & A Important aspects of Shareholders Agreement Important aspects of Management Agreements Remuneration per director (including executive directors) Terms of reference of Board Committees Identification of key risks, brief discussion of how they are managed Policies regarding social, ethical, safety and environmental issues Aggregate political donations Aggregate charitable donations

Compliance and Applicability l Compliance with the Code is on a voluntary rather than Compliance and Applicability l Compliance with the Code is on a voluntary rather than mandatory basis i. e ‘comply or explain’ l The following companies are ‘designated institutions’ required to comply or explain non-compliance l l Listed companies (Stock Exchange listing rules to make some provisions mandatory) Banks and non-banking financial institutions l l l Bank of Mauritius has also issued complementary guidelines which make certain mandatory provisions Financial Services Commission has made certain provisions mandatory through licensing conditions Larger public companies defined as those companies (or Groups) with turnover > Rs 250 million (USD 9 million) State owned enterprises, including statutory corporations Large private companies; turnover > Rs 250 million (USD 9 million)

Other initiatives l A series of training workshops have been held covering: l l Other initiatives l A series of training workshops have been held covering: l l l Board composition and directors duties Role of Audit Committee Role of Corporate Governance Committee Shareholder rights and responsibilities Elaboration of guidance notes for the implementation of the Code (work in progress) Elaboration of guidance notes for SOE’s (work in progress) including: l l l Special circumstances (Role of Parliament, Minister, Board) Identifying appropriate stakeholders The ‘Corporate Objectives Statement’ (elaborated by SOE board, approved by parent Ministry) l l Main areas 1) Purpose, value drivers, stakeholders and objectives 2) Corporate vision 3) Statement of accountability 4) Expectations of financial and non financial performance Mauritius Institute of Directors

Reactions & Key to success l l Initial reactions have been very positive (inevitably Reactions & Key to success l l Initial reactions have been very positive (inevitably some scepticism and resistance to change) Code widely recognised as the essential reference document Ultimately we hope that each institution will practice Corporate Governance according to the Code, but in a way that is relevant to their specific business and circumstances The goal of the Code is to build greater trust between l The Company and investors To lower the cost of capital – essential for companies to buy-in to the project. Conformance without performance will never be successful l The Company and their other stakeholders To help build a culture of social and environmental responsibility, helping to bridge the ‘Us v/s Them’ divide l SOE’s and the public To enable SOE’s and parastatals to enhance the quality of service they deliver to the public at large