Good governance vs overzealousness: where do we stand?

I was recently delighted to address the 2021 MEA National Conference which took place online on 18th June with the participation of a distinguished line-up of academic and business people as well as the Leader of the Opposition. 

The Malta Employers Association organised this conference to discuss the challenge of balancing economic growth with quality of life, which challenge stands before the country.

During this event, I was given the opportunity to moderate an interactive break-out session entitled ‘Importance of Good Governance’. A discussion was held amongst participants in the context of the impending decision by the Financial Action Task Force as to whether to place Malta on a grey list and effectively reclassify it as a high-risk jurisdiction. 

In opening the session, I asserted that Malta’s damaged reputation constituted a very serious negative externality to business and society, one which could not be neutralised by using technology or any other resource that money can buy. 

Malta’s loss of reputation was affecting companies’ ability to attract business, workers or partners from abroad.  The situation also affected business in the sense that the country’s efforts to meet the Moneyval and other targets led to overzealousness in certain regulatory and enforcement aspects such that our country became uncompetitive when compared to other jurisdictions.

One participant described reputational loss as “the death of our business”.  It was explained that a potential greylisting would have very serious effects on businesses as well as on their employees through increased controls that would need to be introduced, a further deterioration in the “ease of doing business” and more complicated access to finance.  The discussion showed that employees as much as employers were concerned about their futures.

The discussion was then switched to whether good governance and protecting the country’s reputation was the sole responsibility of Government and politicians or whether there was also a role in this for the private sector.

Participants felt that serious companies in Malta have always vastly outnumbered the less serious ones. Serious companies have a good track record of conducting their business in an ethical and transparent manner.  It was discussed that there are procedures to be followed and these are far from complicated to design and introduce.  They do, however, come at a small cost in terms of time and money but in the long-term, companies always felt that it was time and money well spent.  Examples given were those set in recruitment procedures, procurement, KYC procedures or having Anti-Bribery/Corruption clauses incorporated in contracts/agreements.

There was an idea floated that the Corporate Governance Guidelines of the MFSA applicable to Listed Entities and Public Interest Companies would be cascaded down to smaller businesses in a scaled-down version.  This was felt justified because good governance is certainly not within the exclusive realm of Government and the institutions – although they have a very strong say.  

It was also felt that good governance was not merely a matter for large corporations because small companies or indeed even individuals – through their behaviour – could cause a loss of reputation to a larger cohort of businesses or an entire sector. These guidelines delve into matters related to Conflicts of Interest, Confidentiality, Regulation, Codes of Conduct, Board Structures and Proceedings, amongst others.

The participating stakeholders concluded that as long as there was no overzealousness, it would be beneficial for businesses to be guided on a voluntary basis on how to improve their governance and how to conduct their business in a more responsible manner.