Public sector approaches to corporate governance

Perhaps the simplest way to understand corporate governance is to think of it as ‘the management of management’. Thus, corporate governance often involves putting arrangements in place to ensure that management acts in the best interest of stakeholders.

‘Effective governance in the public sector encourages better decision-making and the efficient use of resources and strengthens accountability for the stewardship of those resources. Effective governance is characterised by robust scrutiny, which provides important pressures for improving public sector performance and tackling corruption. Effective governance can improve management, leading to more effective implementation of the chosen interventions, better service delivery and, ultimately, better outcomes. People’s lives are thereby improved.’ (Good Governance in Public Sector- IFAC draft consultation paper issued June 2013)

In the late 1980s and early 1990s, there were concerns about malpractice in organisations in the private sector and by organisations and individuals in public life. These concerns resurfaced again in the early 2000s with the accounting scandals in the U.S., Europe and also in Asia. More recently, in Mauritius, Betamax, State Trading Corporation, ICAC, MBC, Mauritius Telecom, Air Mauritius, etc. are no less in comparison.

With the move towards a ‘Modern Mauritius’, and the reduced levels of bureaucracy, there is an increased need to demonstrate openness and accountability.

Public service organisations, charities, mutual benefit organisations and the accountancy profession are meant to be heavily controlled by statue and regulation, which should include standards of conduct. Extensive safeguards are also meant to be built into internal procedures. Financial regulations, schedules of reserved or devolved authority, separation of power, regimes of corporate governance and internal control, declaration of personal and financial interest, rules for reporting gifts and hospitality and contacts with suppliers and so on are meant to all exist to create an environment free from abuse, fraud and corruption.

Sound systems like these are the first line of defence against unethical conduct. But following the rules is not enough on its own: professional, ethical conduct requires us to think about the reasons behind the rules, and constantly to monitor their effectiveness.

Further to the ongoing scandals since 1980s and the growing pressure and concerns that have been highlighted as a result of the recent humiliations of the previous government and the tidal wave of sleaze in the administration of many Ministers, a Committee on Standards in public life is highly recommended. An advisory non-departmental public body working under the aegis of the Cabinet Office is commended for a renewable period of up to three years, with an original terms of reference to examine the current concerns about standards of conducts of all holders of public office, including arrangements relating to financial and commercial activities, and ma-king recommendations as to any changes in present arrangements which might be required to ensure the highest standards of propriety in public life.

The committee should outline standards of behaviour for public officials (both elected and appointed) in three main reports covering the following areas:

•    Ministers, chief executives, civil servants, quangos

•    Central govt. spending bodies, themes and issues

•    Local govt. spending bodies, themes and issues

Beyond these three reports, there are ten principles that should be applied to all those operating in public life: (the Ten Commandments specifically tailored for the Ministers in office)

•    Selflessness – Holders of public office should make decisions solely in the public interest. They should not aim to create material or financial benefits to family or friends.

•    Integrity – Holders of public office should not be under any financial or other obligations that might influence them in their decisions.

•    Objectivity – All decisions in public business should always be made on merits.

•    Accountability – Holders of public office are accountable for their decisions and actions. They must submit themselves to scrutiny when appropriated.

•    Openness – Holders of public office should be as open as possible about their decisions and action and state their reasons. The reasons should only be withheld when the wider public interest demands.

•    Honesty – Holders of public office must declare any private interest that relate to their public duties.

•    Leadership – Holders of public office should promote and support these principles by leadership and examples.

•    Transparency – Holders of public office should take informed transparent decisions and managing risk.

•    Professional behaviour – Holders of public office should comply with relevant laws and regulations and avoid any action that would discredit their position or profession.

•    Values – Holders of public office should promote values for the country they serve and demonstrate good governance through behaviour.

These principles should be applicable to all holders of public office. The principle of leadership should ensure that the holders of higher public office should champion these principles.

An introduction or revision of the following is also recommended:

•    Standards of conduct for officeholders

•    Civil service code

•    Ministerial code

•    Parliamentary Commissioner for Standards

Ministers’ scandals since the 1980s have brought the issue of public interest against private gain into the spotlight. Many Ministers appeared to be abusing a system of privilege for their own private gain and the public’s trust in public figures was further damaged.

The function of good governance in the public sector is to ensure that government departments and Ministers act in the public interest at all time. This requires:

•    Strong commitment to integrity, ethical values, and the rule of law; and

•    Openness and comprehensive stakeholder engagement.

In addition to the requirement for acting in the public interest, achieving good governance in the public sector also requires:

•    Defining outcomes in terms of sustainable economic, social and environmental benefits.

•    Determining the interventions necessary to optimize the achievement of intended outcomes.

•    Developing the capacity of the department, including the capacity of its leadership and the individuals within it.

•    Managing risks and performance through robust internal control and strong public financial management; and

•    Implementing good practices in transparency and reporting to deliver effective accountability.

Our Parliament should create an Independent Parliamentary Standards Authority (IPSA), a body to independently oversee and regulate Ministers’ engagements, behaviours and expenses where new rules and regulations could be introduced by the Constitutional Reform and Government Act. The main role of the IPSA would be to create compliance officer who would regulate the expenses system of all Ministers, administer and pay Ministers’ expenses and their salaries. The IPSA and the compliance officer should be independent of Parliament, Government and of political parties.

The IPSA’s values would be independence, honesty, openness, accountability and fairness. These values would underpin the behaviour expected of the chair and members of the IPSA. In adhering to IPSA’s values, the Chair and members would undertake at all time to:

•    Observe the highest standards of impartiality, integrity and objectivity in carrying out their duties and responsibilities;

•    Act in good faith and in the interest of the IPSA.

•    Not disclose any confidential information without lawful authority.

•    Not misuse information or opportunities gained in the course of their public service for personal gain or for political purposes, or to promote their private interest or those of connected persons, businesses or organisations.

•    Declare in a register of interests any political, financial, personal and business interest; and

•    Comply with the IPSA’s rules on claiming expenses and the acceptance of gifts and hospitality.

•    Observe the Ten Principles of Public Life as discussed above.

The Chair, who would be independent of Parliament, would have a range of responsibilities including;

•    Maintaining a register of interest for Parliament;

•    Giving guidance to Parliamentarians on matters of conducts;

•    Investigating cases of possible misconducts; and

•    Reporting to the IPSA committee on standards and privileges

Coded Standards are a guide to a number of key components of effective practice which is based on the underlying principles of accountability, transparency, and probity. Compliances with a code can be seen as evidence of a department having good governance. Compliance is not enough in itself; Ministers must comply with the spirit as well as the letter of the code.