4 - 10 October 2001

How to get a return on personal investment

A capacity audience last Wednesday attended the keenly awaited half-day workshop on Corporate Governance for the Maltese-run family business conducted by international specialist Peter Barrett from IoD Hong Kong at the Malta Financial Services Centre (MFSC) building in Attard and organised by the Institute of Directors (IoD).
IoD organised the workshop in association with the MFSC after numerous requests from participants who attended the last workshop at the Corinthia Palace Hotel in Attard, for a session devoted solely to the particular governance problems faced by Maltese companies. The IoD have been at the forefront in promoting good corporate governance in Malta through conferences, seminars, education and the media.
Some of the key areas that Mr Barrett tackled during the governance workshop on 26 September included responsibilities of the Board, the roles of the chairman and managing director, succession in the family business and the planning of the estate. During the event he examined in depth a number of other critical areas of concern to Maltese-run family businesses including the differences between family-run businesses and professional firms, family harmony, using external advisers, self-analysis and a presentation on “How to save your business”.
In his opening remarks James Satariano, chairman of IoD said “the Board is the engine of wealth creation and we need good governance to ensure that it does not become an endangered species. The duty of the board is to monitor management since nobody else can do that and in my view tens of thousands of lives may depend upon how well we run our companies here in Malta. We at the IoD have always argued that the business culture of these islands and the principle objective of its business enterprise is to generate economic returns for its owners. The majority of directors in Maltese family-run firms own a number of shares that are “significant” in terms of their personal finances.
“This, in my view, has two beneficial effects: it aligns personal with corporate interests to give a genuine sense of stakeholding and it also limits the number of outside directorships to a ‘responsible’ number. In other words, top management is highly motivated but also simultaneously exposed to risk; it is this feature of our family firms that has made our Maltese enterprise owners capable of prodigious performance. Corporate Governance is about how the organisation achieves this purpose. We all know that managers and directors of public enterprise do not think like owners.”
This theme was developed by Mr Barrett, the link between the forms of governance and economic performance being direct and fundamental. Mr Barrett introduced the delegates to a number of useful tools for identifying the training needs of directors and senior managers through self-analysis, a coached “breakout” to moot a set case study with co-delegates in groups of 15-20 persons, while he referred extensively to the Draft Code on Corporate Governance prepared by the Malta Stock Exchange.
Delegates were asked to score their own company boards against the Code to ascertain and evaluate individual board performance as a departure point for discussing with their boards areas of identified weakness. The Draft Code, maintained Mr Barrett, is “not just for public companies but represents best possible practice in Malta”.
Mr Barrett then suggested to the delegates that they submit their questionnaires to the IoD Malta to compile a National Corporate Governance Benchmark to establish appropriate training for local private companies on board effectiveness. This audit was considered important by the delegates.
The Maltacom Group in particular came in for significant comment by Mr Barrett who asserted that the way Maltacom manages its corporate governance is among the best in the world since Maltacom strives to reach the best UK corporate governance standards, as the company is listed on the UK Stock Exchange.
Mr Barrett gave an overview of a number of succession models and outlined the succession strategies of high and low profile individuals including a fascinating insight into the approach adopted by Roy Disney, son of the late Walt Disney; a traditional Chinese family-firm succession story and various fiscal models of great interest to the delegates. He also related how important it is for the business community to take difficult decisions and recounted how Hutchison Whampoa, one of the most successful firms in Asia, had shed over 250 companies in less than six months in order to re-establish profitability.
During his summing-up Mr Satariano explained that “the field of corporate governance has emerged in recent years as a crucial aspect of company performance”. Mr Satariano announced that the IoD will shortly be introducing the Diploma in Company Direction and this will be co-ordinated by the IoD in Malta in association with ODL Hong Kong. “The management of business performance to produce wealth and employment is vital in a country with no natural resources except human resources – properly trained directors to lead these resources responsibly is the IoD’s next goal,” he concluded.