Accountability Deficit: Mismanagement and Board Oversight in Mauritius’ SOEs

Having elected the ‘Alliance du Changement’ for better governance, the public expects a clear departure from the previous administration’s mistake

By Lex

The performance of numerous State-Owned Enterprises (SOEs) is deeply concerning. Despite receiving substantial government funding, amounting to billions of rupees, and being governed by boards with a blend of executive and non-executive directors from both the private and public sectors, these entities have demonstrated alarming financial underperformance and suffered significant reputational damage. The severity of this situation is underscored by the need for billions more in public funds to prevent the collapse of critical entities like Air Mauritius. This pattern of mismanagement extends to SBM, a private bank with majority government ownership, which under prior leadership sustained considerable losses and faced severe criticism for imprudent decisions, including the write-off of substantial bad debts owed by disreputable clients, both local and international. Furthermore, the Mauritius Investment Corporation (MIC), established with approximately Rs 80 billion to rescue and support “distressed” businesses in response to the pandemic, has also drawn negative media attention for its financing of questionable enterprises, some apparently unaffected by the Covid-19 crisis. Adding to these concerns are disturbing allegations from various stakeholders regarding collusion, the falsification of board meeting records, and potential conflicts of interest.

* What specific fiduciary duties (as outlined in Section 143 of the CompanyAct 2001) were expected of the executive and non-executive directors of State Owned Enterprises and private companies with majority governmentownership (Air Mauritius, SBM, etc.) and the MIC in relation to financialperformance and reputation management?

Executive directors hold internal leadership roles, managing the company’s operations and assuming high-level responsibility. Non-executive directors assist in oversight of business activities and offer objective perspectives for strategic decisions. Companies are expected to adhere to principles of good governance and high ethical standards.

* One would expect that the board members would have understood and interpreted their duty to act in good faith and in the best interests of the different institutions, considering the significant government funding involved and the public interest in these entities. Does it seem that that was indeed the case?

This has not been the case, as the instances of poor governance we are currently observing are a consequence of the previous government’s complete laissez-aller approach. The former administration appointed cronies to lead critical institutions, both public and private – the latter with majority government shareholding -, without establishing any accountability mechanisms. One would hope that the present government, having secured its mandate on a platform of positive governance change, will assiduously avoid repeating the shortcomings of the previous regime.

The former regime consistently obstructed parliamentary scrutiny into the condition of certain companies by claiming confidentiality clauses or citing their private status. This lack of transparency prevented the disclosure of crucial details. The present precarious state of Air Mauritius, for instance, is largely attributable to the mismanagement and questionable practices of cronies appointed by the former government, who have faced no repercussions for their actions.

It remains unclear what concrete actions or strategic initiatives, if any, the Board of the national airline actually implemented to protect the company during its period of increasing difficulty. This uncertainty fuels speculation about potential inaction or the inadequacy of any measures taken, raising serious concerns about the Board’s oversight and its ability to fulfill its fiduciary responsibilities.

* Proper due diligence processes should have been in place for board members to assess the financial viability and reputation of clients receiving loans (in the case of SBM) or companies receiving investment (in the case of the Mauritius Investment Corporation). That does not seem to have been the case – and for a long time, isn’t it?

The National Code of Corporate Governance of 2016 sets out the principles of good governance.

‘Directors should be aware of their legal duties. Directors should observe and foster high ethical standards and a strong ethical culture in their organisation. Each director must be able to allocate sufficient time to discharge his or her duties effectively. Conflicts of interest should be disclosed and managed.
‘The Board is responsible for the governance of the organisation’s information strategy, information technology and information security. The Board, committees and individual directors should be supplied with information in a timely manner and in an appropriate form and quality in order to perform to the required standards.
‘The Board, committees and individual directors should have their performance evaluated and be held accountable to appropriate stakeholders. The Board should be transparent, fair and consistent in determining the remuneration policy for directors and senior executives.’

The principles of good governance demand significant accountability and diligence from board members, especially those genuinely invested in the institution’s success and reputation. Yet, the apparent actions of individuals who depleted company funds through negligence or malfeasance, or their blissful unawareness of the fundamental ethical and operational Code, highlight a dangerous dereliction of duty that undermines the very foundation of good governance and erodes public trust.

* Non-executive directors are also expected to exercise a level of care, diligence, and skill in overseeing the decisions and actions of the executive management, particularly concerning high-value transactions and potential risks. But is this truly possible in reality, or are they perhaps silenced into submission by the management and the rest of the board?

While non-executive directors are indeed expected to exercise care, diligence, and skill in overseeing executive decisions, particularly concerning high-value transactions and potential risks, the reality of their effectiveness can be complex and potentially compromised. The ideal of an independent and impartial perspective, detached from daily operations, is crucial for their intended role.Read More… Become a Subscriber

Mauritius Times ePaper Friday 11 April 2025