The European Commission has set up an expert advisory group to provide detailed technical advice on preparing corporate governance and company law measures. The group comprises twenty non-governmental experts from various professional backgrounds (issuers, investors, employees’ representatives, academics, regulated professions, etc.) with particular experience and knowledge of the subject.

Single Market Commissioner Charlie McCreevy said: “Expert technical advice from stakeholders is indispensable to making regulation work. I am confident that this group has the practical experience and technical skills to provide such advice on corporate governance and company law. An appropriate framework in these areas should ensure more effectively run companies, which in turn should make an important contribution towards enhancing growth and jobs in Europe in line with the Lisbon competitiveness agenda.”

Members of the group have been appointed for three years. They were selected following a call for applications launched in January 2005. The group will be consulted by the Commission on a regular basis. The group’s advice will supplement, not replace, public consultations on Commission’s initiatives. The Commission will regularly consult the group, chair the group meetings and establish the calendar for meetings.

The technical work of this group will be complementary to the more strategic role in the convergence of corporate governance in Europe carried out by the recently created European Corporate Governance Forum.

More details of the Commission’s work on company law and corporate governance are at: http://www.europa.eu.int/comm/internal_market/company/index_en.htm

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MONEYWEB: Philip Armstrong is well known within Edward Nathan, getting better known amongst the corporate governance community. Now Stephen Mildenhall, you're one of our judges in the Deloitte Good Governance Awards – and in fact we're going to have another finalist this evening in Joe Pamensky, representing Bidvest in the Remuneration Committee section – have you ever known of the work that Philip Armstrong does?

STEPHEN MILDENHALL: Actually not – no, I couldn't say I have.

MONEYWEB: Would it surprise you to hear that he was the convener and the main editor of the King report, which we all know?

STEPHEN MILDENHALL: That is quite surprising, because I guess he certainly hasn't got the credit for it.

MONEYWEB: And Philip, you've moved not only past the King report into something for the Commonwealth Association for Corporate Governance. So you seem to have identified this area early on, and making a career of it now.

PHILIP ARMSTRONG: Yes. Thank you, Alec. Yes, I've been concerned more with trying to see what makes business work. You know corporate governance isn't just about a set of rules alone. Its also about how you translate that to really drive the business in a properly focused but credible and accountable way. So I've been very fortunate in being involved in a lot of international initiatives. Commonwealth's one of them.

MONEYWEB: And now the biggest of them all. You've been appointed as the head of the Global Corporate Governance Forum of the World Bank and the International Finance Corporation. Did you have to apply for a job like that?

PHILIP ARMSTRONG: It’s a rather long, convoluted story, but I've worked with them for a number of years in an advisory capacity in fact, and a little while ago I was approached to put my name forward when they were seeking to fill this position. And it really sort of unravelled from there.

MONEYWEB: Is it a new position?

PHILIP ARMSTRONG: No, the Global Corporate Governance Forum was initiated in 1999, following the first set of OECD corporate governance principles. And it was largely directed at the meltdown that took place in Asia and to try and project governance standards there at an internationally stable level. And also, of course, with the Eastern bloc moving into a more market-based economy, there is a lot of focus there. About a year ago the person who was previously the head of it, who is now the head of the International Corporate Governance Network, which is the investor body, relinquished the position. It’s been vacant for about a year and they've been really trying to identify someone they felt would be able to take it to the next phase.

MONEYWEB: How many applicants do you think there were?

PHILIP ARMSTRONG: I'm told there were 50.

MONEYWEB: Fifty applicants from around the world?

PHILIP ARMSTRONG : Yes.

MONEYWEB : And a South African got the nod. Congratulations on that. But what are you going to be doing on a day-to-day basis then?

PHILIP ARMSTRONG: It’s quite difficult to explain in a few words, but essentially my role is to firstly give some structure and strategic vision to the next phase for the next three years. The second one is to look at the work that's currently being done, which is very much around awareness issues, and now start to bring some focus around where can we make changes, how can we make them, and how do I stitch together the various agencies and institutions involved in governance into assisting or facilitating more effective governance-based systems?

MONEYWEB: So the World Bank's very involved in emerging markets, emerging economies. Are you going to have much work on our own continent here in Africa?

PHILIP ARMSTRONG: The focus is definitely there. Wilgrowitz [?] in his recent visit made a commitment to that. And certainly one of the advisory areas I've been already playing a role in is identifying issues and circumstances elsewhere in Africa, and where governance is going to play a critical role in investment opportunities.

MONEYWEB: Looking at the public sector, in other words government and those organisations, or looking at companies?

PHILIP ARMSTRONG: We'll be looking at both. The focus was previously very much in the private sector. I think they came to quickly realise that in the emerging markets governance through the private sector is not necessarily a major driver, and that the public sector is very often quite predominant, particularly through state-owned enterprises. And there's another initiative again, which I've been working with the OECD, who've just recently launched guidelines in that area. So we're looking at really trying to integrate the two.

MONEYWEB: Philip, here in this country we've heard of obviously our own King Commission. We know quite a lot about Sarbanes-Oxley. The Brits had something called the Cadbury report. How good are we in corporate governance in South Africa, relative to the world?

PHILIP ARMSTRONG: It’s a difficult one to answer. Perhaps I might lie a bit more on the critical side. I think we're very good with the reporting, the awareness. I think there's very few markets that are as aware on corporate governance issues as South Africa. I think in terms of reporting, very comprehensive. What worries me a little bit is that, other than for some very prominent companies, I still think it’s a little bit formulaic and I'm not sure about the substance. But I don't think the answer lies in regulations. I think it lies in a more active market in terms of engagement to test and validate these reports on governance conduct.

MONEYWEB: Would you agree with that, Stephen?

STEPHEN MILDENHALL: I think we do tend to be reasonably good in South Africa, compared to other countries, but I think there are certainly exceptions. And I also do think that, when it comes to disclosure, people tend to just go by disclosure rather than practising it in some cases.

MONEYWEB: David Shapiro, last question for Philip?

DAVID SHAPIRO: Is there a report globally that highlights business practices globally, for anybody looking to go into another area – where you'd be able to determine levels of corporate governance, or how to conduct yourself in those areas?

PHILIP ARMSTRONG: Not really. I think there are a lot of people reporting on different aspects. You know, rating agencies have done some work. The World Bank has done a very comprehensive assessment, but much more around economic indicators and investment climate. From a governance point of view it’s been very much focused around investors, people like McKinsey and others who've been trying to test the climate of governance.

MONEYWEB: And if you want to invest, for instance, in a company in Zambia, you've got to know that you can trust their financial results. You've got to know that there isn't a chief executive there dipping his hand in the till. How do you know that?

PHILIP ARMSTRONG: Well, that's the problem at the moment, if you want my honest opinion. I think that's the real issue – how do you put in place structures or support the very rudimentary structures there to make them more effective. And it’s a very complex issue to answer very quickly. But the real issue is just looking at how the market is able to sustain good governance in those environments, and that's the real challenge which I guess I'll be faced with.

MONEYWEB: Bon voyage to Washington for three years, Philip Armstrong, a director of Edward Nathan – now the head of Global Corporate Governance Forum at the World Bank. Very, very big job.

(Source: www.moneyweb.co.za)

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Qatar and not the UAE ranked as the most competitive economy in the region this year, according to the World Economic Forum, although the UAE came second. This is a testament to economic reform and massive foreign investment in Qatari oil and gas expansion.

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Standard & Poor's Corp. is getting out of the business of rating U.S. companies on corporate governance, closing the door on the struggling service that was beset with difficulties since its 2002 kickoff.

Simultaneously, the firm is withdrawing its rating of embattled Fannie Mae, the sole U.S. company that allowed the firm to go public with its corporate governance rating.

Though the business has been successful in emerging markets, S&P never found its footing importing the business model to the United States, with corporate America showing little interest in coughing up big bucks for the type of labor-intensive governance workup the firm was offering.

The intensifying regulatory climate in the United States may have presented the firm with one of its biggest challenges: companies facing the costly and time-consuming process of complying with the Sarbanes-Oxley Act and other governance reforms didn't have the appetite - or the need - for S&P's offering.

S&P, a unit of McGraw-Hill Cos., first brought the so-called corporate governance evaluation and score to the United States in October 2002 after several years of marketing abroad. The evaluations, which include in-depth discussions with company officials and board members, focused on four areas: ownership structure; stakeholder rights and relations; financial transparency and information disclosure; and board structure and process.

Fannie, only a small handful of companies hired S&P for the governance evaluation, though the rest declined to make the score public, according to the firm. Though S&P has been tight-lipped on what individual clients pay for its governance evaluation, at the time of its launch, officials said the fee ranged from $20,000 to $100,000, depending on how much time and effort is put into the individual engagement.

Corporate governance scores are distinct from credit ratings and S&P will continue to monitor Fannie Mae and other companies' governance practices as part of its "normal credit rating surveillance," the firm said.

"I think (Sarbanes-Oxley) was expensive and it occupied a lot of attention," said George Dallas, who manages S&P's global governance services out of London. Companies might have seen the highly interactive service as "nice to have rather than a have to have."

At the same time, S&P drew some criticism from investors for the model's potential conflicts of interest, at a time when the market was highly sensitized to such issues. Unlike other governance rating firms that rank a large universe of companies, S&P only scored companies willing to pay for the governance checkup and it was up to the client whether to publicly disseminate the end product.

Though S&P officials remained adamant that the evaluations could be conducted in a fair and objective manner, the service took more heat after announcing its rating for Fannie Mae in early 2003. Fannie received a strong 9 out of 10 score. Eventually amid a swirl of scandal relating to accounting, compensation and other governance issues at Fannie Mae, the score notched down. In its most recent downgrade, before the score was withdrawn Friday, the score was lowered to 6 from 7.

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UAE's Economy Minister Shaikha Lubna Al Qassimi said that an amendment to the company law would allow corporations to offer a minimum 25-30% stake when going public. Current law dictates that 55% of a company's stock must be offered for sale. Shaikha Lubna also told a capital markets conference yesterday that the government plans to accelerate the privatisation of state-owned companies.

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A Birmingham professional has slammed a new Government Bill that could see accountants jailed for up to seven years.

The Company Law Reform Bill could lead to seven year jail terms for auditors and directors of firms who make mistakes on accounts, even if the errors were genuine and involved no dishonesty.

Accountants could also be struck off.

Malcolm Winston, senior partner at the Birmingham office of UHY Hacker Young, claims the Bill proposed by the Department of Trade and Industry is ludicrous.

He said: "The proposed punishments are wholly disproportionate and could discourage candidates from entering the profession."
"If the new Bill becomes law it will be another example of further unnecessary red tape.

"UK accountants already work to very rigorous and exacting standards and there is no evidence that this type of sanction is necessary. The proposed legislation would simply increase compliance costs, which would ultimately be passed on to clients."

However, in a submission on draft clauses to be included in the Bill, the Institute of Chartered Accountants in England and Wales has called for the swift introduction of the "much needed" reforms.

The Institute has welcomed the broad thrust of the Bill but "has raised a number of concerns about the detailed drafting of the clauses which may not achieve their intent".

Nevertheless, it backs auditor liability reform.

But it urges a re-think on the wording of the changes.

It said it was concerned that the inclusion of the words "knowingly or recklessly" could well result in criminal charges being brought where there has been an honest mistake.

The Bill will go before the House of Lords next month.

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Jordanian Corporate Governance Society participated in the forum entitled" Agenda of enhancing corporate governance in the Middle East and North of Africa" organized in Morocco. The forum was organized by Economic Cooperation and Development Organization, Fifth Working Group with collaboration with Corporate Governance Forum for Middle East and North Africa. Vice Chairman of Society, Omer Al Jazzy presented a working paper on role of awareness in the field of corporate governance in Jordan and challenges that encountering this role whether from legislation or practical point view, in addition to what is related to culture of business society in the field of corporate governance. He added that the society is committed to through a working plan to enhancing the concept of corporate governance in Jordan.

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