Call for corporate transparency
By Lyna Mohammad

Deputy Minister of Finance, Dato Paduka Awg Hj Yakub delivering his speech at the opening of the Corporate Governance and Directors Duties & Responsibilities Seminar. Photo: Rudolf Portillo

"Increasingly living in a global village, no doubt we have to compete internationally. The standards of corporate life in the country have to stand up to scrutiny by world economics," said Deputy Minister of Finance, Dato Paduka Awg Hj Yakub Abu Bakar.

He stated this at the opening of the Corporate Governance and Directors Duties & Responsibilities Seminar, organised by the Brunei Darussalam Institute of Certified Public Accountants (BICPA).

Transparency, he added, is not just the process of approval but also how companies are managed are essential, in line with the efforts that have been made to attract foreign direct investment into Brunei.

"It is noted that the high corporate governance imposed by the US prompted a number of companies in Europe to speed up their process of high corporate governance as the Europeans see the benefits outweigh the costs," he said.

Disclosure quality is an important element of corporate governance as studies show, and accounting standards play a critical role in corporate governance by informing investors and by making contracts more verifiable.

In some studies in 2001, it was also believed that a firm may have higher disclosure quality if its auditor is one of the "Big Six International Firms". With previous research associating Big Six Auditors with higher audit quality, these firms may be more likely to ensure transparency and eliminate mistakes in a firm's financial statements.

This is because they have a greater reputation to uphold, they may be more independent firms and they face a greater legal liability for making errors. Additionally, he said, even in cases where actual disclosure is not higher, they (Big Six Auditors) may offer higher perceived disclosure quality and allay investors' fears due to their prominent, recognisable names.

The Deputy Minister noted that behind every corporate setback, there has been a series of past decisions that have not served that particular company well, or failures to make appropriate decisions when needed, and the responsibility stops at the board of directors.

Good corporate governance however, does not guarantee corporate success but makes corporate failure less likely; corporate failures attributable to lack of control, fraudulent financial reporting and deceitful top managements, in particular. Good corporate governance also impacts on strategy, not just on controls, and adopted business plans need to be viable when tested against unfavourable future scenarios.

In seeking to provide the framework, in which corporations can succeed, the government is mindful of the place that regulations can play in promoting high standards of corporate governance, he noted.

Promoting the use of Acceptable Accounting Standards in Brunei with the view to facilitate the adoption of Accounting Standards as well as the roles and responsibilities of directors to uphold the practice of good corporate governance, the Deputy Minister invited BICPA to work with Ministry of Finance (MOF) on this matter.

He said that high standards of corporate governance depend upon individual boards of directors and that too many imposed standards are unlikely to be sufficiently sensitive to the particular needs of unique businesses.

Regulations and laws, in general, should be a last resort where it is appropriate when individual enterprises and representative bodies reveal that self-regulation is inadequate or not appropriate.

Dato Paduka Awg Hj Yakub said that he accepts that regulation brings more consistency, which means both a fairer 'level playing field' and also a corporate scene that can be interpreted with more confidence by analysts, investors as well as others.

"Mankind by nature is constantly subjected to temptations and greed. Good corporate governance will prevail if we can avoid such temptations and greed," he said.

The day-long Corporate Governance - Director Duties and Responsibilities Seminar is a practical course showing participants how to improve the realities of corporate governance to help ensure an organisation's success.

The course is designed for chairpersons of boards, board committees, public and private sector enterprises, heads of public sector agencies or legislative bodies, board committee members and other non-executive and executive directors, etc.

Keynote speakers for yesterday's seminar was Eur Ing Professor Andrew D Chambers from the United Kingdom, and the panel speakers were Mr Kaka Singh and Mr B.S. Mangat, both from Singapore and Brunei Darussalam's Ahmad Basuni Hj Abbas.

The seminar content includes new perspectives on corporate governance, global convergence and diversity in corporate governance, the need for a free market in corporate control, where internal audit fits in the corporate governance mosaic, difficulties in observing the best practices for the small/ family owned companies, essential principles of best corporate governance, tomorrow's board and tomorrow's audit committee, audit committee best practices, effective directors, rules and responsibilities and effective boards.

Courtesy of Borneo Bulletin