Wednesday 19 February, 2020

JSE corporate governance review of firms shows need for improvement

The Jamaica Stock Exchange (JSE) has published the results of its Corporate Governance Index for 2018/2019, indicating that most companies participating in the survey of governance practices are performing fairly, but there’s room for improvement.

The index first launched on April 27, 2016, was developed in association with Inter-American Development Bank (IDB) and the Multi-Lateral Investments Fund (MIF).

For the period April 1, 2018, to March 31, 2019, the JSE in collaboration with the Corporate Governance Index Review Committee (CGIRC) conducted a review to assess the corporate governance practices and principles of the companies listed on the JSE for more than a year.

The CGI measures the strength of a company’s adherence to corporate governance standards and best practices, which are altogether based on governance codes developed by the Private Sector Organisation of Jamaica (PSOJ).

The governance standards are also based on legal and regulatory requirements as embodied in the rules of the JSE, the Companies Act and the Securities Act.

Ratings of the CGI range from ‘AA’ which means that the company’s performance was “excellent in terms of the various principles of corporate governance as documented in the JSE’s Corporate Governance Index,” and ‘ A’  which means that company’s performance was “very good in terms of the various principles of corporate governance as documented in the JSE’s Corporate Governance Index.”

The lowest rating on the Index, ‘NR’, means, the JSE said, “that no rating was applied due to insufficient information on which to base a rating or that the company has listed for less than the stipulated period for which rating would be applicable.”

For the 2018/2019 CGI, a total of 67 companies were reviewed. Of this total, only eight companies granted the JSE permission to publish their CGI ratings.

The overall average CGI for the period 2018/2019 was B.

The JSE commented, “This indicates that most companies’ performance was fair in terms of the various principles of corporate governance as documented in the JSE’s Corporate Governance Index Manual.”

However, above this ranking are three other categories ranging from BB through A to AA, indicating that for most companies there is scope for improvement, although they did not get a failing grade.

Among the companies which have disclosed their rankings are Jamaica Producers Group and Carreras, which each received the second-highest ranking of A for corporate governance.

The Jamaica Stock Exchange Limited, PanJam Investments Limited, Lasco Manufacturing and t-Tech limited disclosed a ranking of BB, which is the third-highest on the corporate governance index scale.

AMG Packaging and Paper Company Limited and Honey Bun (1981) Limited disclosed a ranking of B on the CGI scale, indicating that there are three levels of excellence left to achieve.

The Corporate Governance Index Review Committee (CGIRC) is an independent body under the leadership of the PSOJ Corporate Governance Committee.

The JSE notes that it was created to ensure “transparency and accountability and to maintain the credibility of the assessment system.”

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