A total of 23 high profile corporate directors were bestowed with the ‘Accredited Director’ status, while 58 directors were awarded with certificate of participation by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and the Securities and Exchange Commission (SEC) last week for successfully completing the Corporate Directors Program.

The awards ceremony was held under the patronage of Chairman of the Securities and Exchange Commission Tilak Karunaratne.

As the trustees of the shareholders, directors play a major role in the business and therefore being equipped with the financial reporting requirements and the governance aspects have become vital for directors to perform their duties and responsibilities diligently. With this objective in mind, CA Sri Lanka and SEC came together last year to introduce a groundbreaking program for directors to help uplift their knowledge and skills to equip them with the required knowledge in today’s constantly changing context.

Having completed two successful intakes, the directors were recognized at the awarding ceremony for successfully completing the required modules of the program and those who have fulfilled the requirements to be recognized as Accredited Directors.

The program was conducted over ten sessions and featured a combination of lectures, panel discussions and work group sessions featuring well known experts including representatives from the corporate community, regulatory agencies, corporate lawyers, financial analysts, auditors and assurance providers.

President of CA Sri Lanka, Arjuna Herath while congratulating the directors who were awarded with the Accredited Director status and the certificates, emphasized that a director’s role is both critical and wide in their capacity as trustees of shareholders.

“In today’s complex and constantly changing world, challenges are part and parcel of a director’s daily life. Therefore, as an institute which is championing good governance and is continuously endeavoring to offer the country’s professional community with the thought leadership and most pertinent of programs for their advancement, the Corporate Directors Program is yet another important initiative aimed at enhancing the country’s corporate leadership,” he said.

He added that the importance of the program was obvious by the overwhelming response it received, which led to a quick comeback for a second time in 2014, although the original schedule was to organize only a single program for a year.

Meanwhile, Chairman of the Securities and Exchange Commission of Sri Lanka Tilak Karunaratne made the following comments at the event.

The Corporate Directors Program is a distinct and timely initiative that is designed to enhance the knowledge and skills of directors in listed entities. Knowledgeable and progressive leadership in these companies indeed is important for the smooth functioning of the capital market. It is under such conditions we at the SEC signed the MOU with CA Sri Lanka in May 2014 to provide financial assistance for this program.

I perceive this initiative as an ideal opportunity for directors to widen their knowledge on performance and conformance governance, corporate and social responsibilities, financial and integrated reporting and applicable laws and regulations.

“Yaha Palanaya or Good Governance” is a term that has become a salient feature in the winning formula in election of leaders in this region in recent times. The election campaigns of President Maithripala Sirisena of Sri Lanka, President Joko Widodo of Indonesia, and Prime Minister Narendra Modi of India are important examples of this phenomenon. Further, the same theme is put in to practice under the leadership of the President Xi Jinping of China in minimizing corruption and creating a cleaner society in that country.

Inculcating good governance in a country would not be possible unless and until the essence of this ideology cascades down the line to all important segments inter alia the economy. Therefore, I expect this program conducted jointly by CA Sri Lanka and SEC will provide the knowledge and skills required in promoting Good Governance – which in essence is corporate governance – within the respective organizations of the participants.

Transparency, accountability, risk management, credibility, prevention of concentration of power are the cornerstones of good governance. I am confident that this program would have addressed all these aspects through its curriculum.

However, I must stress here that effective corporate governance is not merely complying with rules, but is about intellectual honesty and adhering to the true spirit to the essence of Good Governance.

Few decades ago economists Milton Freidman perceived the responsibility of the private sector as increasing profits in their corporates. However in today’s world, we believe that running the business successfully is not simply about profit and market domination but management focused on corporate social responsibility. Companies that focus on corporate social responsibilities will foster accountability within their organizations and promote inclusive development which is the key for good governance. On the other side of the coin, companies will be able to enhance their brand image and reputation, foster positive work place environment, increase customer loyalty, etc. I am pleased to note that the program would have delved into this segment even further.

Financial and integrated reporting is vital for a good governance framework. Integrated reporting will incorporate financial and non-financial information and thereby enabling stakeholders to understand how the organization performs. An integrated report looks beyond the traditional timeframe and scope of the current financial reporting by addressing longer-term consequences of decisions and actions. It demonstrates the link between strategy, governance and business model in an organization that leads to transparency and credibility.

Awareness on relevant rules and regulations cannot be undermined when we talk of good governance within organizations. Directors should have a thorough understanding on relevant company law provisions, rules on risk management and compliance, listing rules of the Colombo Stock Exchange (CSE), employment regulations, etc.

Risk management and compliance is a pivotal requisite if we are to bring about a culture of good governance in organizations.

Prudent risk management will increase efficiency in asset allocation, reduce waste, curb fraud, promote better management of contingent and maintenance activities, reduce cost of capital, etc. Let me also stress on the importance of auditors executing their duties with due diligence. We are exploring the possibility of placing a legal duty on Audit Firms carrying out audits of Listed Companies to report any irregularities or improper conduct they find in the financial statements of the company to SEC. This type of responsibility imposed on auditors will assist the regulator to be more vigilant and take preemptive action to protect the interest of investors. This would lead to increased credibility and greater transparency of both Listed Companies and audited reports particularly in the mind of potential investors. This is a legal requirement present in other jurisdictions such as Malaysia.

Interdependence between governance and progressive leadership is seen in successful organizations. If you have leadership without governance, you risk tyranny and fraud. If you have governance without leadership you risk atrophy, bureaucracy and indifference. Hence I urge directors to utilize the skills you acquire to become pragmatic leaders who would encompass the current changes in the corporate world when formulating and implementing strategies and business processes.

If directors execute their corporate role prudently, our job as the regulator will be much easier. Their farsighted, informed and prudent decisions would encourage an efficient price discovery mechanism, increase market value, reduce systematic risk in the market and also result in a myriad of other positive factors. This would pave the way towards attaining the cornerstones (transparency, sustainability, accountability, risk management, credibility and prevention of concentration of power) of good governance in society.