JAMAICA STOCK EXCHANGE 2008 CONFERENCE
MONTEGO BAY, JAMAICA
January 31, 2008
Presentation on
COLLABORATIVE GOVENANCE FOR GROWTH AND DEVELOPMENT
by
Omar Davies, Member of Parliament &
Opposition Spokesman on Finance & Planning
A: INTRODUCTION:
1. Pleasure etc, to participate once more in this significant annual conference. Has grown beyond a Jamaican event and provides an opportunity for participants in the financial sector from Jamaica, the region and indeed other areas to meet and reflect on important issues.
2. This is an interesting topic which I have been asked to address. I have spent a great deal of time reflecting on the issues which I will seek to raise and to stimulate minds of participants to think further about.
3. This topic is of critical importance as we seek to further develop the capital markets in the Caribbean but in a way to ensure maximum public trust and confidence.
B: DEFINITIONS
1. The word “governance” used in several contexts to refer broadly to the process of decision making and the way in which decisions, having been taken are implemented (or not implemented).
2. As such we often use the word in several contexts at the corporate, national and international levels to broadly refer to the exercise of power and action over a set or group by another set or group.
3. Broadly applied, it basically refers to the way a sector or institution is directed, administered or controlled. It also refers to relationships between stakeholders in achieving many broadly established goals and objectives and the extent to which all the various sector interests or parties are served with equity.
4. What are the characteristics of good governance? The list could be exhaustive but may include that it must be participatory, consensus oriented, accountable, transparent, responsive, effective, and inclusive and adheres strictly to the rule of law.
5. In looking at the issue of collaborative governance there is the assumption of full and active participation in a process where decisions effectively represent as broad a consensus as is feasible through the maximum flow of information and through consultation.
6. The challenge which we should seek to address within this context is how the collaborative approach can enhance the process of growth and development in a dynamic global environment.
7. Within the context of this conference, I would wish to focus the attention on the important actors in facilitating the expansion and development of the capital market in Jamaica and the wider Caribbean. As such we need to identify the principal actors between whom collaboration will take place.
C: MAIN PLAYERS (ACTORS) WITHIN THE CONTEXT OF THE FOLLOWING SETS OF PLAYERS
1. Members of the Public or the clients
2. Professionals or special interest groups operating within the sector
3. The Regulators
4. The Media
5. The Legislators/members of t
he political directorate
6. Even as these five groups of players/actors are united around a common vision as reflected in my suggested definition of collaborative governance, there are specific tasks for each. Would wish to briefly outline my view as to the role to be played by each.
D: ROLE OF “CLIENTS”
1. In a sense, this is by far the most important group/set of actors in collaborative governance. A basic reason for this position of preeminence is that, in the final analysis, the resources being invested, loaned, borrowed belong to this group.
2. As such, even whilst there are obligations to be discharged by all other actors, a desirable situation is that members of this group seek to increase their knowledge of the operations of the sector and to be as vigilant as possible in ensuring that whatever actions are being taken are consistent with the objectives of good governance.
3. In several instances the more vigilant members of the public can be wrong in raising false alarms, but it is my view that such vigilance, even when misguided, is to be preferred to situations where members of the public expect that someone else will act on their behalf.
4. As such, I urge members of the public at every instance to seek to systematically increase their knowledge of operations of the sector not only domestically but internationally and watch carefully to ensure that best practices are being pursued.
E: PROFESSIONALS/SPECIAL INTEREST GROUPS
1. The first obligation of those players/professionals in the sector is to ensure that relevant legislation and governance rules are adhered to. Clearly at the level of the firm in which you are employed, there is an obligation to protect the reputation/integrity of that institution.
2. In some jurisdictions, whistle-blowing legislation has been introduced in order to provide protection and incentive to professionals in the field to reveal or to make known public malpractices which are taking place.
3. However even in the absence of such legislation, there is an obligation, within the context of collaborative governance. The responsibility which this places on this group is that professionals in the field should not only be ever watchful but be willing to bring wrongdoing to public attention.
4. It is always fascinating me that whenever major wrongs have been revealed the extent to which many professionals, saw signs which should have triggered a warning light but kept this information to themselves because they felt that it had no direct consequence on their jobs or on their own area operation.
5. A fascinating issue which I would wish to place on the table, particularly in my present situation of not having ministerial responsibility, is whether there should be retroactive penalties even when these are not required by law.
6. In instances where a law has been explicitly broken e.g. fraud – then it is clear that he/she who committed the act should not be allowed to profit from any illegal action. Even in those instances it is sometimes difficult to clearly delineate the benefits which may have resulted from such actions and hence what penalty should be enforced.
7. However, I have been amazed in several instances where officers can be seen to have been, at the minimum, cavalier in decision making are protected by clauses in their contract which allow them to depart with significant sums as part of the separation agreement. Even as an ordinary member of the public, such “rewards” do not go down so well with me and it is an issue which I would wish to explore further. I will return to this matter from another angle later in my presentation.
F: THE REGULATORS
1. The job of the regulators is perhaps one of the most difficult, particularly in small societies such as those of the Caribbean.
2. Collaborative governance demands of them that rules and regulations should be applied without fear or favour. The difficulty is that there are times when those against whom these rules and regulations should be applied have become societal icons. Furthermore because the loss of position and financial re
sources is such a major “come down”, regulators may place themselves in personal danger to carry out their tasks.
3. Nonetheless, within the context of striving towards a common objective of improving governance, equity demands that the laws be fully applied with equity.
4. Regulators also have an obligation to keep current as to international best practices. We all know that there is no jurisdiction where the perfect regulatory structure has been developed and it is imperative that regulators gather from time to time, either by themselves or within the context of symposia such as this, to share ideas as to how their performance can be enhanced through collaboration and learning from experiences of each other.
5. A final task for regulators complements the work of the first group of actors – the clients. Regulators have an obligation as an integral part of their job to increase the level of public education and public awareness. This aspect of their jobs is often relegated to a small PR/Public Education Department.
6. It is my view that this activity should be given priority attention with the “head honcho” of the regulator institution seeing this as perhaps his/her most important task. As I indicated before, in the final analysis the resources being managed belong to the public. Hence, advising them on steps which they can take to watch for warning signals must be seen as perhaps the first line of defence.
7. In this context, I would commend for reading by all members of this audience a full page advertisement put our by Jamaica’s Financial Services Commission in the papers of Sunday last. This is a situation where the FSC within the context of certain recent “challenges”, have answered the major questions being posed in plain simple English such that members of the public would have a clearer understanding of the reasons for the position which the institution has taken.
F: THE MEDIA
1. In any society with a market driven financial sector all forms of the media have a critical role to play, not only in informing the public but also to complement the watchdog responsibilities of the professionals in the area as well as the regulators.
2. Too often, for whatever reason, sometimes the lack of knowledge about the sector the media houses do not play the role which we desire that they play.
3. This deficiency speaks to several issues. The first relates to the need for media houses to employed persons with the appropriate training to write and comment on financial matters. From my own experience, too often the persons assigned to cover important areas of the financial sector demonstrate not only a less than acceptable level of knowledge about the sector but often do not demonstrate basic numeracy skills.
4. As such they are often taken up by hype and public relations without being able to probe beyond superficial statements and headlines.
5. The media also have a task in ensuring that the main players within the sector are questioned as to actions which have been taken (or not taken) consistent with the objective of transparency and full disclosure.
6. A final important area of responsibility for the media is to ensure that the State, ostensibly in pursuit in acquiring information for national security, does not become over intrusive into the private lives of citizens. I should confess that this is one area of concern to me even as we abide by the letter of the law of international agreements.
H: POLITICAL DIRECTORATE/LEGISLATORS
1. This group has a critical role, particularly in small societies such as the Caribbean.
2. This group is faced with the fact that already income disparities within our societies have laid a foundation of inequality.
3. Wrongdoings in the financial sector not only exacerbate such inequalities but strengthen the fears of those with less privilege and less money that decisions are only taken in favour of the rich.
4. Therefore, it is imperative that the legislators ensure that collaboration at th
e regional and international levels leads to imposition of the highest level of governance in the financial sector – not only to demonstrate to the “outside world” our commitment to transparency and probity but also to demonstrate domestically that the rights of the voiceless and those who need most protection from the State are being looked after.
5. Within the context of good governance, certain delicate issues have to be addressed. I name but two. The first relates to the relationship between the political directorate and the regulators. It is imperative that once the legislation has been enacted there should be no interference from the political directorate in the execution of their duties by the regulators.
6. Naturally, if there is evidence that the laws dealing with the legislation and regulations are not being enforced, or are being enforced unevenly, the political directorate must take action in addressing the activities of the regulators.
7. That having being said, I repeat that day-to-day activities by the regulators should be free from political interference.
8. I turn to an issue which is fundamental to the governance of the financial sector and one with which I have wrestled during my 14 years as Minister of Finance. It relates to the assessment of “fit and proper” and the associated criteria.
9. Basically, even whilst we seek to reduce the level of subjectivity in making such assessments, often in the final analysis, there is a “judgment call”.
10. For much of the legislation in Jamaica, this judgment call has been placed in the hands of the Minister of Finance. I have never felt that this is the ideal situation and an important issue which should be addressed in seeking to move towards collaborative governance is what would be a model to which we should aspire in making this determination.
11. Within that context, I introduced an interesting question posed to me by a friend, who is a theologian – Is there no redemption once an individual is judged not to be a ‘fit and proper’?
12. Could we design clear rules and criteria to allow someone to reverse that initial assessment? Would public acknowledgement of
I: CONCLUSION
1. As I have indicated, this topic has caused me to reflect on several issues, not only in terms of the governance of our sector at this stage but in the future as changes take place.
2. I have sought to identify roles for five significant groups of actors who play a critical role in governing the sector. This development of good collaborative governance is a “work in progress”. As we can see, there is no jurisdiction which has developed the perfect form of governance. Hence, whilst we can learn from each other, there is no one with all the answers.
3. I do not know whether my presentation today has answered any of your questions but I sincerely hope that it has caused you to think about the issue.
4. I thank you for hearing me.
