1.

Rationale of the Research

The public sector including parastatal bodies in Mauritius play a strategic role in the provision of essential goods and services for the betterment of living conditions. The activities of these bodies impact on the quality, accessibility and affordability of services provided to the community, specially the poor and vulnerable.

Compared to private companies, parastatal bodies and state owned enterprises face a distinct set of governance challenges as they differ on their social obligation to the nation in addition to the running of an enterprise in a cost effective manner.

According to the Code of Corporate Governance for Mauritius - Guidance Notes for State-Owned Enterprises, 2006, parastatal bodies have to operate within the overall policy framework set by Government. However, globalisation has put pressure on parastatal bodies to operate along business lines and adopt international standards of corporate governance as multilateral agencies take good governance into account while making lending decisions. The policy of the Mauritian Government has been to promote good corporate governance in the private sector. This being the case, for consistency and to set good example, it was equally felt important that good corporate governance should also be practiced by SOEs, More so, sustainable economic development calls for the contribution of all sectors, private and public. However, the general perception is that good corporate governance lags well behind the economic development in the island.

The outcome of the study will give the degree to which good corporate governance practices are being adhered to in parastatal bodies in Mauritius. The findings from the research will provide public administrators on the causes of poor governance and how to avoid them in their own respective organization.

It is also expected that the outcomes of this research will provide practical solutions to the problems presently faced by parastatal bodies in furthering good corporate governance.

2.0
2.1

Litterature Review
Corporate Governance in a Narrow and Broader Sense

Corporate governance, in a narrow sense, is about how an organisation is directed and controlled (Cadbury Committee (1992)). It is about the structures and processes in place to facilitate and monitor effective management of an organisation, including mechanisms to ensure legal compliance and to prevent improper or unlawful behaviour on the part of officers of an organisation. Boards of directors are responsible for the governance of their companies while the shareholders role is to appoint the directors and to satisfy themselves that an appropriate governance structure is in place.

The Organisation for Economic Development (OECD), in its report (1999:10), takes a broad view of corporate governance and defines it as the full set of relationships among a companys management, its board, its shareholders and other stakeholders. It provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance determined. The term Corporate Governance finds its genesis in the private sector and conceptions have traditionally focused on the corporate-shareholder-relationship. However, a broader view of corporate governance would include the relationships to those who are involved with, or with an interest in, the organisation (employees, directors, suppliers, etc) and as well as the stakeholders served or affected by the organisation (customers and local communities).

2.2

Theories of Corporate Governance

To explain the concept of Corporate Governance, researchers have documented the strong and consistent links between corporate governance and firm performance, under the agency theory (Jensen & Meckling, 1976), the resource-dependence theory (Hillman & Dalziel, 2003), the stakeholder theory (Hillman & Keim, 2001) and the institutional theory (Suchman, 1995), but the theories are not without contradictions.

Likewise, Peng (2004) suggests that, regardless of definition used, multiple perspectives such as agency and institutional theories and resource dependence are necessary to gain a fuller understanding of governance as these will continue to influence enterprise decision making (Child and Lu, 1996).

2.3

Conventional Good Governance Attributes

The connection between corporate governance and organisational performance lies in the multi-dimensional nature of good governance. Corporate governance codes such as the Cadbury Code in the UK, and the OECD corporate governance principles can be found to contain certain (usually implicit) assumptions about what governance factors make for a good performing organisation. Some of the factors most commonly found in corporate governance codes are (Heracleous 2001:4; Leblanc 2001):

1. Effective Board of Directors; 2. Separation of the roles of Chair and CEO; 3. Majority of non-executive or independent directors; 4. Small board size; 5. Balance of director skills and competencies; 6. Audit and other board committees; 7. Effective board performance evaluations; 8. Linking CEO rewards to performance; 9. Transparent appointment processes; and 10. Adequate communication with investors

The aboves are also termed as internal governance mechanisms that determine the quality of an organisations performance.

Nevertheless, certain research studies have found that, upon observation of these variables, the relationship between many of these variables and the financial performance of an organisation, is weak or even negative.

Heracleous (2001) is one of many authors who claims that, while many of the above factors might be necessary for good organisational performance, they certainly are not sufficient. Most recently this was echoed by Leblanc and Gillies (2004).

2.4

Soft Governance Attributes and Performance

Studies have shown that, measuring corporate governance by the above hard but easy to verify variables, these factors account to less than 10% of the variance in performance (Larcher et al. 2004:39). There are many possible reasons for findings of a weak or no relationship between conventional governance measures and organisational performance.

Recently, there has been a series of articles providing evidence on the importance of the soft side of governance or the behavioural dynamics of what takes place inside the black box of the boardroom. This interest has come about partly as a result of corporate collapses (such as Enron and Worldcom), where the firms in crisis broadly conformed to accepted corporate governance standards (Sonnenfeld 2002: 106). Some of the soft governance factors that appear to be important for performance in the private sector include clarity in roles, responsibilities, and relationships between: CEO and Chairperson; directors and management; directors and shareholders/stakeholders, healthy Chairperson/CEO interface, directors working as a team, culture, trust and open dissent, right skills, competencies and characteristics, a good induction process and ongoing access to training, leadership skills of Chairperson, information flows and regular evaluation of board performance. (Leblanc, 2001; Cook and Deakin, 1999; Lawler et al., 2002; Roberts, 2002; Nadler, 2004)

2.4

The Case of the Public Sector

In developing countries, the state-owned enterprise sector is an integral part of socioeconomic activity. Most state-owned enterprises were established to fulfill the social objectives of the state rather than to maximise profits, however, rising stakeholder expectations have forced governments in many countries to reform the corporate governance systems of state-owned enterprises, with expectations of improving their operations to reduce deficits and to make them strategic tools in gaining national competitiveness (Parker, 1999, Dockery and Herbert, 2000).

In attempting to take some of the lessons from the private sector to the public sector on the relationship between governance practices and performance, it is important to exercise caution because of the distinctive nature of the public sector for example: multiple objectives, minister as shareholder, ministerial appointment processes, different type of accountability and a more complex legal framework.

The focus of governance in the private sector is on the board of directors. In the public sector context, boards are sometimes difficult to identify and define as they operate from different statutory and managerial framework. (IFAC: Governance in Public Sector: A Governing Body Perspective, August 2001, 1).

Secondly, public sector entities are also subject to different forms of accountability to various stakeholders which are different to those that accompany in the private sector has to its shareholders, customers, etc. (IFAC Report, 2001)

3.0

Research Problem
Although Government has established the necessary framework for promoting good corporate governance in parastatal bodies, its implementation and consequently, its resulting effects are taking time to materialize. This is an area which will be investigated in this study. In addition, it should be pointed out that the Director, National Audit Office, has, over the years, given unfavourable reports on these organisations and the major issues that keep on repeating are delays in the preparation of the financial statements and the submission of the Annual Reports which have to be laid before Parliament, thus openly defying the concept of accountability and transparency. The Director of the National Audit Office has also, year after year, highlighted in its reports that poor corporate governance is a major factor that is causing the wastage of public funds, in particular, in parastatal bodies. These shortcomings are pure reflection of the state of corporate practices in those organisations.

The government, while presenting its budget these last years, had voiced out its concern about the financial liabilities of certain parastatal bodies which in fact turn out to be contingent liabilities of the Government. Every time they face difficulties, Government has to commit financial resources to bail them out. A few examples include the National Transport Corporation, State Trading Corporation, Agricultural and Marketing Board, etc. Government felt the need to require parastatal bodies to comply with the Code of Corporate Governance in view that massive amount of funds are channeled to these organisations for delivering an effective and efficient service to the public. Any shortcoming on the part of these organisations results in the poor utilisation of public fund, which above all, is subject to greater accountability and transparency and are scrutinized by Parliament. In recent Budget Speeches, the government planned the overhauling and re-engineering of the parastatal sector to improve performance and reduce contingent liabilities. The

programme includes such measures as the formulation of key performance indicators, liberalisation of public sector monopolies so as to increase competition, outsourcing of activities by parastatal bodies in particular to small and medium enterprises, rationalisation, and review the role and functions of those parastatal bodies where there is still a business case for ongoing operations but no longer a need for government interventions.

In spite of the good intention of the Government, after five years, it is observed that parastatal bodies are still caught up in the trap of underperformance, wastage (National Audit Report 2010) and inefficiency causing greater scrutiny from both the public and the media. Lately, governance problems such as conflict of interest and clashes between Chairperson and Chief Executive Officer (Mauritius Enterprise Ltd), firing of Chief Executive Officer (Air Mauritius), lack of transparency and disclosure through non submission of annual accounts by some parastatal bodies as per the relevant Act, non compliance of the Statutory Bodies (Accounts and Audit) Act, 2009, etc, were largely reported in the media.

It is in this context that the present study will be carried to have an insight of as well as to evaluate the extent of good governance practices prevailing in the parastatal sector and to explore the constraints impairing the effective application of good governance practices in the public sector of Mauritius.

4.0

Objectives of the Research

The objectives of the research are as follows:

1. To identify and investigate into the factors that are inhibiting the effective implementation of the Code of Corporate Governance in public sector;

2. To identify the benefits of implementing the Code of Corporate Governance; and

3. To conduct a comparative analysis between the implementation of the Code in the public and private sectors . This will enable the adoption and transfer of good practices from the private sector to the public sector 5.0 Hypothesis

Ho

There is no difference among respondents on the extent that the Code of Corporate governance is being implemented in their respective organizations

H1

There is a difference among respondents on the extent that the Code of Corporate governance is being implemented in their respective organizations

Ho

There is no difference among respondents on the factors that are inhibiting the effective implementation of the Code of Corporate Governance in public sector

H1

There is a difference among respondents on the factors that are inhibiting the effective implementation of the Code of Corporate Governance in public sector

Ho

There is no difference among respondents in the perceived benefits of implementing the Code of Corporate Governance in public sector

H1

There is a difference among respondents in the perceived benefits of implementing the Code of Corporate Governance in public sector

Ho

There is no difference among respondents on the extent that the Code of Corporate governance is being implemented in the private and public sectors

H1

There is a difference among respondents on the extent that the Code of Corporate governance is being implemented in the private and public sectors

6.0

Sources of data
The general belief of business research is often thought of as collecting data, constructing questionnaires and analysing data. But it also includes identifying the problem and how to proceed solving it. Data sources can be described as the carriers of data (information). (Ghauri et al., 1995) For this study, the researcher will be using primary sources to gather data for meeting the research objectives. As such data will be collected through questionnaires and structured interviews.

7.0
7.1

RESEARCH AND METHODOLOGY

Type of Research Approaches
There are three type of research Exploratory, descriptive and explanatory. The methodology for this research will be an exploratory and explanatory one.

7.2

The Research Process

The research process will be completed in six steps are mentioned as under:

1. Identifying the research problem; 2. Defining the research problem; 3. Determining how to conduct the research or the method; 4. Collecting research data before analyzing; 5. Interpreting the data; and

6. Presenting the results

7.3

Survey design
There are two approaches in designing a research i.e the qualitative or the quantitative approach. For this research, a qualitative approach has been used which involves the identification of the construct, sampling, design of survey instrument and data analysis. It is thus designed with a view to adopt a cost effective method as well as ensuring the validity and reliability of data

7.4

Identifying the constructs

In the initial phase of the research, literature review will be carried in journal and publication that reflect the topic of the study. A comprehensive review of the literature will be the basis for the development of instrument to be used in this study.

7.5

Design of survey instruments

A survey will be carried out at ministries and some of the 200 parastatal bodies and departments and a questionnaire will be designed to that effect and will comprise different sections in order to meet the objectives of this study. In addition, a sample of respondents will be interviewed so as to gather their views and opinion on the enabling factor as well as the construct of good corporate governance practices.

7.6

Scale and measurement

The main types of questions that will be included in the questionnaire are 1. Dichotomous question

It is one in which there are only two alternatives constituting of Yes and No.

2.

Multiple Choice questions

These questions offer three or more alternatives out of which the respondent had to select one or more from different possible answers. 3. Likert scale

The scale intervals are interpreted as follows: Strongly Disagree Disagree Neither Agree Nor Disagree Agree Strongly Agree S.D D N A SA 1 2 3 4 5

7.7

Sampling
The population consists of some 150-200 parastatal bodies of Mauritius including stateowned enterprises. For this study, quota sampling will be used to determine the size of the sample.

7.8

Data analysis method

The data obtained from the survey will be encoded and analyzed using EXCEL and SPSS software. Both descriptive statistics (mean and standard deviation) and inferential statistics (Chi Square, Kruskall Wallis test) will be used to analyze the data and information. The data will also be presented where appropriate using charts and diagrams as far as it was possible

7.9

Ethics
For the purpose of ethics, the followings principles will be observed:

1. Cover letters will be included in the questionnaire explaining 2. Participants will be provided with detailed instructions as to how the questionnaires should be completed and returned; and

3. Participants will be told that information obtained will be treated in strict confidentiality and anonymity will be maintained both during and after the survey.

8.0

Report Structure
The dissertation report will be organised into six chapters. The areas and topics to be covered under are summarized below.

CHAPTER 1: - Introduction Chapter 1 states the problem statement, aim and objectives of the research. It gives a brief introduction of the subject under study and the significance of the dissertation. CHAPTER 2: Review of Literature Chapter 2 deals with the literature review with respect to good governance practices.

CHAPTER 3: -- Corporate Governance in Mauritius Chapter 3 gives an insight about the development of corporate governance in Mauritius through existing local legal and institutional framework. CHAPTER 4: Research methodology Chapter 4 deals with the methodology used to carry out the survey. CHAPTER 5: Results and Discussion Chapter 4 deals with the analysis of data. The findings and inference drawn from the analysis will be fully elaborated.

CHAPTER 6: Conclusion and Recommendations Chapter 6 concludes the study and provides recommendations for enhancing good governance in parastatal bodies