Modern corporate governance places great emphasis on concentrating responsibility at and increasing the authority of the board of directors. However, as a general rule, boards of SOEs in Senegal are not always considered to be strong, professional, or accountable.
Board authority Formally, boards have all the authority of their private-sector counterparts, including the power to hire and fire the Director General (CEO). In practice, boards ‘rubber-stamp’ the nominations made by the President and Line Ministers, and do not have the authority to remove general directors. This fatally weakens the board by reducing its power and authority over management, and increases the perception of political interference in SOEs.
Board composition.In general, board composition of most companies in Senegal (particularly SOEs) is based on a “parliamentary” model. Board members are allocated to shareholders based on their ownership in the company, sometimes by formal shareholder agreement. As a general rule, the Ministry of Economy and Finance and the Line Ministry split board seats 50/50, although in important SOEs other Ministries and government bodies may be represented. In most majority-owned SOEs the board consists only of civil servants.
Board qualifications.Many board members are not considered to have the required professional qualifications. There are no rules or guidelines on the professional qualifications required to become a board member of an SOE. Informal interviews suggest that, in practice, the qualifications of SOE board members varies widely. Many board members appear to have limited private sector experience, and no financial experience. There are no guidelines or codes of ethics that have been developed for the board members of state companies, and no training is provided. Many observers express the opinion that board members of SOEs do not understand many aspects of their role.
Board accountability and liability.The Corporate Governance ROSC notes that there is no tradition of board members acting in the interests of the company and all shareholders. SOE board members appear to be even less accountable than their private sector counterparts. As in many countries and companies, SOE board members appear to act in the interest of the State or individual that appoints them, and not in the interests of the company. Most State representatives are appointed to the board by their Ministry, and represent the interests of their Ministry. Some Ministries apparently have “pre-board” meetings for some companies in which important issues are discussed and instructions. There is no tradition of acting in the interests of all shareholders. The mandate of directors has not been clarified.
Board Remuneration. The State currently does not ensure that board members are sufficiently compensated, and most boards are not. Traditional sitting fees for board members are CFA 25,000 (USD 50) per meeting, which are low relative to Chairman and general director pay. Remuneration is insufficient to attract new, qualified candidates with higher levels of responsibility and liability.
Recommendation 5: The board of each company should have the formal and informal authority to hire and fire the general director.Provisions in Law 90-07 that require proposals from the office of the President or from a Minister should be repealed. General Directors should be selected following a formal search procedure, and hired based on their qualifications.
Recommendation 6: The ownership policy to be developed by the State should include a specific policy on how the government nominates board members and its expectations for board composition:
As a first general principle, boards of SOEs should be assigned a clear mandate and ultimate responsibility for the company’s performance, in line with the policy and commercial goals set by the State. In conjunction with their increased responsibility, boards should meet more often - at least 6 times a year for larger companies.
As a general principle, boards should be composed of the most highly qualified people available, regardless of whether they come from the private or public sector, and if they are affiliated with a particular Ministry or not. All board members should act in the interest of the company and all shareholders.
Boards should include at least two private sector business or financial experts. In the long-run, the majority of board members in each company should have private sector expertise.
Large SOEs should set up audit committees, to oversee the relationship with the external and internal auditors, and manage conflicts of interest. The committee should be composed of outside (and preferably “independent”) directors.
The remuneration of board members should be increased, to compensate board members for their increased liability and to attract board members with higher qualifications.
The ownership entity (in conjunction with private sector bodies such as the Institut Sénégalaise des Administrateurs) should provide board members with the tools required to help them to do their job. These might include (i) a director training for SOE board members, in all areas of modern corporate governance, and (b) the development of detailed guidelines for SOE board members. The ownership entity should assist SOE boards to carry out board self-evaluations on a periodic basis.
Recommendation 7: The role of the Contrôle Financier should be carefully reviewed.The presence of non-voting participant at board meetings, who owes his duty not to the company but to the State, is somewhat at odds with good board practice. Most observers feel that the current structure is not particularly useful or productive. The ownership entity could usefully combine the employ the experience of the existing group of contrôleurswith training from private sector institutions to create a professional cadre of board members (who could serve on both SOE boards and other private sector boards). Other contrôleurs could work as employees at large SOEs in the role of “company secretaries”, guiding boards and management in correct corporate governance procedure.