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Tuesday 22 June 2021
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Tunisia: “Corporate Governance still lacks maturity”

Tunisian companies are bound by the Guide of Good Governance Practices to separate  the office of President of Board of Directors  from that of  CEO. Upon exercise, the separation is hard to gain ground in Tunisia. This raises the question of whether to  go on combining  powers in the hands of a single person, or to  legislate  as it is the case  in some  countries or simply to leave  the market players  decide.
These issues were addressed during a discussion meeting organized recently by the Tunisian Centre of Corporate Governance and moderated by Mokhtar Fakhfakh, former CEO of BIAT and incumbent honorary chairman of its board of directors. Having a long and rich experience in leading a number of large Tunisian companies, Mokhtar Fakhfakh granted us the following interview:

What are the good practices of corporate governance that Tunisian directors should adopt?

As you know, Tunisian directors have nothing to invent. They must be transparent and should not be hang-up.
In this regard, the guide of good practices in corporate governance, like those of most countries in the world, recommends Tunisian companies to separate the office of chairman of the board of directors from that of CEO. Moreover, the Tunisian lawmaker gives companies wishing   a strict separation between the functions of management from those of control, the possibility to opt for the dual structure including the Executive Board and the Supervisory Board.
Also, as you can see, companies that practice collegiality in terms of management and those opting for more difficulties are going forward more rapidly than those deviating. It should be noted in this connection that this collegiality involves a great deal of transparency, the existence of valuable and comprehensive procedures, but above all continuous consultation at all decision levels

The key words in corporate management remain, in my view, collegiality, consultation and social sensitivity.

What would be the best management system that Tunisian companies can join?

The requirements that the company is facing are growing day by day, generating high expectations of all stakeholders, whether external (authorities, communities, customers, media, shareholders, insurers, associations, neighbors …) or internal (Staff, unions, group …).

To ensure availability  of Information able to show that organizations put in place are capable to meet these expectations, many companies have implemented management systems that meet specific standards , such as ISO 14001 for environment, ISO 9001 for quality, OHSAS 18001 for health and safety,  SA 8000 for ethics …

These different standards operating on the same PDCA principle – Plan-Do-Check-Act, it is wise to avoid the development of «silo” systems working in parallel and to focus on integrating different themes within a single management system.

Thus, the final objective of the setting up of an Integrated Management System will be to ensure harmonious and sustainable integration of  different thematic chosen by the company to develop its strategy and its management.
In this case, the integrated management system is the best governance system for Tunisian companies.

How can we convince Tunisian directors to adopt governance best practices?

As you know, change is coming gradually. However, it is estimated that practices of corporate governance in Tunisia still lack maturity despite successive institutional reforms and sustained economic growth during the last decade.
Furthermore, the low exposure of Tunisian firms to international market (including the opportunity to search funding from international banks or setting up joint ventures with foreign partners) deprives them of stimulus to move towards better governance practices.

Some Tunisian companies including large private ones have made progress in the field of governance, which is not the case for small family businesses. But despite the use of audit provided  by major international firms for their financial statements, several large private companies set   their financial statements according to local accounting standards (and not according to IFRS standards).

The assessment of corporate governance isl part of the rating process. I think, in general, that weak governance is a constraint whatever the strength and durability of financial profile of the company evaluated. The current economic crisis gave renewed emphasis on standards and practices of corporate governance. If their low international exposure protected Tunisian enterprises against effects of the global financial crisis, It also explains the poor record of Tunisian corporate governance practices.

Indeed, the family structure of the capital of Tunisian enterprises is a major obstacle to the adoption of corporate governance good practices. In such structures, shareholders founders often hold decision positions and can manage their business against the interests of creditors and minority shareholders. Internal control procedures remain inefficient when compared to those of similar Western firms, and the concept of independent director is not yet usual. Transparency, generally limited, is a constraint for Tunisian companies to move towards the foundations of business management, namely: collegiality, cooperation and social sensitivity.

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