Yes Minister?

Successive governments' practice to bar people with different political beliefs from the boards of state-owned companies, authorities and commissions has been described as appalling by Ms Mizzi, a former chairman of Sea Malta.

"In Malta, we're so politically oriented that you have a situation where 50 per cent of the population who are of the wrong political colour - real or perceived - are eliminated from the pool of human capital," she said.

"This is an appalling situation. For the good of the country it has to stop. Human capital is the most important asset this country has and half of it is practically unused. This country cannot afford to squander know-how in this manner."

Ms Mizzi accepts that the party in government does not appoint people it did not trust to certain positions. However, just because someone held a different political opinion did not mean they were not trustworthy to sit on a board, especially if the appointees understood that their allegiance was, first and foremost, to the company.

The subject of competent boards is something Ms Mizzi takes great interest in, having just successfully defended her thesis, titled Effective Boards And Corporate Governance In Malta, for the M. Phil degree at the Maastricht School of Management, in The Netherlands.

At the MSM, the defence of a thesis takes the form of a public defence where lecturers and students interested in the subject may attend.

She was inspired to pursue this degree, the basis and proposal for her PhD, after she attended a conference about corporate governance at Henley Management College, UK, in 1999.

During a buffet lunch, an elderly, distinguished-looking gentleman asked if the space next to her was free and they got talking on the subject. Little did she realise that she was speaking to the founder of the concept, Sir Adrian Cadbury. She instantly took to the subject, a topic she was already living, and in 2003 started the degree.

Her studies must have come in handy when she had to confront Investments Minister Austin Gatt in 2005 over the privatisation of Sea Malta. She eventually resigned because she felt the government had abdicated its responsibilities in disposing of a company of strategic importance to create a monopoly in private hands.

She smiles, but refuses to dwell on bygones, preferring to look ahead to new business pastures.

Today, she sits on a number of boards including those of the Bank of Valletta and Millennium Insurance Agency. She also runs her own company, which owns a number of retail outlets, and has considerable overseas work experience in different spheres including banking, manufacturing and retail.

She is the only female elected on the council of the Malta Chamber of Commerce and Enterprise and a member of the newly formed think-tank, The Today Public Policy Institute.

In a candid interview, Ms Mizzi speaks on how the island's size could lead to an incestuous situation where the same person sat on too many boards, possibly leading to conflicts of interest to the detriment of stakeholders.

She believes that political appointments often lead to a situation where the directors' loyalty was towards the minister who appointed them, when it should be towards the company.

Did this happen more in Malta because of the size of the island and the fact that the persons were more attached to the minister who appointed them?

"You hit the nail on the head. This is a case where size matters! In large countries, political appointees will not even get to see the minister or hear from him. The smallness of our country is such that one has closer ties and access to the minister," she said.

Putting her hand on her heart to stress a point on political interference, she added that some ministers just did not know where their political responsibilities stop and think they can interfere in everything - "they take the title 'political master' to its literal limits".

"In the past I have had people from the ministry call me, the chairman, objecting to and questioning trivial matters such as moving persons from one department to another - things which are purely within the jurisdiction of the management, not even that of the board," she said.

"In my opinion that's interference and when that used to happen I would tell them so. A senior ministry staff member even tried to interfere with the contents of the chairman's statement in the annual accounts. I put him right in no uncertain terms and he never dared call me again.

"They don't realise that their responsibility is political. The commercial, administrative and legal responsibilities lie with the board of directors who have been appointed precisely to fulfil these roles."

Certain ministers, she insisted, had to realise that their political responsibilities were distinct from the oversight responsibilities of the board of directors.

Political appointees, on the other hand, had to realise once and for all that their loyalty was towards the company... even if they had to make decisions, which go against what the minister wanted.

Cases where the interest of the company clashed with political agendas were not unheard of, she said, citing the employment of unnecessary personnel, especially on the eve of an election, as a case in point.

She feels that political intervention should only be exercised if the board was leading the company up a route that went against the national interest or the interest of the shareholders.

"After all, if the minister does not like the workings of the board, as a shareholder representative, he/she has every right to remove the directors. In all other cases, there should be an arm's-length relationship," she argued.

"In Malta we have the ridiculous situation where ministers think that by appointing a person to the board he is doing him or her a favour.

"The truth is that, given the huge responsibilities undertaken by the board member and the ridiculous remuneration involved, it is the ministers who should be thankful to whoever accepts such appointments.

"Directors' responsibilities at law are so daunting that if they realised what they were in for I am sure many would decline. Also, unfortunately, independent mindedness of political appointees is not a particularly appreciated trait," she pointed out.

Ms Mizzi is a firm believer that the exercise of good corporate governance is vital, and points out that the three magic words to achieve it are transparency, accountability and integrity.

"The first two can be regulated and controlled, but you cannot legislate for integrity. Integrity has to come from within; from knowing that there is a right and wrong way of doing things; that some things are just not acceptable, even if never discovered and brought to light," she said.

These principles were equally applicable to companies of any size or structure, whether family run, large private or public entities, or authorities. They also applied to the running of the country.

One thing she will be researching for her PhD is whether there is the necessity for some form of licence, training or certification for those wishing to sit on a board of directors, particularly of listed and large companies with substantial shareholder, social and economic impact.

She explained that the function of the board of directors was setting policy, oversight and monitoring of the executive. In addition, there were important legal responsibilities that rested squarely and exclusively on the board of directors.

"I concur with the school of thought, gaining ground both in the UK and the US, that persons who are eligible to be board directors should have some sort of endorsement or certification of their qualifications - I do not mean academic qualifications - from a competent body. After all, even an electrician or plumber needs a licence to carry out the job!"

Certification for directors could either be issued by the Malta Financial Services Authority, the Chamber of Commerce and Enterprise or the Institute of Directors after it has been verified that the aspiring board member is knowledgeable of the legal responsibilities and all obligations involved in occupying the post.

The potential director should know the responsibilities she/he is going to take on and be conscious that these entail onerous obligations.

"The better the quality of boards, aware of the importance of good governance, the less likely the corporate disasters. Avoiding a catastrophe is important to our small country, as should a company sneeze many would catch a cold!"