Last week I started to explore circumstances and practices which spoke to the nature of the local business environment in the Caribbean. I singled out as systemic weaknesses: cliquism and cronyism; the tight interlocking of ownership and management; the preponderance of closely held family businesses; the mutually manipulative relationship between local business elites and the political directorates; the influence of borderline ethics and criminal enterprise on commercial activity; and, weak laws and enforcement of product/service liability.

Directors of privatised entities

To these we can add the consideration that the recent wave of privatisation of public enterprises has added difficulties to the business environment. With the benefit of hindsight (20/20 vision) observers have discovered that far too many of these "privatisation deals/management contracts" have not turned out to be what they were portrayed as, at the time of their agreement. Since these deals represent a substantial recent addition to local business activity, it has created some cynicism and disenchantment among the business community. It is obvious that, under private management, several of these former publicly owned firms have not, to say the least, distinguished themselves under either external management or private ownership. A major contributory factor, I believe, has been their failure to take adequately into account the particular characteristics of the regional business environment.

Additionally, we find that there is a fairly common practice of government - appointed negotiators of these "privatisation deals/management contracts" being placed on the Board of Directors of these entities by the government (in cases where they have kept some shareholding) after they have been privatised. Some of these Board appointees receive "handsome" director's fees when compared to what prevails as the norm in the rest of the country. The conflict of interests and questionable ethics involved in this type of practice are formidable, particularly in light of the subsequent poor performance of these entities after privatisation. Regrettably, to date there has been little public debate of this important matter.

The financial press

In market economies the media generally, and the financial press in particular, are expected, through their public commentary, analysis, and disclosures, to protect the broader interests of the investing public, and so contribute towards the development of a healthy business environment. In most of the Region the situation in this regard is far from satisfactory as the examples given below show.

Thus in some countries there is very little coverage of local business and financial news. There are also instances where such coverage is given that the same financial analyst has written under several names in the local media, creating the appearance of several different commentators with several different points of view. This practice is clearly unethical, as such an analyst is obviously well placed to manipulate investor behaviour, if he/she so desires.

There are also instances where private newspapers are owned by the same elite business interests in the country, which form part of the network that exercises hegemony over the corporate/commercial culture in the Region. This is also a matter of consideration concern as it raises some of the same issues that attach to the government-owned media, namely that such entities will be ill disposed to vigorous and critical journalism which impinges on their owners' interests.

Corporate governance and accounting practices

In addition to the issues of the wider business environment identified so far, there are other specific problem areas directly related to the governance structure of local corporate enterprises in the Region and their accounting practices, which raise concerns similar to those that surfaced as a result of the Enron scandal. Several of these were referred to recently by Christopher Ram in relation to Guyana in his Business Page Series. Others have, however, identified similar concerns in other parts of the Caribbean.

While readers can get more details from the Ram article, I want briefly to highlight the following concerns: combining the position of CEO and Chairman of the Board of Directors; interlocking directorates; weak representation of minority shareholding interests; insider trading; related-party transactions between firms that are patently not at arms-length; a weak regulatory environment; and, questionable audit-integrity, from the external auditors.

The significance of the above list is that, as we have seen over the last several weeks, in one way or another, all of these issues have surfaced during the Enron scandal! Some persons may find this outcome surprising, given the vaunted reputation of the United States' commercial practices and business environment. The problem, however, I believe, lies in the intrinsic nature of the marketplace. As I said before, despite the undoubted efficiency that comes from a competitive market environment, greed and criminality lurk in every market corner waiting for the unsuspecting public/investor and a mis-managed regulatory system.