Corporate governance in the public sector : the ethics within a European Union framework

Abstract

The purpose of this study is to get a better understanding of corporate governance and its regulation in the Maltese Public Sector with particular emphasis to the Ethics within a European Union framework. Corporate governance is a subject which is constantly changing and evolving. Following an unprecedented wave of financial scandals, this subject has become one of the most debated topics in the area of management worldwide. However, whereas due emphasis has been given to the rules pertaining to good governance, the same cannot be said to the role of ethics, which has been somewhat given less importance. The American response to apply stricter rules and more severe penalties was the SarbanesOxley Act. On the other hand, the European Union took a different approach by providing guidelines and letting the individual 27 Member States act upon. This study explores the principles of governance with which the Maltese public sector abide and makes reference to the laws which are the basis of incorporating good governance within the public sector. Good governance principles apply both to the Ministry and Government entities/authorities in the conduct of their work. Their responsibilities are discussed with the intention of highlighting the importance of the functions of management, control and the supervisory processes, which are the determining elements in assessing the degree of accountability pertaining to each party responsible for the relevant process. Furthermore, reference is made to the bodies within the Maltese Public Sector that form an integral part of the mechanisms in place in order to provide a protective shield against fraud and mismanagement. Rules and regulations are important, but do not suffice to solve all corporate governance issues and to prevent corporate scandals. In this regard, the study provides a detailed analysis of the Ethical regulatory codes and frameworks at a national and a European Union level. This includes the code of Ethics applicable to the Public officers, Code of Ethics for Board Directors and the Internal Audit and Financial Investigations Act in relation to the ethical scenario. At a European Union level the Ethics Framework is discussed to which Malta as one of the 27 EU Member States, must adopt together with the principles in the other frameworks set up at an EU level. Apart from discussing the codes, regulations and frameworks this study will also focus on two separate cases which with bad practice led to weak accountability, lack of transparency and shows how good governance was compromised by the infringement of the respective code of ethics. Such issues strengthen the argument that there is much more that needs to be done, due to the fact that even though the Principles of good governance have been discussed at all levels of society, such breaches still occur both at national and at an EU level.