Enhancing board effectiveness in Maltese public sector entities : an analytical study

Abstract

This study critically evaluates Board Effectiveness (BE) within Maltese Public Sector Entities (MPSEs), with a focus on five key aspects: board selection and appointment, board role, board composition, board remuneration, and board performance evaluation. Semi-structured interviews were conducted with twenty-two participants, including eighteen MPSE board members (BMs), a representative from the Malta Institute of Directors, two corporate lawyers, and one corporate advisor. The findings indicate significant deficiencies in BE, particularly due to a lack of transparency in the selection and appointment process. This process is often influenced by political loyalties, which exclude new talent and discourage competent individuals. The identification of BMs as Politically Exposed Persons (PEPs) further restricts the inclusion of diverse talent, particularly among entrepreneurs. Additionally, insufficient training for BMs and persistent political pressures have been found to hinder the fulfilment of fiduciary duties. Female representation on MPSE boards is notably low, and foreign appointments are rare, thereby weakening the overall board composition. Moreover, the remuneration for MPSE BMs is significantly lower than that in the private sector, adversely impacting the quality of BMs. Resistance to implementing performance evaluations, which could potentially reduce political protection, has also been observed to impede BE. This study underscores the necessity of strengthening corporate governance (CG) practices to enhance BE in MPSEs, which is crucial for fostering a thriving economy and creating a positive legacy for future generations.