THE RISE of public companies over the past century has driven rapid social and economic development in most of the Western countries that have adopted the basic tenets of legislation enabling the formation of companies.

The corporate framework has enabled promoters of companies to attract large amounts of money from members of the public who hand over their money in exchange for shares in the enterprise which everyone hopes will be successful and produce dividends for the hopeful shareholders on an annual basis.

Customarily, a board of directors is appointed and entrusted with the control and management of the company on behalf of the shareholders who together own the enterprise.

This separation of ownership from control brings concerns about corporate governance to the fore, especially because of the impact of the operations of some of the larger companies on the society.

One only has to look at the collapse of the Enron corporation in the United States to understand how the management of large companies can have an impact, adverse or beneficial, on individuals in the society, be they shareholders, employees or past employees drawing well-deserved pensions.

The current financial meltdown and our local corporate history provide similar examples; so that how public companies are managed has become a matter of immense public interest.

Earlier this week, Prime Minister David Thompson spoke on some of these issues in his address to the Fifth Annual Conference of Caribbean Group of Securities Regulators held at Accra Beach Hotel.

Mr Thompson reminded the regulators that corporate governance was already a burning issue in all respects and that certain areas such as disclosure requirements for directors, insider trading rules and conflicts of interest needed to be documented with appropriate procedures to be followed.

In his opinion, overlapping directorships resulted in various conflicts of interest.

He also thought that "the corporate governance structures of many boards appear to be inadequate to effectively oversee the entities which they are supposed to serve".

No right-minded person can deny the need for proper rules of corporate governance, given the impact of public companies on the society, but in small societies, one has to be particularly careful not to throw the baby out with the bath water.

Take the very issue of overlapping directorships.

This is a pertinent issue, but in small societies such as ours it arises because the same group of connected persons are prepared to risk their money time and again; and given the history of capital development in our island, these corporate pioneers and their families and friends become the shareholders and the directors in what start life as private companies.

Indeed, many of our flagship companies originated as an idea born at the kitchen table, or in the drawing rooms of close friends, with the inevitable resulting when birds of a feather flock together.

So while we think that the Prime Minister's concerns are valid, we urge that rules of corporate governance be carefully fine-tuned to suit our local conditions, and we caution against any wholesale adoption of rules from larger societies fighting more sophisticated problems.