PECG, ZIMCODE GOOD FOR ALL SECTORS:

The Public Sector Corporate Governance Bill, has been discussed in many forums and the general conclusion among people from various backgrounds is that the Bill is a good tool to instil corporate discipline in public entities.

IT GIVES “teeth” to the National Code on Corporate Governance (ZimCode) that had been ignored by some entities as it is a voluntary code. Once the Bill comes into law it will also enact the ZimCode into law to the extent that it applies to public entities, this is according to Part VI of the Bill.

Various consultations with different sectors of the economy have confirmed the fact that the ZimCode is not a strange document as far as good corporate governance is concerned.

They believe it is driven by the desire to see entities of all form and size embrace good corporate governance practices in Zimbabwe.

What then causes people not to embrace it is because of what it “does”. Once an entity attests to being guided by the principles of the code there has to be evidence that the code is at work and explanations for non-compliance are adequate.

This seemed to be the drawback for some people who do not want their “trees to be shaken”.

The above necessitated the Bill to give effect to the ZimCode such that public entities are obliged to apply all its principles.

Part VI of the Bill deals with codes of good governance and under this part entities “will have to adhere to good corporate governance codes as set out in the First Schedule . . . ”

The First Schedule as highlighted in sections 31 (2) and 46 of the Bill is the National Code on Corporate Governance (ZimCode), therefore all its provisions will be applicable to companies that are public entities.

Any amendments to the ZimCode shall be binding on public entities as highlighted in section 46.

The Bill and ZimCode provide guidance in areas that have been sources of corporate scandals such as appointment and remuneration, tenure and conditions of service of boards of public entities.

Their application could see a new trajectory in the way public entities are managed and controlled. It will introduce checks and balances and a culture of performance in entities.

Clause 11 of the Bill will regulate the appointment of members to boards of public entities.

It will regulate board terms, board composition, appointments, skills mix, gender balance, regional representation and so forth.

The ZimCode being a voluntary code had provided guidance in these areas but some entities had not applied them since they were not compulsory.

Under the same clause, board members will not be allowed to serve for more than two four-year terms, a total of eight years in all.

This is a step further from the ZimCode’s principle 104 which had room for review for independent non-executive director’s term exceeding nine years.

The Bill curbs board member tenure to a maximum of eight years.

This is to give room to refresh the board by making new appointments.

Accordingly, persons that will be selected as non-executives will have to be appropriately qualified and experienced before they can be appointed to a board and that the board needs to have an appropriate diversity of skills.

The ZimCode highlights the skills, capacity and competence of candidates in principle 85 (e & iv), 94 and 95.

The Bill is also progressive in terms of gender equality as it states that, “There will have to be equal numbers of men and women on all boards”. While the ZimCode had propagated for gender equality in board appointments this Bill will make it compulsory for every public entity to have a fifty-fifty representation of men and women on the board.

Having noted the above position of the Bill and ZimCode in terms of appointments, tenure, gender balance, board condition of service it will be unfair to assume that the public entities are the only ones faring low in these areas and in corporate governance in general.

Corporate scandals have been experienced in all sectors of the economy, whether private or public.

It’s just that some sectors are good at sweeping things under the carpet, yet if one is to look closely at their appointments, tenure, gender balance, skills mix, remuneration to mention but a few, one may find them wanting as well.

Seeing that the PECG Bill and ZimCode are bringing in guidance that can make entities realise their potential in terms of performance and profitability it is not therefore a wild dream for these two to be recommended to all sectors of the economy.

The Companies Act, Chapter 24:03 which is under review, could incorporate some of the principles availed in the Bill and ZimCode.

This will ensure that a wide range of sectors are mandated to observe and practice good corporate governance for the benefit of the entities and the nation at large.