A spotlight on governance
As messy as the Botswana Building Society (BBS) Limited saga has been, one positive that came out of it has been the critically needed spotlight being shone on the country’s corporate governance.
The history of the country’s corporate sector is littered with episodes of gross poor governance and even scandals, very often swept under the rug and eventually forgotten. By necessity, the spotlight on governance is often on government as a taxpayer funded entity, but it is also true that some of the worst governance infractions have taken place and continue to do so in parastatals, private companies and NGOs.
In the absence of substantive whistle-blower legislation and similar supportive structures within most organisations, vices such as nepotism, procurement fraud, corporate bullying, gross corruption and abuse of power have become commonplace in the corporate space, with the culprits seemingly immune to censure.
There have been numerous instances where boards and their executives connive to flout their own board charters, keeping shareholders in the dark and presenting padded books of accounting at annual general meetings (AGMs). It is a culture thing that starts with seemingly small violations such as not stepping away when one is conflicted in procurement, to extending a favor to submit a tender beyond the closing time. These small violations grow into gross corruption such as fudging numbers and committing corporate crimes such as those around transfer pricing, tax evasion and others. The fact that generally in Botswana, the corporate sector is dominated by the same, long serving veterans who periodically rotate around the various major entities means that the top-down change required to introduce a new culture of shareholder responsibility, has been slow and in some instances non existent at all. The finance sector, in particular, tends to approximate a close-knit set of leaders at the helm of businesses engaged in mutually-beneficial activities, a situation which at best, lends itself to poor peer review, and at worst a cartelisation of sorts impenetrable to the gaze of regulators. Low shareholder activism in the country as well as poor financial literacy have also meant that where outrage should be expected at some of the corporate lapses we have seen, AGMs come and go with little outcry. The shareholder registries of the highest profile members of the private sector, particularly in the financial sector, tends to be dominated by institutional investors such as pension funds, which, while they are astute, tend to adopt a long-term investment horizon that generally glosses over transitory episodes in governance.Therefore, the BBS saga gives the country’s private sector an opportunity to witness robust engagement of corporate governance in real time. As the board of directors and the executive management engage in a highly public, no-holds barred contest, the lessons BBS is providing for free are priceless.
The BBS issue is also a learning curve for regulators, including the Botswana Stock Exchange, Bank of Botswana, CIPA and the Ministry of Finance and Economic Development, all of whom interface with the building society at varying degrees. The 14,000-odd shareholders at BBS, ranging from the minnows to the mega-sharks, should also be carefully monitoring the developments there with a view to casting the right vote at Friday’s AGM. The right vote is better governance