Corporate governance in Zim: We can do better!
Corporate governance is defined as a system by which entities are managed and controlled.
The governance of corporations can be on a statutory basis, can be based on a code of principles and practices, or can be a combination of both. In Zimbabwe, corporations are governed by The Companies and Other Business Entities Act (Chapter 24:31), the National Code on Corporate Governance Zimbabwe (Zimcode/NCCGZ) of 2014, and/ or King IV report on corporate governance.
Despite properly laid down governance principles, corporations are not yielding the desired governance results because of basic principles which are being negated. Zimbabwe has recently witnessed malpractices and irregularities by directors of corporates who have neglected their fiduciary duties. People of high social statuses are making it into directorate positions. They apply for directorate positions and when they get interviewed, some of them sound promising, but their contribution to corporates leaves very little to be desired.
Concerns
A concern was noted for individuals who sit on multiple boards of directors, and a rectifying measure through the National Code on Corporate Governance of Zimbabwe was put in place to require that a board member should not serve on more than six boards at the same time. Talented and motivated individuals were then requested by the government to submit their applications so that a pool of experts can be created to facilitate the ease of selection and rotation of directors. However, there has been minimal evidence of such rotations so far. Most directors are very busy members, who only turn up for meetings to get allowances and to build cartels in order to further their own personal interests.
Diversity
You hardly find a board member who is less than 30 years old. Same old members are being used rotationally and they are producing the same old results. It is not disputable that experience comes with age and exposure, but if it is not working, there is a need to change the approach and find workable solutions.
One Member of Parliament once lamented that “If the dogs are not hunting, they should be changed”. In any case, does it mean that young people have nothing to contribute to the governance of today's corporates?
Although it is common knowledge that one of the major causes of economic meltdown in Zimbabwe is corruption, I believe that brain drain is worsening the situation. There is a serious brain drain of young and talented youths who are making significant contributions in other countries whilst our own beloved country is left in the hands of weary, elderly citizens to find governance solutions.
It’s no point having skilled and high profile board members, if that does not translate to good results and improved governance practices. It is better to have young and energetic board members with low social statuses, but with commitment than to have idle, high profile members who are too busy to contribute to the success of corporates. Even better would be to have a good mix of young and old, male and female and so on.
Way forward
There is a need for a paradigm shift from a traditional way of thinking with regards to the Mandate and conduct of directors. Well documented governance principles without the right people to implement are of no use.
The Zimcode prescribes that the board and its committees should have a formal process of evaluating its performance and those of individual directors and that the annual report must disclose the result of the evaluation.
Most of our public institutions do not evaluate board performances and those who are doing it are merely conducting a box ticking exercise without considering the real contribution to the organisation for each member or the board collectively. These evaluations should be taken seriously if we want to improve in this regard as a nation. There should also be continuous monitoring of board performances with a dashboard of key result areas to ensure that those charged with governance are leading organisations in the right direction. It is not in the best interest of organisations to wait for year end to assess board performances only to discover that corporations have long gone off track.
The Zimcode also requires that the board must have a balance in terms of skills which enable companies to have sub-committees which are properly constituted with skilled members. Because Board committees drive organisations, they need to comprise dedicated personnel who are technically sound and sober. The Board should receive continuous training with regards to expectations and their mandate. Some directors do not even know what is expected of them in discharging their fiduciary duties. During my career in the audit field, I have come across directors who sit on multiple executive committees on nepotism and political basis. On one occasion, one of our local universities had a council/board of 22 members, but during the meeting to which I was invited, only three members were participating and the rest were concentrating on coffee and snacks.
I wondered if having 22 council members was necessary, especially at the expense of the institution. If we want to take our public institutions in the right direction we need to be honest with ourselves and do the needful.
Albert Chimbohwayi is a Partner at KRES Chartered Accountants, He is Chartered Accountant (Zimbabwe), Certified Forensic Auditor, and Registered Public Auditor. — albertchimbos@gmail. com/ albertc@kres.co.zw or Skype: albert.chimbohwayi