By Albert Chimbohwayi
Corporate governance is defined as a system by which entities are managed and controlled.
Corporate governance can be on a legal basis, can be based on a code of principles and practices, or can be a combination of both. In Zimbabwe, companies are governed by the Companies and Other Business Entities Act (Chapter 24:31), the Zimbabwe National Corporate Governance Code (Zimcode / NCCGZ) of 2014, and / or the King IV report on corporate governance.
Despite properly defined governance principles, companies do not produce the desired governance results because of core principles that are denied. Zimbabwe has recently witnessed embezzlement and impropriety on the part of corporate directors who have neglected their fiduciary duties. People of high social status advance to managerial positions. They apply for managerial positions and when interviewed some of them look promising, but their contribution to companies leaves very little to be desired.
Concern was noted for people serving on multiple boards, and corrective action through Zimbabwe’s National Corporate Governance Code was put in place to require that a board member must not sit on more than six boards of directors at the same time. Talented and motivated individuals were then invited by the government to apply so that a pool of experts could be created to facilitate the selection and rotation of directors. However, so far there has been little evidence of such rotations. Most of the directors are very busy members, who come to meetings only to obtain compensation and create cartels to promote their own personal interests.
You rarely find a board member who is under 30 years old. The same old members are used in rotation and produce the same old results. There is no denying that experience comes with age and exposure, but if that doesn’t work, there is a need to change the approach and find workable solutions.
A member of Parliament once lamented that “if the dogs are not hunting, they should be changed”. Does this mean in any case that young people have nothing to contribute to the governance of companies today?
Although it is common knowledge that one of the main causes of the economic collapse in Zimbabwe is corruption, I believe the brain drain is making matters worse. There is a serious brain drain of young and talented young people making significant contributions to other countries while our own beloved country is left in the hands of elderly and weary citizens to find governance solutions.
There is no point in having competent and high-level board members if this does not translate into good results and improved governance practices. It is better to have young and energetic board members with low social status, but with commitment than to have idle, high-level members who are too busy to contribute to business success. Even better would be to have a good mix of young and old, men and women and so on.
There needs to be a paradigm shift from the traditional way of thinking about the tenure and conduct of directors. Well-documented governance principles without the right people to implement are of no use.
The Zimcode prescribes that the board of directors and its committees must have a formal process for evaluating their performance and that of individual directors and that the annual report must disclose the result of the evaluation.
Most of our public institutions do not evaluate the performance of the board of directors and those that do are just performing a check mark exercise without considering the actual contribution to the organization of each member or of the board of directors. administration collectively. These assessments must be taken seriously if we are to improve in this regard as a nation. There should also be continuous monitoring of board performance with a dashboard of key result areas to ensure those charged with governance are leading organizations in the right direction.
It is not in the best interest of organizations to wait until the end of the year to assess board performance only to find that companies have long since derailed.
Zimcode also requires the board to have a balance in terms of skills allowing companies to have well-constituted sub-committees with qualified members. Because board committees run organizations, they must include a dedicated staff who are technically sound and sober. The Board should receive ongoing training with respect to expectations and its mandate. Some directors do not even know what is expected of them in the performance of their fiduciary duties. During my career in the field of auditing, I have met directors who sit on several executive committees on political and nepotist bases. On one occasion, one of our local universities had a 22 member board / council, but at the meeting I was invited to only three members attended and the rest were focused on coffee and snacks.
I wondered if having 22 board members was necessary, especially to the detriment of the institution. If we are to move our public institutions in the right direction, we have to be honest with ourselves and do what is necessary.
- Albert Chimbohwayi is a partner at KRES Chartered Accountants, he is a Chartered Accountant (Zimbabwe), Chartered Judicial Auditor and Chartered Public Auditor. – albertchimbos @ gmail.com / albertc @ kres.co.zw or Skype: albert.chimbohwayi