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NewsDay

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Zimbabwe thrives on secrecy

Opinion & Analysis
The reported collapse of two banks and a pharmaceutical company reminds us to reflect on where the country stands in respect of embracing corporate governance in general with particular focus on role, value and liability of non-executive directors (NEDs). Of specific interest are issues relating to NED role and qualities, nomination and appointment, influence on […]

The reported collapse of two banks and a pharmaceutical company reminds us to reflect on where the country stands in respect of embracing corporate governance in general with particular focus on role, value and liability of non-executive directors (NEDs).

Of specific interest are issues relating to NED role and qualities, nomination and appointment, influence on decision-making, within the Zimbabwean context. Based on the nature of the business, NEDs must have requisite qualifications and experience to bring value to any entity.

Professionals in marketing, finance, legal, engineering and other areas will justify their appointments.

As a unit, the NEDs must contribute to effective decision-making of a board.

They must ensure board and senior management succession while controlling family and personal interests.

NEDs must be men and women of integrity, be trustworthy, honest and ethical.

NEDs must emphasis the need for boards to safeguard and enhance the company’s going concern status and continued profitability through continuous company supervision.

There is need for entrepreneurial leadership that ensures control and risk management.

To enhance NED performance and contribution, the company secretary must train and orient newly appointed NEDs, including provision of policies for the board business compliance, specially the audit committee.

In the long run, NEDs must be furnished with comprehensive and timely information for consideration to make informed decisions and contributions.

The board, through the chairperson in liaison with the board secretary, must determine specific decisions reserved for its deliberation.

For accountability and independence, the company secretary must be responsible to the chairperson. NEDs must chair and dominate all key committees, such as audit, risk, remuneration and nomination.

Independence of NEDs. NEDs’ independence is compromised if they have family ties with executive directors (EDs), especially the mannaging director.

Cross-directorship and overstaying on boards beyond 10 years must be avoided.

Former company executives (within three years) and professional service providers like lawyers are deemed not independent.

Independence is also compromised when one receives some payment beyond board membership fees from the company.

NED representatives from significant shareholders may also struggle to be (and be seen to be) independent.

It should be noted that NEDs and EDs are equally liable for corporate failures. NEDs lacking independence cannot be whistleblowers for their fellow EDs.

Criticisms of NEDs Some NEDs lack knowledge about the business they are superintending while others just do not dedicate adequate time to add value to the firm.

Some NEDs are just too busy and have no time to discharge their NED roles diligently.

Due to circumstances beyond their control, NEDs have no interactive platform with shareholders beyond the annual general meeting, which has specific business to discharge.

NEDs, who are EDs in other firms, may also not criticise their peer EDs as they interact in other fora.

The Zimbabwean context Investments in business of trust such as banking, are proving a heavy load for Zimbabwean NEDs as their stewardship roles go beyond their own shareholders’ investments.

Similarly those overseeing debt funded entities end up with conflicting interests, as they succumb to ED power and corrupt tendencies.

There is the tendency to abuse trust bestowed on them. The clique syndrome becomes apparent in board appointments.

Most boards, even for listed companies, take a regional if not tribal trend in terms of composition.

While the Institute of Directors of Zimbabwe (IODZ) reportedly has a pool of potential directors, it’s not clear whether this facility is being utilised and the extent thereto, as it is not mandatory anyway.

The significance and visibility of the IODZ beyond training and education seems limited and marginalised.

In some countries, the equivalent of our own IODZ should own and champion the corporate governance cause.

Cross-shareholding and cross-directorships are issues of concern in Zimbabwe.

While shareholding is basis for nominating NEDs, it does not follow that such NEDs must be EDs at the investing firm.

Enforcement, ownership and government recognition and support of the current corporate governance drive should ensure that it projects a national outlook and acceptance. The IODZ, ZSE and or the Securities Commission must champion this cause, instead of the players concerned.

It is acknowledged that previous corporate governance efforts collapsed due to the political developments. It is also feared that the inclusive government environment has not helped matters as there is so much “short-termism” in all government focus. A key element of corporate governance is enforceability.

Another interesting area that needs further tackling is that of the shadowy nominees that invest in most companies.

One fears and feels that these are the EDs who have amassed so much wealth that they now own the companies they were “employed” to manage.

Zimbabwe thrives on secrecy, or is it incapacity to unravel issues?

Viable companies have fallen to their knees and no explanations or convictions are made and resultantly no lessons can be drawn. What we can all do is to speculate. Indeed in Zimbabwe, directors never fail as they are not held to account.

.Gilbert Gandashanga is a corporate services practitioner with skills in human resources development, human capital strategy and talent management. He writes in his personal capacity.