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Ethics lure investors: Researcher


An academic and researcher has said investors look at the calibre of CEOs and management team before considering to invest in particular companies.


Speaking at a business breakfast meeting in Harare yesterday, Norazida Mohamed said the calibre of the chief executive officer and the management is important for investors who also look at the reputation of the organisation.

“Investors pay close attention to the reputation of the corporation. Investors and lenders view corporate reputation as important before making investments. Strong corporate governance in an organisation is an important factor to investors,” Mohamed said at a breakfast meeting organised by the British Council and the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI), under the theme, Tone at the Top” & “Mood in the Middle”: The Power of Corporate Culture.

She said research has shown that organisations lose as much as 7% of their annual turnover as a result of fraud, adding that corruption was costing the global economy $1,5 trillion annually.

Mohamed said a high percentage of frauds are committed by senior management and executives, greed is one of the main motivators for committing fraud, fraudsters often work in the finance function, fraud losses are not restricted to a particular sector or country and the prevalence of fraud is increasing in emerging markets.
“The message from the top is not just we will comply with ethics and law. The message is far broader — our company is committed to the highest ethical standards in every aspect of its business — not just compliance, but to all business practices,” she said.

“Ethics is part of the corporate branding and requires that every level of the company be committed to this value.”

The board and executive management, Mohamed said, can help translate the “tone at the top” to a healthy “mood in the middle” by ensuring certain organisational practices are in place at all levels, including recruiting and screening methodologies.

MEFMI acting executive director Rose Malila-Phiri said her organisation believed that raising awareness of local and international best practice was a necessary catalyst for organisational effectiveness.

“. . . good corporate governance has become widely recognised as critical to the prevention of corporate, national and global economic failures. It is now also widely accepted that good corporate governance is critical to building and growing sustainably successful institutions in the public, private and civil society sectors,” she said.

“A key component of good corporate governance is an ethical culture. Empirical evidence suggests that great organisations are built on strong ethical business practices.”

Malila-Phiri said ethical practices play a significant role in reducing the cost of doing business and improving the ease of doing business and are thus critical in enhancing a conducive environment for sustainable investment.

“A strong ethical culture is central to the global anti-corruption and anti-money laundering drives,” she said.

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