ZSE companies contravene governance code


A SURVEY on the corporate governance practices of companies listed on the Zimbabwe Stock Exchange (ZSE) has shown that a significant number of public companies are in contravention of the Zimbabwe National Code on Corporate Governance (ZimCode).


Launched in April 2015, ZimCode provides a corporate conduct framework for both the public and private sectors, which covers many subjects including disclosures related to sustainability reporting and remuneration of directors.

The survey, conducted by the Institute of Chartered Secretaries and Administrators in Zimbabwe (ICSAZ) between August and October 2017, set out to find out whether board practices adhered to Zimcode and international best practices.

The investigations covered 15 major topics in connection with board governance practices, including board selections, recruitment and composition; board leadership; board evaluations; audit committee and board remuneration matters.

Another major finding was that 54% of companies did not have a policy on social media to be used by employees, management and the board showing that many firms are lagging behind on this key change in the business environment.

The findings revealed that 31% of the boards of the 61 listed companies were yet to disclose remuneration packages as required by the code.

“About 67% of boards had remuneration committees to review the directors’ compensation. About 69% of all boards disclosed executive and non-executive directors’ remuneration separately,” the survey report revealed.

“Both, the ZimCode and King IV report, advocate for such a committee. It is also expected that all boards should disclose the directors’ remuneration separately for executive directors and non-executive directors (NEDS)

“According to the King IV report, many international and institutional investors are paying additional attention to disclosure and voting on remuneration. In order to foster accountability on remuneration, King IV report recommends including definite disclosure, among which, that remuneration should be disclosed in three parts, namely a background statement, an overview of the policy and an implementation report.”

Listed entities had 500 board seats cumulatively, according to the 2017 Zimbabwe Quoted Companies Survey conducted annually by Zimind Publishers, which publishes NewsDay, The Standard and Zimbabwe Independent.

This shows that the number of directors yet to disclose their renumeration packages is quite significant.

Chapter three of ZimCode provides guidelines for board directors, including provisions proscribing selective corporate disclosure. It also contains provisions requiring every board to conduct themselves with honesty and integrity.

Disclosing renumeration packages became part of international best practices after the global recession of 2008. A lot of big companies that failed had directors with absence remuneration packages and most of them walked away with a fortune as the companies went under.

The survey noted that many boards needed reforms in their practices to conform with ZimCode.

“Many boards have implemented some governance reforms. However, there is still a lot to be done by boards to regularise their practices to be in tandem with best practice. The research survey revealed that most boards were lacking particularly in having formal directors’ education programs, non-existence of remuneration committees in some boards, lack of succession planning and lack of a policy on social media.

“Most of the companies’ annual reports were largely made up of financial information and accounting policies and very little of sustainability reporting.”