By Brian Sedze THE profound and fundamental good corporate governance design and implementation stinks right at the Office of the President and Cabinet (OPC). Without substantial evolution of the mind within the leaders this country will not achieve optimum economic success and the endemic corruption cannot be nipped in the bud.
This view is from my experience as a training and development chairperson and counsellor of one of the pre-eminent institute in the arena of corporate governance in Zimbabwe. It is also derived from having intimate knowledge and contributed in drafting the National Code on corporate governance. The weakest link is the OPC and I will elaborate.
First, directors in Zimbabwe are appointed on who you know instead of what one knows. In Zimbabwe the norm is loyalty-based board appointment devoid of competence, balance and desired strategic outcomes. It was recommended to the Chief Secretary, the then State Enterprises minister Gorden Moyo and then Prime Minister Morgan Tsvangirai that a database of potential directors be set to ensure neutrality and a wider human capital base to select from. Ultimately the OPC was given the mandate to implement the same.
Despite creating a comprehensive database and its management system at a huge cost including but not limited to advertisement, database management systems, vetting and or due diligence, it was all futile.
Appointment to State-owned enterprises, commissions and authorities is still based on an old boys’ network and or tribal cliques and or political network. Those, who sent their resumes for consideration in future appointments wasted their time because it’s not happening. It was all window dressing.
The impact of such loyalty-based appointments is two-fold, that is, allegiance to the appointing authority instead of discharging duty to ensure the best strategic outcomes of the company. Those political considerations often outweigh economic and social impact and outcomes.
Second, it was recommended that the best practice is to appoint board members only but the ministries go further to appoint the board chairpersons. It is ideal and was recommended that the board should appoint the chairperson at its first board meeting.
The appointment of a board chairperson by the parent ministry creates a super board member who usurps both the executive function and the powers of the board. The chairperson is often untouchable as he is a proxy and a surrogate of the minister or the President.
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The board must make decisions “as a board” but due to the chairperson’s proximity to political power he or she often takes instructions from the minister and instructs the executive team to implement without considering the company context. The divide of the board as a policy and strategy making organ then the executive as the strategic implementation organ is blurred as the super board member becomes both the board chairperson and the executive.
Third, Zimbabwe has great professionals and technical experts in law, engineering, accounting and so forth but that knowledge, skills and abilities are inadequate for one to be a corporate governance practitioner a prerequisite for being effective as a board member.
It was recommended that every board member must upscale competences by compulsory training in policy and strategy formulation, effective board chairing, role and responsibilities, enterprise risk management and so forth. This is not done and there are no demands to acquire continued professional development points each year like most other professions. Surprisingly the party responsible for State business, Zanu PF, find it necessary to have the minimum qualification to be a member of Parliament or office holder to be a certificate from Herbert Chitepo School of Ideology yet they don’t believe running a State enterprise requires some minimum skill as well. It stinks.
Fourth, it was recommended that boards must have balance. Balance is enhanced by having the majority of board members being independent board members.
The importance of non-executive board members is to enhance the roles of the Audit Committee, the company secretary and board committees. In the Zimbabwean context “independence” should be interpreted to mean not overly invested in Zanu PF politics.
The reason there is a perception of catch and release in court proceedings is that most directors and ministers are arrested based on emotions not robust audit reports, some are arrested to investigate, some only get into the awkward position after falling out of favour with the chairperson who is also basically a minister’s or President’s surrogate and also carry their thinking.
The second importance of having independent board members is that beyond providing balance their passion and commitment is to the company not any person, outside institutions and political players.
Fifth, corporate governance is a relatively new concept in Zimbabwe. Due to shortage of that skill at one point one late Eric Bloch led dozens of companies as a board member. To address that deficiency besides compulsory training I opine that Zimbabwe has no business in adopting a voluntary corporate governance framework. It must adopt a “comply or else” not a “comply or explain” framework like the Sarbanes-Oxley Act in the United States of America. In any case most don’t even explain corporate governance deficiencies pointed by the Auditor General in hundreds of reports each year.
Directors and other State actors must acquire personal liabilities for infringements on tender processes, recruitment, budget approvals, financial reporting, audit and risk management, systems and procedures, and so forth. It will curtail the rot of deliberate mismanagement and taking illegal or improper instructions from political masters. If one is personally liable the cloud remains beyond political protection.
Sixth, it was recommended that all State enterprise directors, Cabinet members and senior employees must subject themselves to annual life style audits. It is not a witchhunting exercise because it is ordinarily expected that some may have own wealth and businesses. Even if they have such independent income it must lead to declaring to the President and or Chief Secretary their annual tax returns. Wealth has a tax impact. If the pre-appointment and post-term wealth can’t be explained it was recommended that an unexplained wealth order be issued.
Unexplained wealth orders are in existence but most aren’t based on a population size of one, methodologies murky, the investigations not based on a fair and equitable basis and mostly limited to those who have fallen out of favour.
Seventh, my view is that salary ceilings imposed or subject to strict regulation are ill-considered, uninspiring and a strategically weird national trajectory. It’s a bad policy. To attract and retain talented directors and senior executives they must be remunerated at an externally comparative and performance-based remuneration.
These ceilings are a cause of the agency challenge as to be equal to external peers. It manifests in rent seeking behaviour, corruption and financial malfeasance. Placement of salary ceilings ensures State-owned enterprises have professional rejects delivering attendance not value.
Eighth, the recycled board members are corporate dinosaurs and most are appointed but not providing leadership in current trends of cyber security, international financial reporting standards, environmental and social governance, new workspace dynamics like home-working, sustainability, ethics, human and animal rights, reputation management, and so forth. We are neither implementing best practices nor moving with the times.
The office of the President and Cabinet must implement corporate government frameworks and practices that ensure economic success through transparency, fairness, competence-based appointment, politically neutral and accountable directors. At the moment the directors are an appendage of a political party to deliver political outcomes instead of maximising economic and social outcomes.
- Brian Sedze is strategy, innovation and corporate governance consultant and Chief Executive of Medulla Edutainment Services. He can be contacted on [email protected]
