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Involve workers in corporate governance

By Farai Musamba

UP UNTIL now the governance situation in our companies seem not to have involved the workers on the shop floor.

etica, sans-serif”>Workers seem not to be taken as an important stakeholder who can contribute seriously on the governance issues that obviously have a bearing on the long-term survival of the company and the general welfare of the workers.

The economic situation that prevails in Zimbabwe today is certainly getting from bad to worse.

It is undergoing a dramatic change in which the living standards for the common man have rapidly declined and continue to do so.

In recent weeks we have seen a number of events which have greatly affected the ordinary worker’s ability to survive – at least honestly.

How else can we describe a situation where a worker who earns around $30 000 a month is expected to foot a transport bill of around $22 000 a month?

A number of companies though have been quite imaginative and worker-centred that they have in place transport allowances, which are self-adjusting in line with gazetted fares. Unfortunately these may not be many.

We are all aware that there is a new minimum wage of $47 000 or so, but realistically, how many companies and organisations are paying their workers this figure?

Even if they are paying this much, the worker is still left struggling to make ends meet. Once we factor in rentals, water and electricity charges, lunch for the worker, then there is nothing left for the family at home, school fees etc.

This begs the question; if the situation is this bad how then is the average worker surviving?

Obviously, it shows that the worker has to be engaged in other activities to sustain his/her family.

I hope these other activities are noble. If they are not, you certainly cannot condone them, but you are forced to understand the pressures affecting the worker.

One wonders though why the employer is unable to increase the workers wage to a living wage, since these are a direct input cost and can always be passed on in increased prizes. The answer is obvious, the employer is in dire straits himself.

He argues that he is not even able to find enough money to pay the current low wage because the input prices are increasing everyday that he is unable to keep pace with them.

If he keeps on increasing costs he will not be able to pass them on in the form of price increases in the midst of price controls and possible consumer resistance.

It is obviously a plausible argument in an environment where inflation is running at 228%.

The only problem in this response is that in the midst of these problems, a certain stakeholder in the company does not seem or is not seen to be feeling the pinch as everyone else. We all know that every organisation has a number of stakeholders who I will state – at the risk of repeating what we all know.

These include the shareholders, management team, state, suppliers, customers and society in general.

As the fortunes of a company plummet certain of these stakeholders tend to lose more than others while others appear to be unruffled by the stormy weather engulfing the company.

We have already seen how the worker is on the wrong end of the stick as his/her relative income continues to decline. Other stakeholders can be added here.

They include the customers who are obviously being charged higher prices.

This is in addition to being subjected to shortages, ill treatment, and lack of choice as companies engage in cost cutting measures as it is a seller’s market.

Suppliers will no longer be paid on time and they are expected to be thankful that they are being paid at all. Suppliers have responded by charging cash or revised credit terms to 15 days or less. However this may have been too late as the damage would have been done.

Society is expected to endure higher levels of environmental damage through pollution and other degrading factors. Society is expected as well to thank the company for at least providing work to its members.

As with society the state also suffers through reduced taxes as everything possible is done to avoid paying tax or reduce the tax bill. Although the state may gain through “inflation tax” as appears to be shown through the above budget tax collections by the Zimbabwe Revenue Authority (Zimra), the amount collected actually can be even higher if mechanisms to avoid or reduce companies’ tax bills were not in place.

The shareholders are sometimes not better off at all as they are not awarded any dividends. It is common to see statements which say, “due to the need to conserve cash the directors have decided not to declare any dividend this period”, or something to this effect.

This means they also lose out in terms of dividends. Of course we may take into account the argument which says the passed dividend will result in an appreciation of the share price. Whether or not the share prices are appreciating significantly in order to compensate for the lost dividends is arguable.

In addition there are other factors to consider but these cannot be considered now as they deserve to be looked at separately for justice to be done on them.

Now that we have seen the suffering of all the other stakeholders we are probably left with only one. This stakeholder can be said to be resilient. It is management!

It is arguable that in Zimbabwe it is only management, which has better fortunes as the company gets deeper into problems.

While every one of the stakeholders is asked to tighten belts, the management loosens theirs. Is it not a fact that when companies are struggling there is still money to invest in luxury executive vehicles for management. Perks and allowances continue to be increased to match inflation.

In short, the management is not expected to suffer a decline in its living standards when everyone else does. This is probably why companies are still able to purchase luxury vehicles for them when others have to foot to work.

There will always be justifications for looking after the management as they may say if this management team is not well looked after then it will leave for greener pastures or something to that effect. Surprisingly, this is often said of management that has “managed” the decline of the company’s business that it becomes irrational to look after them well so that they can sink the company further into problems.

Maybe they should be allowed to move onto greener pastures, which they will quickly turn into barren pastures.

It is important to note here that increased benefits to management during difficult times are a result of poor governance at board level. A board that presides over the bleeding of a company to death while continuing to increase management benefits does not deserve to be the one driving the company.

The situation raises a corporate governance issue.

Good corporate governance means looking after all the stakeholders of the organisation. The organisation does not exist in a vacuum. While it should take care of its management it becomes wrong if the other important stakeholders are left out.

During periods of economic or business decline many workers are desperate to earn even a pittance but surely it cannot be morally justified in a company whose management and directors are clearly living in a neck deep pool of goodies. Corporate governance standards require that a company treat all its stakeholders with due respect and families as this is in the long-term interest of the company.

The apparent lack of attention on the welfare of workers is perhaps caused by the nature in which governance issues are handled at board level. An important stakeholder like the workers probably needs to be represented at this level in order to articulate issues of importance to workers.

It may be argued that the average worker is more loyal to the company than the average manager since the worker is more likely to spend his working life at the company, unlike the manager who is always hopping from greener pasture to greener pasture.

Because of this, workers are more likely to look after the company’s interests better and probably deserve to be represented at board level in order to balance the power of management. The mechanics of their representation could be through employee share ownership schemes.

With more worker participation we are more likely to see improved governance of our body corporate.

At one time worker/directors were the in thing in Zimbabwe. One wonders why they were dropped from literally all the boards they ever used to sit on.

This position is probably worth revisiting.

Farai Musamba is a fellow member and manager (student services) of the Institute of Chartered Secretaries and Administrators in Zimbabwe.

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