Multiple directorships lower effectiveness

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MULTIPLE directorships have been blamed for contributing to corporate governance failures among Zimbabwean companies.

Report by Staff Writer

CEO of the Depositors Protection Board John Chikura told a recent Institute of Chartered Accountants of Zimbabwe seminar that local companies still faced challenges in adhering to good corporate governance.

“Good governance is not just about compliance and conformance with rules and regulations; it is about establishing internal processes and attitudes that add value, enhance business reputation and making the business more attractive to both internal and external investors,” he said.

Chikura said most of the times boards were not independent and suffered from huge conflicts of interests, which in turn led to poor reporting and disclosures.

According to studies held globally, holding too many directorships lowered  effectiveness. Most are agreed that busy directors provide excessive compensation for their CEOs, resulting in lower firm performance.

A study by Shivdasani and Yermack provides evidence suggesting multiple directors cater to the CEO, thus compromising their monitoring role.

Such directors may not fully represent shareholder interests.
In the US, professional bodies have also recognised the possible detrimental effects of multiple directorships.

The Council of International Investors and National Association of Corporate Directors ordered that directors should not serve on more than two or three boards.

In Zimbabwe, some of the people who hold multiple directorships include Harare mayor Muchadeyi Masunda, Elisha Mushayakarara, Joseph Kanyekanye, Bothwell Nyajeka, Bekithemba Nkomo, Canaan Dube, Ngoni Kudenga, Charles Utete and Sternford Moyo.

Masunda is the chairman of Old Mutual, Lafarge, Zimbabwe Sugar Association, and the Commercial Arbitration Centre. He is also a board member of Zimplats and Bindura Nickel Corporation.

Mushayakarara chairs Mashonaland Holdings and RioZim and sits on the ZB Holdings board, where he is the chief executive officer.

Nkomo is a director at African Sun, Aico and Seedco while Kanyekanye’s board seats include Star Africa, RTG and Capital Bank.

Nyajeka is on the boards of PG Industries and TA Holdings and chairs the ZB Holdings board. Kudenga is at ABC Holdings, BNC and Hippo Valley while Dube is at Barclays, Delta and Edgars. Moyo is chair at PPC, Zimra, and Stanbic as well as being a board member of Alpha Media Holdings.

Chikura said given the prevalence of multiple directorships, Zimbabwe still had a long way to go in terms of corporate governance and most companies were only paying lip-service to it. Recent experiences from the banking sector and some listed companies showed the country was not yet compliant with corporate governance practices.

He believed that in order to achieve sustainable success, corporate governance should be more about performance and should be based on the values of transparency, accountability, fairness and responsibility.

He said there was need to go beyond focusing on compliance related issues and concentrate on inputs of corporate governance such as composition of boards and separation of CEO and chair positions. — Staff Writer.

MULTIPLE directorships have been blamed for contributing to corporate governance failures among Zimbabwean companies.
CEO of the Depositors Protection Board John Chikura told a recent Institute of Chartered Accountants of Zimbabwe seminar that local companies still faced challenges in adhering to good corporate governance.
“Good governance is not just about compliance and conformance with rules and regulations; it is about establishing internal processes and attitudes that add value, enhance business reputation and making the business more attractive to both internal and external investors,” he said
Chikura said most of the times boards were not independent and suffered from huge conflicts of interests, which in turn led to poor reporting and disclosures.
According to studies held globally, holding too many directorships lowered  effectiveness. Most are agreed that busy directors provide excessive compensation for their CEOs, resulting in lower firm performance. A study by Shivdasani and Yermack provides evidence suggesting multiple directors cater to the CEO, thus compromising their monitoring role.
Such directors may not fully represent shareholder interests.
In the US, professional bodies have also recognised the possible detrimental effects of multiple directorships.
The Council of International Investors and National Association of Corporate Directors ordered that directors should not serve on more than two or three boards.
In Zimbabwe, some of the people who hold multiple directorships include Harare mayor Muchadeyi Masunda, Elisha Mushayakarara, Joseph Kanyekanye, Bothwell Nyajeka, Bekithemba Nkomo, Canaan Dube, Ngoni Kudenga, Charles Utete and Sternford Moyo.
Masunda is the chairman of Old Mutual, Lafarge, Zimbabwe Sugar Association, and the Commercial Arbitration Centre. He is also a board member of Zimplats and Bindura Nickel Corporation. Mushayakarara chairs Mashonaland Holdings and RioZim and sits on the ZB Holdings board, where he is the chief executive officer.
Nkomo is a director at African Sun, Aico and Seedco while Kanyekanye’s board seats include Star Africa, RTG and Capital Bank.
Nyajeka is on the boards of PG Industries and TA Holdings and chairs the ZB Holdings board. Kudenga is at ABC Holdings, BNC and Hippo Valley while Dube is at Barclays, Delta and Edgars. Moyo is chair at PPC, Zimra, and Stanbic as well as being a board member of Alpha Media Holdings.
Chikura said given the prevalence of multiple directorships, Zimbabwe still had a long way to go in terms of corporate governance and most companies were only paying lip-service to it. Recent experiences from the banking sector and some listed companies showed the country was not yet compliant with corporate governance practices.
He believed that in order to achieve sustainable success, corporate governance should be more about performance and should be based on the values of transparency, accountability, fairness and responsibility.
He said there was need to go beyond focusing on compliance related issues and concentrate on inputs of corporate governance such as composition of boards and separation of CEO and chair positions. — Staff Writer.

“Good governance is not just about compliance and conformance with rules and regulations; it is about establishing internal processes and attitudes that add value, enhance business reputation and making the business more attractive to both internal and external investors,” he said.
Chikura added that most of the times boards were not independent and suffered from huge conflicts of interests, which in turn lead to poor reporting and disclosures.
He said even though rules continued to be drawn and staff had been trained in corporate governance, companies had not been successful as recent experiences from the banking sector and some listed companies had shown.
Interestingly, the market regulator, the Securities Commission of Zimbabwe, last year removed Chikura as a commissioner, along with Martha Rukuni after Finance minister Tendai Biti cited they were engaged in an occupation which was inconsistent with their duties as commissioners hence against corporate governance.
In the case of Chikura, Biti cited the events involving Renaissance Holdings and Afre as a demonstration of conflict of interest that arose when commissioners sat on multiple boards of listed companies.

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