IN ANY economy, corporate governance is a key indicator of the extent of security on investment with government institutions, listed entities and banks normally expected to lead the way.
However, in Zimbabwe’s case, it seems government is the biggest culprit in terms of violation of good corporate governance tinets.
Investopedia defines corporate governance as a system of rules, practices and processes by which a company is directed and controlled. Corporate governance essentially involves balancing the interests of the many stakeholders in a company — these include its shareholders, management, customers, suppliers, financiers, government and the community.
Since corporate governance also provides the framework for attaining a company’s objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure.
Corporate governance became a pressing issue following the 2002 introduction of the Sarbanes-Oxley Act in the United States, which was ushered in to restore public confidence in companies and markets after accounting fraud bankrupted high-profile companies such as Enron and WorldCom.
Most companies strive to have a high level of corporate governance. These days, it is not enough for a company to merely be profitable; it also needs to demonstrate good corporate citizenship through environmental awareness, ethical behaviour and sound corporate governance practices.
When it comes to executive-level positions within an organisation, assigned titles and the roles associated with each can become muddled quickly. For small organisations or those that are still in the startup or growth phases, the chief executive officer (CEO) may also be serving as the chief financial officer (CFO) and the chief operating officer (COO), which leads to a lack of clarity and an overworked executive. Even though it may seem easier or more cost-effective to assign multiple titles to a single executive-level individual, this can wreak havoc on the continuity of the business and may ultimately negatively affect its long-term profitability.
A company’s chief executive officer is the leader of the organisation and holds a high degree of responsibility. The CEO is tasked with directing a company’s mission, developing its policies and creating its short, mid and long-term goals for profitability and operational success.
Employees and the public view the CEO as the head individual in charge of the company, and he or she is required to carry out the expressed directive of the board of directors.
At times, the CEO is also the president of the company, which tends to be more common in smaller organisations. On the other hand, large corporations have a number of high-level management positions including department heads or presidents who are expected to report to the individual who holds the title of CEO. No matter the size of the company or total revenue it may produce, the CEO must possess a high level of credibility as well as business prowess.
As a subordinate to the CEO, the COO is viewed as the second in command in both large and small organisations. The COO plays a part in assisting the CEO in creating the broad initiatives a company implements, but more importantly, the COO acts as the individual who oversees the operations and the business functions on a daily basis.
The COO also helps the CEO in making important decisions about functionality and productivity, and he or she works closely with the CFO and the chief information officer. Employees and the public view the COO as second in charge in the organisation, as the position is held most commonly by the vice president of a company.
Although both the CEO and the COO play important and similar roles within a company, one individual should not hold both positions. The separation of the two executive titles and the duties inherent to each is meant to provide a division of labor that is necessary to ensure the organisation runs smoothly and ethically. Companies benefit greatly when the job duties of the CEO and COO are given to different individuals.
Corporate governance has evolved over the years from being board processes and procedures to involve the full set of relationships between a company’s management, its board, its shareholders and its other stakeholders, such as its employees and the community in which it is located with academics arguing the quality of governance is directly linked to the policy framework.
Never mind issues such as board independence, autonomy of the audit function and separation of roles between management and directors, key state enterprises and institutions have gone for long periods without boards as in the case of Zimra in 2014.
Although the government last year adopted a National Code On Corporate Governance, whose aim is to encourage leadership to adopt high standards of corporate governance through well-defined national and ethical value systems, very little has been done to implement the code except announcing the Office of the President and Cabinet is working on a new code of ethics and a Public Sector Corporate Governance Bill to deal with public sector mismanagement and corruption. No timeframe has been given as is the norm.
Despite various accounts of gross incompetence, maladministration and even embezzlement of funds, a number of parastatal and state owned enterprises executives remain ensconced at the helm of these institutions in what seems to be a deliberate ploy by government officials and politicians to keep milking these organisations dry.
In some instances, serious allegations of a fraudulent nature have been levelled against executives and top management at some state owned institutions, but no action has been taken.
In fact, in cases where accused officials were suspended pending full investigations, political muscles have been flexed to reinstate them.
Despite ongoing investigations that had been instigated in July, Civil Aviation of Zimbabwe (Caz) general manager David Chawota was in September reinstated after about two months of forced leave. The leave was meant to pave way for investigations into alleged poor corporate governance but the general manager was reinstated after Transport minister Joram Gumbo, acting on information provided, said he did not see any reason why Chawota should not be at work.
Chawota is reportedly caught up in a series of fresh scandals involving conflict of interest, cronyism and tender irregularities in contravention of good corporate governance practices barely before the dust has settled.
Government sources recently told this paper that Chawota is now embroiled in fresh controversy including the unprocedural awarding of several potentially lucrative concessions for coffee shops at the Harare, Bulawayo and Victoria Falls airports to certain companies without going to tender.
In another case which exposes a blatant conflict of interest, Caaz entered into contractual arrangements with a company called LL Promotions Pvt Ltd, in which Chawota is listed as one of the directors, raising questions on Gumbo’s decision.
Health minister David Parirenyatwa and Labour minister Prisca Mupfumira ordered the reinstatement of suspended Psmas MD Henry Mandishona in what the duo said would ensure the medical aid service provider recovers without hindrance.
Mandishona was sent on forced leave before being suspended by the Psmas board of directors earlier in the year on grounds he had flouted tender and employment and remuneration procedures, misrepresented the board to some stakeholders, acted outside the board’s authority and incurred costs without the board’s approval.
Mandishona’s case came after top government officials and former Psmas CEO Cuthbert Dube allegedly devoured Psmas through monthly salaries amounting to as much US$500 000and other benefits to government officials while nearly one million of its beneficiaries were failing to get access to treatment and drug facilities for which medical practitioners and centers were demanding cash up front, as the medical aid society reeled under a burdensome US$140 million debt. Sustainability practitioner Tapuwa Nhachi said the involvement of ministers in some cases to overrule board decisions shows that the government is not serious in its commitment on the corporate governance code.
“It means politics at the end of the day will override good corporate governance issues,” said Nhachi.
Secondly, Nhachi said, the reinstatements also show how government disregards the auditor general and independent auditors.
Nhachi also said government is found wanting in that the draft Mineral Bill and Companies Act are being done under the Office of the President without consultation.
Harare based lawyer Obert Gutu said Zimbabweans should not expect much from a Zanu PF government that thrives on corruption and patronage to reward loyalists at the expense of national interest.
“Corruption is part and parcel of the Zanu PF way of doing business, they talk about good corporate governance but in reality, they never practice what they say or say what they practice,” Gutu said.
“Most, if not all, parastatal bosses and other top executives are part and parcel of the Zanu PF Mafia. They are virtually untouchable. Until such a time that we completely uproot the Zanu PF regime together with its corrupt way of doing business, you might as well forget about economic revival in Zimbabwe,” added the lawyer.
Gutu said its survival of the fittest in Zanu PF where small fish get fried whilst big fish simply swim away.
“You can never expect to practise good corporate governance in a fully – fledged dictatorship such as the one we have in Zimbabwe.Zanu PF is like a Mafia and in Zanu PF circles, the law of the jungle reigns supreme,” Gutu said.