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The role of corporate governance in leadership

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. In Zimbabwe, the National Code on Corporate Governance (ZimCode), was launched in April 2015 and is now widely accepted as the leading corporate governance framework. ZimCode contains international best practice, principles and standards on corporate governance and provides guidelines on responsible business conduct. The promoters of ZimCode are Standard Association of Zimbabwe (SAZ), Institute of Directors Zimbabwe (IoDZ) and Zimbabwe Leadership Forum (Zimlef).

Eve Gadzikwa

Leadership and corporate governance go hand in hand and neither exists in a vacuum. The world we want to experience is where everyone leads with integrity and embraces corporate governance for the common good. Corporate governance questions the role of leadership in creating fairness and transparency in the use and management of resources, impact of business operations to the environment and corporate social responsibility. It tests the integrity of those who are entrusted to be the custodians or agents of national and company resources. In short, leadership means good stewardship of shareholder’s assets and the earth’s natural resources to ensure that today’s business operations are sustainable beyond the current generation. Leadership speaks about responsible business conduct which embraces the 3Ps; people, planet and profits. However, there is a clear division of responsibilities between the various levels of leadership, ie, board, chairman, CEO and management

The role of the board and directors of any enterprise is the link between shareholders and the company. An effective board should lead and control the company in partnership with its managing director, CEO and the senior management team. Building an effective and high performance board is not an easy task, but it is highly possible and desirable. An effective board must develop a methodology to ensure that the board has the correct structure, composition, size, culture, gender balance and skills set as well as ensuring that the board is not only effective, but also consistent in its performance and sustainability in terms of succession planning. A dysfunctional board is one which chooses to ignore these important elements of good governance. For instance, non-executive board members are required to be trained on corporate governance best practices, director excellence, to act in good faith, to exercise their duties in terms of business judgment rule and must not have material personal interest.

The chairman

The chairman, once perceived as a ceremonial head, is responsible for the leadership of the board and is pivotal in the creation of the conditions necessary for overall board and individual director effectiveness, both inside and outside of the boardroom. It is also the chairman’s role to ensure effective communication with stakeholders and to chair general meetings. Today, the chairman must be skilled and is expected to be independent not only on appointment, but is expected to remain independent throughout his tenure. The chair must promote and oversee the highest standards of ethics within the board and the company, to lead the board and in particular discussions on all proposals put forward by the executive team, to set an agenda for the board which is focused on strategic matters, to be forward looking to oversee current business, to maintain a proper process to ensure compliance with board policy on matters reserved to the board for consideration, to ensure that board members receive accurate, timely and clear information to enable them to monitor performance, to make sound decisions and give appropriate advice to promote the success of the company. The chair must manage board meetings so that sufficient time is allowed for the discussion of complex or contentious issues. The chair must create the conditions for overall board and individual director effectiveness including among other things, regular CEO and board evaluation.

The chief executive

The chief executive is responsible for the day to day management of the business, in line with the strategy and long term objectives approved by the board. The chief executive officer reports to the chairman and must prepare regular informative and accurate updates for board members in order to facilitate decision making. He is responsible for all executive management matters affecting the organisation. All members of executive management report, either directly or indirectly, to the chief executive officer. Undoubtedly, the success of an organisation greatly depends on the drive, leadership, integrity, experience and effectiveness of the CEO and his team.

Role of senior management

All members of the senior management team report directly to the CEO. They are responsible for appraising the performance of each member of the team, encouraging their development and further training, where necessary replacing them, recruiting replacements and formulating remuneration proposals for remuneration committee decision are making. The senior management must support the CEO.

The company secretary plays a crucial role in the governance of the company and the board’s discharge of its leadership. The contemporary company secretary is the chief administrative officer of the company or chief governance professional within the organisation. The chair relies on the expertise of the company secretary in terms of current best practice, corporate governance requirements, directors’ fiduciary duties, board reporting and disclosure obligations and proper meetings procedures.

Gadzikwa is Director General SAZ, ARSO President Elect. These New Perspectives articles are co-ordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society (ZES), e-mail kadenge.zes@gmail.com, cell +263 772 382 852.

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