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Zim firms shun good corporate governance

ZIMBABWEAN corporates have shunned corporate governance evolution by among other things persistently sticking to outdated practices that have seen some banks and listed companies perennially scoring poorly on the country’s corporate governance rankings.

By Taurai Mangudhla

Sources close to the Institute of Chartered Secretaries and Administrators in Zimbabwe (Icsaz) say participants in the annual excellence in corporate governance awards in the banks and companies listed on the Zimbabwe Stock Exchange (ZSE) generally report as little detail as possible on corporate governance, normally just enough to fulfil listing requirements.

“The problem is the requirements are currently vague and do not speak to the quality of the information required,” said a source close to the corporate governance panel.

An analysis of the Icsaz corporate governance awards results since inauguration in 2013 show that Zeco Holdings has been ranked last for three successive years on the ZSE-listed companies’ category, scoring as low as 64 points out of a possible 289 points due to poor reporting.

ZSE-listed companies scores are based on shareholder treatment, stakeholder practices and sustainability reporting as well as board practices. The panel also looks at governance, risk management and internal audit reporting in banking institutions.

Companies that have featured at least twice in the bottom 10 of the ZSE listed companies for the three years include Zimplow, Falcon Gold, Powerspeed, Hwange Colliery, ART Corporation, Zimre Holdings and Willdale.

Falgold was ranked 59 out of 60 in 2013 before improving by one position to 58 in 2014. Falgold remained third from the bottom at 55 out of 57 in 2015.

Art Corporation was positioned 52 out of 60 in 2013 and 52 out of 57 in 2015. Listed coal miner Hwange Colliery ranked 58 out of 60 in 2013 and 50 out of 57 in 2015.

The bottom 10 in 2015 included RioZim, African Distillers, Astra Industries and StarAfrica.

On banking institutions, Agribank and POSB featured twice in the bottom five between 2014 and 2015. The banking category was introduced in 2014. POSB was ranked last at position 15 in 2015 and 13th out of 17 in 2014, while Agribank was ranked last in 2014 and second from last in 2014.

Standard Chartered Bank is also among the list of poor performers having been ranked 14 out of 17 in 2014 and one place up from the bottom five at number 10 out of 15 in 2015.

In 2015, the bottom five on banking institutions included MBCA, Metropolitan Bank and ZB Bank.

According to Icsaz, the adjudication exercise for the three years generally revealed that there is very little disclosure on the dividend policy with the majority of companies not disclosing the existence of any dividend policy, which they follow in distributing returns to their owners as well as on the policy on directors’ remuneration and management shareholding.

On board practices, some companies failed to make the distinction between independent and non-executive directors as well as display the skills set and experience of directors.

Icsaz said companies failed to show whether or not they conducted board evaluations.

On banking institutions, almost all banks failed to disclose on related party transactions, securitisation issues and existence of all committees required by the RBZ Act.

In the 2015 adjudication report, Icsaz CE and secretary Farai Musamba said there is evidence of lack of an agreed corporate governance reporting framework as revealed by disparities in disclosures by companies.

“As reported last year, the adjudicators noted that some information which participants failed to disclose may be readily available in the ‘cabinets of corporate insiders’. Participants may have policy documents on many of the governance-related issues, but they scored badly for failure to disclose,” said Musamba.

“There is need for the regulators, on one side, and stakeholders, especially shareholders on the other, to demand reforms in the disclosure regimes of participants.”

Zimbabwe in 2015 adopted the National Code on Corporate Governance of Zimbabwe whose standards will be used for the Icsaz adjudication corporate governance awards this year.

In 2015, CBZ Holdings, Dairibord Holdings and Delta Corporation were on first, second and third positions respectively on ZSE listed companies while NMBZ Bank, CBZ Bank and FBC Bank where on first, second and third position respectively under the banking institutions.

Icsaz in 2015 introduced an award for state enterprises, which was scooped by the Zimbabwe Investment Authority.

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