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Poor corporate governance practices derailing recovery

CORPORATE governance malfeasance, among other issues, has fuelled corruption in Zimbabwe, frustrating efforts to rescue the country’s fragile economy. Analysts say that in the absence of sound corporate governance, economic revival is an extremely difficult proposition. Zimbabwe Independent business reporter Cloudine Matola (CM) this week spoke to the Institute of Chartered and Administrators in Zimbabwe (Icsaz) chief executive officer (CEO) Lovemore Gomera (LG), who emphasised that the institution has adopted a raft of initiatives to foster sound corporate governance. Below are excerpts of the interview:

CM: It’s been four months since you were appointed the new CEO of the institution. What have you done to ensure that chartered secretaries uphold good corporate governance values and ethics?

LG: Seminars, workshops and winter schools have been held across the country for our students and members focussed on upholding good corporate governance and integrated reporting among other issues. I have travelled around the country with the institute’s president to meet members and students, discuss with them the institute’s code of conduct and apprise them of the need to be ethical in all seasons despite challenges being faced in the economy.

We have also published several articles on corporate governance and ethics. As part of a global family, we were able to attend and participate in the Governance Conference in Taipei. We also attended the African Congress of Accountants in Marrakech, Morocco, where the theme was “For a Successful Public Sector Performance”. This helped us share best practices with our members and students.
CM: How has corporate governance failure impacted the economy and what do you think should be done?
LG: Corporate governance failures in most organisations the world over have a lot to do with failure of regulatory market, stakeholder and board governance. With globalisation, there has been a greater deterioration in this regard and less governmental control, resulting in a greater need for accountability. This has been largely contributed to the ongoing economic and financial crisis most countries have experienced.
In Zimbabwe, the underlying corporate governance challenges are not just technical or implementation problems, but more often about the problem of paradigms governing approaches and the orientation of corporate governance systems, in which are deeply ingrained poor work ethics and business morals. As a result, there is less commitment from those charged with corporate governance to implement legislation and for shareholders to hold the directors accountable for their actions.
CM: What is your take on situations where one person sits on more than one board. Do you think it affects decision making?
LG: Provided one has the time to devote to the organisation in fulfilling a director’s roles and responsibilities and is not providing goods and services that compete with those of the organisation, I do not see any problem.
Decision-making is compromised when sitting on many boards prevents one attending scheduled meetings or executing one’s mandate fully. The director’s effectiveness should be measured and evaluated regularly.
In Zimbabwe, there is need to rationalise board appointments, as some people have become career directors whose interest is primarily in the emoluments that come with the board seat.
CM: From your perspective, where is Zimbabwe in terms of corporate governance practice?
LG: Although we have the National Code on Corporate Governance Zimbabwe (Zimcord) and a lot has been said and written about corporate governance, very little has been done about it. We need to walk-the-talk and proffer practical steps in addressing corporate governance both in the private and public sectors.
The institute is offering training of governance professionals and encouraging good corporate governance tenets through its Excellence in Corporate Governance Awards for Listed Companies, the Financial Sector (banks and insurance companies), Parastatals and SMEs.
With the mushrooming of a number of players claiming to champion corporate governance, there is need to regulate the area, as some are not authentic and lack the proficiency and practical know-how of good governance best practices.
CM: What are the main challenges being faced by your professionals in various organisations?
LG: Given the prevailing highly competitive operating environment characterised by value-realisation, good corporate governance has ceased to be just a buzz word spoken only when convenient. Worldwide questions are being asked by governments, shareholders, investors and taxpayers concerning issues of accountability, transparency, value addition, legitimacy and the overall credibility of organisations.
Lack of corporate governance makes a country’s landscape uneven. It may be affected by a number of factors, including socio-economic factors, morals and the level of corruption in the country. The biggest challenge being faced by professionals is how to balance good corporate governance and the economic survival of the business.
CM: Since technology is taking over everything, what are you doing to ensure that your chartered secretaries will not be affected when companies upgrade and adopt cutting-edge technology?
LG: I don’t think technology will replace the role of our professionals in the corporate world, but the defining moment comes when one is not sufficiently tech savvy to embrace technology and add some human intervention in the value chain.
Technology aids and makes the work of the governance professionals and chartered secretaries much easier. We are training our professionals to embrace technology, the use of artificial intelligence (AI) and block chain technologies as they execute their roles in companies, institutions and government.
CM: What do you think should be done on those who breach corporate governance ethics and why?
LG: Those who breach corporate governance principles must be severely punished, as this not only deprives the corporates of profits, but negatively affects all stakeholders. The cost of business is unnecessarily increased by poor corporate governance, which is likely to contaminate and destroy the future generation. Economies suffer due to poor corporate governance ethics.
Good corporate governance has emerged as an essential tool to not only enhance professionalism but, more importantly, ensure that organisational functional practices are effective, sustainable, efficient and positively perceived by all stakeholders. The credibility of an organisation can be enhanced by adherence to the principles and practices of good corporate governance.
CM: What are the prospects for the last five months of the year?
LG: In the coming five months, the economic environment will remain tough for most companies. Only those companies with proper governance structures will survive. More and more regulation will take centre stage, as regulators and lawmakers are becoming interested in how governance practices are shaping organisations.
With the increased use and guidance of Zimcord, shareholders are now demanding more transparency and accountability from directors and officers. With the advent of integrated reporting and listing requirements, we are likely to witness a few corporate failures.
CM: Getting the board right, can you elaborate more on that and how far you have gone with that?
LG: Getting it right involves the future-proofing of boards. Through our board evaluation and induction training programmes, companies’ and parastatals’ boards are benefiting from our world-class governance tool kits that enable them to identify risks and future-proof their organisations to avoid failures.
Boards should now be appointed via a transparent and effective interviewing process both in the private and public sectors that takes care of diversity of skills, experience, age and gender. The board agenda should be structured so that directors spend their time deliberating on critical issues that include evaluating whether the board itself has the capacity to make sound decisions.
Through our board evaluation processes we continue to strengthen boards, as directors who do not perform are not re-elected. As the corporate governance experts, we have helped government and the private sector by seconding our corporate governance professionals onto various boards.
CM: What role can sound corporate governance play to curtail corruption, one of the key problems militating against Zimbabwe’s fragile economy?
LG: The scourge of corruption has permeated our communities. It is apparent that everyone needs to take an active part in combating vices in the economy. In order to reap the benefits of effective corporate governance and combat corruption in Zimbabwe, the government needs to review existing legislation in order to strengthen the enforcement mechanism of regulatory institutions.
It can be argued that the challenges and failure of corporate governance in Zimbabwe stem from a culture of corruption and lack of institutional capacity to implement the codes of conduct governing corporate governance.
Most company executives enjoy an atmosphere in which there is a lack of checks and balances in the system, which enables them to engage in gross misconduct, since investors are not included in the governing structure. Policy and procedures required to ensure efficient internal controls are disregarded with impunity, while a thorough selection process is often lacking in the appointment of chief executives and board members — round pegs in square holes remain a challenge to effective corporate governance.

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