MUNHUMUTAPA SCHOOL OF COMMERCE
NAME TARISAI MUVENGI M142286
ALICE
MODULE COPERATE GOVERNANCE
PROGRAMME MASTERS OF BUSINESS ADMINISTRATION
LEVEL 1.1
LECTURER Mr ZIMUTO
According to the King III Report (2009) and the Institute of Directors (IoD) (2009), Good
Governance refers to effective leadership that is characterised by the ethical values of
Responsibility, Accountability, Fairness and Transparency (RAFT) that is based on moral
duties. On the other hand, business practices without Good Corporate Governance are not
sustainable especially in highly competitive global markets of the 21st century and beyond.
Thus, business becomes naked in the absence of ethical considerations in corporations.
According to Mukute and Marange (2006), corporate governance is the system by which
organizations, including Non-Governmental Organizations (NGOs), are directed, controlled
and held to account Corporate governance also relates to organizational compliance with
relevant laws and regulations and conformance to ethics, standards and codes of best
practices. It is the thrust of this paper to unpack the initiatives that have been put in place by
the government of Zimbabwe to ensure good corporate governance
PRINCIPLES OF GOOD GOVERNANCE
Transparency
Transparency means that decisions taken and their enforcement are done in a manner that
follows rules and regulations. It also means that information is freely available and directly
accessible to those who will be affected by such decisions and their enforcement.
Rule of law
The exercise of state power using, and guided by, published written standards that embody
widely-supported social values, avoid particularism, and enjoy broad-based public support.
Accountability
Accountability is a key requirement of good governance. Not only governmental institutions
but also the private sector and civil society organizations must be accountable to the public
and to their institutional stakeholders. Who is accountable to whom varies depending on
whether decisions or actions taken are internal or external to an organization or institution.
Equity and inclusiveness
A society’s wellbeing depends on ensuring that all its members feel that they have a stake in
it and do not feel excluded from the mainstream of society. This requires all groups, but
particularly the most vulnerable, have opportunities to improve or maintain their wellbeing.
INITIATIVES THAT HAVE BEEN PUT IN PLACE BY ZIMBABWEAN
GOVERNMENT
There have been concerted efforts to enhance corporate governance in Zimbabwe in recent
years. This was partly encouraged by international social and economic developments as well
as a reaction to the increase in the number of corporate collapses within the country.104 In
the main, the legal and regulatory framework of corporate governance in Zimbabwe is
determined by the Constitution, the Corporate Governance Manual, various Acts of
Parliament governing public entities, for example, the Companies Act, Acts creating public
entities, the Public Finance Management Act (PFMA), c and the Zimbabwe Stock Exchange
Listings Requirements. The country also launched the Corporate Governance Framework
(CGF) for State Enterprises and Public Entities in November 2010. The main objective of this
document is to improve efficiency and effectiveness and to fulfill the goals of profitability
and affordable service provision in state enterprises and parastatals. The Zimbabwe National
Code of Corporate Governance which is unique and specific to Zimbabwe’s corporate needs
and history, was adopted in April 2015. Furthermore, in April 2014, Zimbabwe came up with
a draft Corporate Governance and Remuneration Policy Framework to govern the operations
of state-owned enterprises and local authorities with regard to remuneration and corporate
governance practices. It is also important to note that organisations in Zimbabwe have
adopted, in addition to the above instruments, corporate governance principles as outlined in
other internationally recognised corporate governance codes and guidelines to promote good
corporate governance.
Reference is also made to other internationally recognised corporate governance principles
which are relevant to Zimbabwe, namely the OECD Principles of Corporate Governance,
Common wealth Association for Corporate Governance (CACG). International Corporate
Governance Network (ICGN) Global Principles of Corporate Governance (hereinafter
referred to as ICGN Principles). United Nations Global Compact Guidelines (hereinafter
referred to as UN Guidelines) and other widely referred to country specific corporate
governance codes like the South African King Reports on Corporate Governance, Malawian
Code of Best Practice for Corporate Governance59 and the United Kingdom Corporate
Governance Code (formerly the Combined Code).
Constitution of Zimbabwe
The Constitution of Zimbabwe, which is the supreme law of the country, raises the quality of
governance demanded of the Zimbabwean society and sets out corporate governance as an
inherently vital part of a healthy and prosperous nation. The Constitution states that
Zimbabwe is founded on respect for internationally accepted principles of good corporate
governance. Section 9 of the Constitution provides for good governance. It states that the
government must adopt and implement policies and legislation “to develop efficiency,
competence, accountability, transparency, personal integrity and financial probity” in all
institutions.
Companies Act
The Companies Act has been in existence since 1951 although part amendments have been
undertaken where considered necessary. The Act governs the constitution, incorporation,
registration, management, administration and winding up of companies and other institutions
and provides for regulation of powers, duties and remuneration of directors. It imposes a
number of statutory duties on directors which, if properly observed, should result in good
corporate governance practices. Although the Companies Act does not specifically provide
for corporate governance, it ascribes liability on directors for conducting the business of a
company fraudulently or recklessly and for falsification of information. It can be argued, for
instance, that disregarding good corporate governance principles may amount to fraud and/or
recklessness.
Failure to implement the good cooperate governance
Despite the significant number of policy initiatives, the country has continued to encounter a
number of economic and social challenges. These challenges have not spared public entities
which have continued to be a drain to the fiscus due to poor performance financially and
otherwise. Over the last two decades, a number of major public entities have been found not
to be financially sustainable and there have been revelations of increased misappropriation of
funds allegedly due to a lack of efficient corporate governance systems. Furthermore, the
entities and the whole country have also experienced pressure from international investors
who demand good standards of corporate governance before investing their monies. The poor
corporate governance practices by public entities have adversely affected their service
delivery and have retarded the economic growth and social development of the country.
Unethical business practices also continue to stifle the country’s public sector, diamond trade
as well as the relatively recently proposed indigenisation bill. Examples of poor business
ethics has been observed in such cases as the War Victims Compensation Fund Scandal,
abuses of the Constituency Development Fund, diamond scandals, wealth accumulation, the
VIP Housing Scandal, the National Oil Company of Zimbabwe (NOCZIM) Scandal, the
Zimbabwe Iron and Steel (ZISCO) Scandal, the Fertiliser Scandal as well as the Harare
Airport Extension Scandal. Of recent, scandals involving the country’s major public
companies such as Air Zimbabwe, Premier Medical Aid Society (PSMAS) and the national
broadcaster, the Zimbabwe Broadcasting Corporation (ZBC) has made headlines in the news.
Owing to these observations, there is a need for a systematic academic study to understand
how such unethical practices influence the performances of such parastatals.
RECOMMENDATIONS
The Institute of Directors of Zimbabwe (IoDZ) spearheaded the campaign to adopt principles
enshrined in the Cadbury Report, the Combined Code, the King Reports of South Africa, the
Malawi’s Code of Best Practice for Corporate Governance and other international corporate
governance codes. Technical assistance, to enhance the country’s corporate governance, was
provided by the International Finance Corporation (IFC), the World Bank, the African
Management Services Company (AMSCO) and the Government of Denmark. Valuable
insights were also drawn from the CACG Guidelines, ICGN Principles and OECD Principles
of Corporate Governance.
Furthermore, whistle blowing as well as naming and shaming defaulters could be used to
motivate compliance. Zimbabwe could consider developing a framework similar to South
Africa’s Companies Act and the Joburg Stock Exchange Listing Requirements which provide
for the publication of delinquent directors’ details. The fear of reputational damage associated
with bad publicity may be deterrent in that directors are less likely to risk financial harm or to
compromise their reputations by engaging in unethical and unprofessional conduct. Public
entities should be encouraged to establish a corporate governance board committee whose
main responsibility should be to ensure that the board complies with good corporate
governance standards at all times. The company secretary will have a vital role to play in this
regard
Privatisation of Some Public Entities It is recommended that the country selects from its
many public entities those entities that can be converted into private entities. Privatisation is
advantageous because it improves efficiency and profitability, increases competition,
prevents political interference, prevents the bureaucracy that is associated with public entities
and eliminates corruption because managers of private companies are more accountable to
shareholders. In addition, private companies are able to more easily raise investment capital
than public entities because the government’s budget has to be spread over several areas of
the economy
CONCLUSION
In conclusion, it is clear that, despite the existence of a credible corporate governance
framework, public entity boards have not been able to effectively discharge their duties due
to several constraints. To enjoy the benefits of its corporate governance framework,
Zimbabwe should focus more on improving the quality of enforcement of the existing
guidelines, laws and regulations. The country should also strive to eliminate corruption,
minimise political interference in the public entities’ affairs and strengthen its regulatory and
judicial systems
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