Home » Governance » Code of Corporate Governance Crafted

Government and the private sector have finished crafting the National Code of Corporate Governance to provide a holistic solution to corporate failure and poor corporate governance. The code is the first of its kind in Zimbabwe and President Mugabe is expected to launch it soon. Among other key issues, the code critically evaluates issues of corruption in the public and private sectors, corporate disclosure, communication and mechanisms for creating trust between shareholders, boards, management and employees.

In a letter dated May 16, 2014 and addressed to all Cabinet ministers and heads of ministries, Chief Secretary to the President and Cabinet Dr Misheck Sibanda said the code would complement Government efforts in bringing sanity to the public sector and local authorities.

Dr Sibanda said production of the code was a private sector initiative with close collaboration with Government.

“It should be noted that many countries have developed their own codes of corporate governance, which initiative contributes to the creation of a conducive environment for doing business,” he said.

In line with the new Constitution, the code acknowledges that appointments to public office must be made primarily on merit and measures should be taken to expose, combat and eradicate corruption and abuse of office.

As such, the State must adopt and implement policies and legislation that develop efficiency, financial probity and accountability in all institutions and agencies of Government.

One key feature of the code deals with concentration of power in an organisation.

The code notes that concentration of power in one person or a small group of people results in unethical practices and corporate failures.

In this regard, the code recommends “The right to vote should be extended to all shareholders. The board, the managers and the majority shareholder must respect the rights of minority shareholders.”

The code says managers and employees should own equity through share ownership schemes over and above the benefits that should accrue to the communities in which companies operate.

The code makes it mandatory that a chairperson or any board member should not double-up as chief executive officer of the same company. Where this is unavoidable, such appointments should be approved at an annual general meeting.

“The roles of the chairperson of the board and chief executive officer should be kept separate and where the two roles are merged, special reasons for combining the roles should disclosed,” reads part of the code.

To improve efficiency and accountability, the code says retired CEOs should not be appointed as board members or chairpersons of the same company for at least three years after they leave their executive post. Further, retired CEOs can only be appointed non-executive members.

The code says a CEO or any other member of the senior management must not chair the boards of subsidiary companies, but may be non-executive directors thereof.

The code applies to all business entities, but it is acknowledged that there are certain entities that require a sector-based approach.

Special sectors such as financial services and SMEs should have their specific codes that will be read together with the national code.

The code comes after media exposure of massive and undeserved remuneration of top executives, flouting of tender procedures and other murky activities in both private and public entities.

Government is addressing the issue of remuneration and Cabinet will soon come up with a comprehensive pay structure for parastatals and local authorities.

In the interim, a salary cap of US$6 000 for the highest paid public sector boss has been effected.

Source : The Herald