Context of corporate governance
The spotlight fell on the need for good corporate governance as corporate scandal after corporate scandal emerged. Renowned author and international consultant on board evaluation and development, corporate governance and strategic thinking; Professor Bob Garratt made a very pertinent observation in this regard. “We have seen this at the start of the 21st century as disaster after disaster has unfolded, from Equitable Life and Enron through Northern Rock and Bear Stearns to Royal Bank of Scotland, HBOS and Lehman Brothers.”
A positive consequence of these scandals has been to spur the development of national codes on corporate governance aimed at ushering in ethical conduct on the part of boards of directors and company executives. Well over seventy countries have developed their national codes on corporate governance to provide guidelines on how organisations, especially listed companies should be directed, controlled by boards of directors and held to account by shareholders and stakeholders, while management is supervised and held to account by board of directors.
Promoters of the National Code
The Institute of Directors Zimbabwe strongly believes that Zimbabwe should have its own national code on corporate governance that should take into account the country’s peculiar corporate governance challenges. It is therefore not surprising that the Institute in 2009 partnered with the Zimbabwe Leadership Forum and Standards Association of Zimbabwe in promoting the development of the national code, which is nearing completion. In making a presentation to some eminent directors on this subject sometime in 2010, this writer was asked why the promoters of the national code had found it necessary to invest money, time, energy and other resources on developing a new code, when other such codes already existed, in particular, King III of South Africa. To appreciate why country after country has seen sense in developing its on national code, albeit retaining the core international principles of good corporate governance, it is important to understand that no two countries share exactly the same corporate governance challenges.
Rationale of a National Code
The former head of Corporate Governance for Barclays Global Investors Limited, Professor Simon Wong cautioned against the transplanting of other countries’ national codes. He noted that it was important to have well thought-through processes that took into account the economic and legal environments that shaped the firm’s structure and behaviour. He argued that national codes should address a country’s peculiar circumstances, while taking into account the international standards. To my board colleagues who wondered why Zimbabwe was not doing the easiest thing, that is adopt the King III or more precisely, King Code of Governance Principles for South Africa 2009, the answer is not hard to find – corporate governance challenges in Zimbabwe do not necessarily mirror those in South Africa. This should be pretty obvious when you consider the economies and legal jurisdictions of the two countries, among other things.
There are advantages to having a national code on corporate governance. They include the ease of dissemination, buy-in to the extent corporate executives and board members will either have been involved in the development of the code or followed the process closely and flexibility in corporate practice, among others. Most importantly, the fact that the code seeks to address the peculiar corporate challenges of the companies and other bodies to which it will generally applying is, itself a strong advantage. This brings me to the most important aspect of code development. The process of developing the national code started on 28 September 2009 with the launch. That it has not yet been finalised on account of under funding is a serious indictment on all of us. The code seeks to provide a solid foundation of good corporate governance on which to build successful businesses that should be ready to compete and take their rightful place in the global village.
The Institute of Directors Zimbabwe (IoDZ) was established in 1958 as the first overseas branch of the Institute of Directors International whose offices are in London and became an affiliate in 1993. It is a voluntary, non-political and non-profit making body whose members are directors of companies, business and public leaders and corporate bodies in the private and public sectors. IoDZ’s primary objectives include the promotion of the best practices in good corporate governance through the training and development of board members and senior executives, consultancy in corporate governance and strategic planning and development of corporate governance standards and tools, conducting board induction and development and serving as an effective voice for directors on matters of public policy and interest.
It is important to note that the code that is being developed will not only apply to registered companies, but to other organisations such as State Enterprises and Parastatals, Non-Governmental Organisations, Foundation Trusts and others. In developing the national code on corporate governance, the bar in corporate governance is being raised to enable Zimbabwean companies to compete effectively in the global village. Zimbabwe is thus taking its rightful place in the family of progressive nations in that henceforth the behaviour of our companies will be regulated by ethical values and standards which can only augur well for the country’s future success.
by Edward Siwela, MBA, BSc Hon Polad
Institute of Directors Zimbabwe
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