Board composition, key personnel in corporate governance

Albert Dhafana
It may be a fair assertion that there is a basic appreciation of corporate governance in the Zimbabwean corporate world.

This is so because of the existence of ‘‘committees’’ be it in agricultural co-operatives, income-lending schemes, community health groups and other such community-led initiatives.

There are also ‘‘councils’’ and ‘‘associations’’ in schools and churches. Companies are compelled by law to have a board of directors.

However, the frequency of corporate scandals, reports of financial impropriety, companies losing properties through court-sanctioned attachments as reported in the media points to serious weak links in the way organisations are being run.

Even church-run institutions have not been spared of wrangles and fights within the leadership. This article will discuss board composition and the key personnel involved in corporate governance.

If these two areas are addressed, it is hoped that other ‘‘pieces’’ of the governance puzzle should fall into place.

Board composition

According to the National Code on Corporate Governance Zimbabwe (NCCGZ), as well as other international codes like the Kings Report and Basel Committee, the composition of the board has a great bearing on corporate governance.

The board should comprise a balance of power with a majority of non-executive directors (NEDs) appointed in terms of appropriate legislation governing the sector.

The Banking Act, for example, specifies the eligibility of an individual to a bank’s board of directors. NEDs are supposed to give a disinterested attention to the company management.

Each board should have the right mix of skills as determined by the knowledge required for conducting the business of the organisation.

Often in the Zimbabwean corporate world, it is common to find a board ‘‘full’’ of lawyers or one ‘‘stuffed’’ with accountants. Such ‘‘elitism’’ and ‘‘exclusivity’’ has been the undoing of many an organisation.

The size, diversity and demographics should be such that it brings effectiveness in the way the board discharges its mandate. Often, some appointments to boards are only a fulfilment of affirmative interests or a window-dressing gimmick for ‘‘political correctedness’’ and not motivated by a real desire for effectiveness.

The board should also have executive directors, one who should always be the Chief Executive Officer, and ideally the other one responsible for finance.

Being full-time employees of the company, they are more informed about company processes, activities, functions and events than part-time NEDs. They act as a filter of information relevant to board decision making.

Under normal circumstances, an NED (independent or not) should not serve more than five years in the board and a third of non-executive directors should rotate every year. This is meant to improve the quality of debates and decision making. If NEDs overstay, their independence may become compromised.

Key personnel

i) Board chairperson

A successful chairperson of the board needs to have the following attributes:

i) Appropriate leadership skills;

ii) Ability to motivate others, working with and through a team;

iii) Good communicator, since he or she is the spokesperson and representative of the organisation;

iv) Endowed with patience and good listening skills;

v) Must be a rational decision maker, who is research- or evidence-led and informed; and

vi) An astute business person, who can profitably exploit opportunities in the business environment.

In the hands of a weak chairperson, meetings degenerate into mudslinging and free-for-all shows. The chairperson should ensure that sufficient order is maintained and that agenda items are sequentially dealt with. The chairperson should properly read the sentiments or mood of the meeting and prudently use his or her casting vote. Some of his or her duties are delegated and he or she is also expected to fulfil statutory duties antecedent.

ii) Company Secretary

He or she provides company secretarial services according to the provisions of the Companies Act 24:03 and other applicable legislation.

He or she must possess professional and academic qualifications as this is a statutorily restricted field of practice – qualified lawyer or a chartered secretary and administrator. As a designated agent of the board chairperson, he executes the following duties:

Notices and agenda of meetings;

Other statutory statements published through the media;

Submissions and lodgements with the Registrar of Companies;

The public officer of the company on whom due process may be served;

Assisting the board chairperson manage the meetings by coming up with a schedule of items for the prior notification of concerned parties;

Informing in advance all who are legally entitled to attend meetings;

Receiving and filing of proxy forms;

Ensuring that the meeting is properly convened and duly constituted — proper person in the chair and the quorum is in place;

Taking of minutes of the meeting. A prudent secretary will utilise technical gadgets like video, voice and picture recorder.

iii) External auditor

The principal duty of an external auditor is to examine the financial statements and reports of the entity; he or she is contracted to, for the purposes of expressing his or her audit opinion on those financial statements and reports.

The opinion may be i) qualified: it indicates that in the opinion of the external auditor the financial statements and reports of the organisation for a specified period of time indicated thereon do not give a true and fair view of the financial performance and position of the entity to which they relate;

ii) Unqualified report: where the auditor gives an opinion to the effect that financial statements and reports of an organisation for a specific period give a true and fair view of the financial performance and position of the entity.

iv) Company attorney

He or she provides legal counsel on applicable laws and compliance requirements. He or she can help the organisation steer from future disputes and costly lawsuits, ensure asset protection as well as assist in negotiating more favourable business transactions.

v) Chief executive officer

Role model to employees and communicating the board’s expectations;

Support the board chair to ensure that corporate governance is upheld in the organisation;

Provide timely, relevant information to the board on the financial position of the organisation;

Providing cutting-edge, well-researched information about business environment to improve standard of discussion in the boardroom; and

Transmission of employees’ input on pertinent issues of the business to the board.