Chronicle Editor
Dumisani Ntini
A commitment to good corporate governance that is aligned with international best practice is crucial for varied establishments from state-owned entities to non-governmental organisations and private corporations.
Formulating and implementing robust corporate governance structures and frameworks assists in the strengthening of growth strategies and the establishment (and maintenance) of a distinct competitive edge.
Boards and executives must not forget the importance of governance considerations in facilitating the smooth functioning, augmenting the aptitude and raising the responsiveness of their establishments, regardless of their market share and positioning.
It is consequently critical for small-to-medium enterprises, large-scale firms, multinationals, parastatals, governments, and the broader spectrum of impact organisations to maintain well-thought-out governance mechanisms. We will examine a few factors that shareholders, boards of directors and executives (hereinafter termed ‘governance designates’) must consider and note in this regard.
The dynamic and ever-advancing nature of today’s markets, coupled with increased stakeholder knowledge of social and economic issues, warrants the need for organisations to clearly exhibit their dedication to good governance as well as the protection of stakeholder interests.
Firstly, it is important for organisations to comprehend the overarching theme of corporate governance.
A simplified and widely applicable description of corporate governance would consequently be — the set of systems and frameworks by which these organisations are controlled and directed.
The directorship aspect entails influencing, motivating, superintending and guiding both organisational actors and pertinent policies within the enterprise.
On the other hand, the aspect of control pertains to ownership (such as shareholding in the case of companies, stewardship in non-profit organisations and statutory custodianship for government entities). Control further entails factors such as measurement, monitoring, remedial action and recalibration of organisational performance as relates to its strategy.
The organisation’s commitment to robust and high-quality governance can commence with the establishment of an organisational governance Charter. The Charter outlines the roles and responsibilities at varied levels of authority in the institution. Respecting always that organisations vary in nature, Boards of Directors and Chief Executive Officers can agree on the specifications, bounds, and the particular content of the said Charter. It is crucial to ensure that the content and structure of the Charter are informed by existing legislation such as the Companies Act, any Stock Exchange provisions, the King Code of Corporate Governance and any other prevailing statutory provisions (found for example in Parliamentary Acts that govern government agencies).
The Charter may also list and explain aspects relating to shareholder protection and it can guide the application of fair and equal treatment at that level. The Charter must furthermore consider the distribution of authority between shareholders, boards of directors and organisational executives.
It is important to note that Charters go a long way in presenting an outline for disclosure of information as well as transparency with regard to activities and operations of the organisation.
The Charter is generally the principal or fundamental document to consider as firms attempt to reflect their commitment to good governance.
Just as Acts of Parliament are generally accompanied by regulations which expand on these Acts and in a sense “give life to them”, Charters can be supplemented by Codes of Ethics or Codes of Professional Conduct as well as Conditions of Service documents (depending on the specific nature of the organisation in question).
These Codes and Conditions of Service policies provide for the conduct and behaviour of those organisational actors who are governed by the boards and executives.
These policies may make reference to other internal organisational policy documents that relate to the overall operations and running of the institution.
These accompanying codes can entail information on the appointment, duties and accountabilities of appointed officials who are primarily responsible for compliance as well as monitoring aspects that have a bearing on the organisation’s sustainability and longevity.
Governance designates should also remember the importance of formulating an annual calendar of events. This is considered an overly pivotal governance (and guiding) document which stipulates dates and events that are central to accomplishment of organisational objectives as well as organisational strategy.
Setting important events on this governance document enables their careful planning, enhances efficiency and presents a reference standard to be referred to for purposes of both board and executive accountability as the year progresses.
In conclusion, it must be noted that a plethora of documents can be further established for improved organisational effectiveness, and to reflect organisational commitment to robust corporate governance, based primarily on those mentioned herein.
There are two key elements, however, that institutions should include in their overall corporate governance frameworks in their attempts to demonstrate commitment.
The first important issue is that of disclosure. This has been cited above under discussion of the Charter. During preparation of annual reports, and when communicating important information to stakeholders (on the firm’s website and other platforms such as social media pages), firms are advised to disclose their perceived levels of compliance and adherence to their set corporate governance policies and procedures.
This goes a long way in reflecting the organisation’s accountability as well as that of its leadership. The second issue of note in this regard is the importance of vividly outlining aspects that relate to the delegation of duties as well as responsibilities within the organisation’s governing structures. This can be shown through the formulation of Board Committees that have oversight of varied operational scopes including, Finance and Procurement, Health, Safety and Environment, Information Technology, Audit and Disciplinary.
All in all, the organisation’s commitment to corporate governance can be aided significantly by the formulation of and adherence to the stated documentation as well as the careful consideration of their inherent elements.
λ Dumisani Ntini is the founder of Global Governance Group, a corporate training and consulting practice with operations in Zimbabwe, Namibia and Botswana. For service information contact [email protected]
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