adminAlbert Dhafana
The mere mention of the term “Director” to an average Zimbabwean is likely to invite a wide range of meanings and even expectations. For some it means unfettered power for the individual who has the title, while to some it is a title of testament to wealth, fame and respect.
Some of our citizens have had bad experiences with people carrying such titles, and recount their professional life with indignation.
It may not be a far-fetched assertion that a good number of corporate players and participants do not know or at least appreciate what a “Director” is or what it entails.
This is the first problem. The Zimbabwean corporate world now has more directors than the “directed” and “directions”. This is the second problem.
Men and women accept or choose to be directors in organisations without the necessary knowledge about corporate governance.
Some owners of companies do not know the enabling laws or established policies to follow when appointing directors. This is largely caused by corporate governance illiteracy. It is an established principle in education that we move from the “known to the unknown”.
Learning is not done in reverse.
Corporate Governance (CG) literacy is not an easy subject, considering that entrepreneurship is in a number of cases a result of intuition, an inborn art, and less a product of “degrees and certificates”. Bill Gates and Mark Zuckerberg are university dropouts — lest we forget.
The questions to ask are:
i) should the powers that be, “decree” the minimum professional and academic qualifications for directors?
ii) Who is a director in the first place? Who appoints them? Whose interests do they serve? Are they necessary after all?
iii) Is there a course or place of learning where people can go to learn to be directors, as happens in sport? The list could go on.
Companies are managed, following provisions set out in the Companies Act. In Zimbabwe, this is called the Companies Act (Chapter 24:03) and is easily (not freely) available at Government Printers and bookshops around the country.
The common law definition of a Director “is a commercial man managing the affairs of the company of which they are directors for the benefit of the company and themselves”.
This definition adopts the correct legal position in that it takes into account that the Directors of the company are not the agents of a company’s shareholders but of the company of which they are directors. But it is the shareholders or owners of companies who appoint these directors, and some owners may also be directors.
From this definition, it is evident that persons occupying the position of a Director may be motivated to accept their appointment to such an office not by corporate interests only but also their own self-interest.
At law, Directors need not have professional and academic qualifications at all. The law seeks to promote an open capitalist market system, entrepreneurial and innovative spirit which is not the preserve of only the educated or professionally experienced persons.
What is interesting in our law (Companies Act 24:03) is that it states the Directors qualifications in the negative, in that it specifies acts that disqualify a person from occupying the position of Director (s173).
Examples are insolvents, prodigals and persons convicted of fraud by a competent court and given a substantial sentence.
Having looked at all these, it may seem that “everyone” is eligible to become a director, save, maybe for those specifically excluded by the Act.
This is not the case, as I would outline below: CG literacy is the ability of directors of a company to know and interpret well their roles in respect of responsibilities placed by the law, objectives of the company and expectations of stakeholders.
A literate board stands a greater chance of realising value for the shareholders, promotes ethical business conduct and is guided by the three pillars of sustainability of “people, planet and profit”.
A “CG-literate” board employs the necessary checks and balances to prevent corporate ills such as corruption, collusive dealings and inefficient systems and processes.
Illiteracy is manifested through “arm-twisting” tendencies of managers who have board members “eating from their palms”. In a number of cases, Board meetings become a “rubber stamping forum”, where cunning CEOs, hood wink and manipulate directors.
The sad result is that society bears the brunt through unjustifiably high prices, shoddy services and stunted economic growth. I will focus on two tools which companies can utilise to improve the CG literacy of their directors.
a) Nominations Sub-Committee of the Board of Directors
It is responsible for the entire nomination process whereby Directors are appointed by shareholders through an election process at general meetings of the company. This sub-committee can use formal or informal means in getting the right candidate.
The vetting process should satisfy corporate and legal requirements. After the election of people onto the Board, this sub-committee should induct, train and develop them in line with developments in a competitive and dynamic environment.
One may be inducted, for example, on how to propose a resolution or second one in Board and General Meetings of the company.
b) Board Charter
This is the constitution of the directors. This is their guide as they carry out their duties. It will cover things such as eligibility and disqualifying acts.
Board members are expected to uphold the highest standards of integrity and refrain from acts which can damage their reputation as well as that of the organisation they lead.
The Charter will specify the terms of office, frequency of meetings and powers of directors.
The Nomination Sub-Committee used in conjunction with the Board Charter can effectively improve corporate governance literacy of board members.
Albert Dhafana is an Organisational Development Practitioner.
Cell: 0738 501 476
Email: dhafana.albert79@gmail
Blog: albertdhafana.blogspot.com
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