adminAlbert Dhafana Correspondent
The corridors and offices of many companies are abuzz with pleasantries of “Compliments of the New Year”. This is a herald of a new year, which many are hopeful will bring positive changes of fortune, especially in business.
Business owners and managers are putting on brave faces as they hope to steer their organisations from the quagmire of indebtedness, low capacity utilisation, threats of liquidation, foreclosures and labour-related litigations.
It is pertinent to point out, at this point, that the major causes of business failure in Zimbabwe have been skirted or deliberately covered up in a business environment of increasing dishonesty.
Business owners, managers and even some business commentators have blamed the tax-man, others alleging that the labour laws are not in sync with the obtaining economic environment; some have vilified the financial sector for being too stringent, even extortionate.
The devil has not been spared in this blame game. The statistics paint a gloomy picture — 4 500 companies “officially” closed shop in 2014 and 7 of the 19 banks are facing serious viability problems, coupled with an increase from 15,9 percent to 18,5 percent of non-performing loans (RBZ Monetary Policy Statement, August 2014).
In my opinion, the corporate world is largely insincere and dishonest when they attribute their failures to largely “outside” factors.
Poor balance sheets, characterised by heavy debts, bloated wage bills and spiralling overheads are symptoms of deep-seated problems “inside” the company.
Corporate governance is not receiving due attention in the business world.
This is the problem.
Corporate governance (CG) thought has developed progressively since the time of civilisation.
I would hasten to add that this concept is not a “child” of colonisation, neither is it a preserve of regulated and formal businesses.
Corporate Governance was practised at Madzimbabwe in the great Munhumutapa kingdom, at the iron smelting plants at Wedza during the Iron Age, along the Nile River in Egypt and by the Pharaohs.
The kraalheads (sabhukus) and Madzimambo/Izinduna all practise corporate governance, using approaches and methods which businesses have adapted to and adopted.
Notable scholars of corporate governance like Brian Coyle and Christine Mallin are in agreement that it is a business practice of mechanisms, processes and relations by which corporations are controlled and directed.
CG outlines the rights and responsibilities of distribution among stakeholders.
In the Zunde RaMambo concept, for example, this is buttressed by the axiom “Nyika Vanhu”, which means that there cannot be a kingdom without citizens.
The chief will identify the various stakeholders or groups of people to drive the kingdom’s food security programme.
Princes and princesses, ministers (machinda), security (mapurisa amambo) and sabhukus are allocated roles. Consultations are carried out for the necessary buy-in from the people who make up the kingdom.
In the end all the stakeholders identify with the project and contribute freely without coercion to achieve food sufficiency and security.
In the Zimbabwean business world, there is need to revisit our traditional systems, as apprentices, to learn the art of consultation and involvement in organisational management.
CG is deeply rooted in African traditions and systems.
Families, villages and chieftains have used the concept with great success.
CG is concerned about rules and procedures for making decisions in corporate affairs.
It speaks to processes through which companies’ objectives are set and pursued in the context of the social, regulatory and market environment.
There is the overarching responsibility of monitoring the actions, policies and decisions of corporations and their agents.
Organisations need to be guided by policies and procedures in their day-to-day activities.
These may be referred to as Standard Operating Procedures (SOPs) in other fields.
Employees need simple but comprehensive finance, human resources policies to guide their day-to-day activities.
Other handy policies and documents may include Information and Communication Technology, Monitoring and Evaluation, Employee Wellness, Disaster and Risk Management policies.
The Boards of Directors are the stewards or guards who act on behalf of the owners of the company.
They supervise management, formulate policies, and provide strategic direction to the organisation.
The board ensures that management acts in the best interests of the shareholders and refrain from “hegemonic” tendencies.
Regular meetings of the Board of Directors will help in strengthening their monitoring role.
The highly publicised corporate scandal in the United States of America in 2001 which came to be known as the Enron Scandal was largely attributed to lack of board oversight.
As recent as 2011, the world woke up to the news of the demise of the News of The World after 168 years in existence, because of an embarrassing discovery of unethical methods of sourcing for news.
In Zimbabwe, the collapse of the banking sector in the years 2002-2004 was largely as a result of “guards” sleeping on duty. Unfortunately, this disease seems to have found no cure in the corporate world.
Boards remain largely ceremonial, without the necessary ‘‘teeth’’ to rein in deviant executives.
According to the National Code on Corporate Governance (NCCG) “Boards are sometimes selected on the basis of who knows who, termed the ‘Old Boys Club’ and that negatively impacts on the effectiveness of the board”.
Good corporate governance requires corporate boards to be accountable, loyal, responsible and independent for the good of society. Companies are formed to serve society and not the other way round.
The activities of companies should satisfy the needs of many people and institutions, who can be shareholders or investors, employees, suppliers, banks, pressure groups, government agencies like the National Social Security Authority (NSSA), Zimbabwe Revenue Authority (ZIMRA), and the ecological environment.
Companies contribute to the moral fabric of society as well. It follows that companies need to engage in ethical practices like fair pricing, adherence to the labour laws, environmental laws and other cultural norms.
Companies which are driven solely by the profit motive will in many instances engage in activities which harm consumers, the environment and even themselves.
In Mutare, people are all too aware of the saddening pollution of the water bodies, particularly in Sakubva River.
Raw sewage, dangerous industrial chemicals, stream bank cultivation have all contributed to the hazardous state Sakubva River is in now.
Innocent children who “cool off” in the river are at risk of contracting life-threatening illnesses.
The farmers downstream in the Dora area have their livelihoods threatened because cattle are drinking water from polluted sources.
There is need for companies to have boards which are stakeholder-focused, working for the common good of the society.
Corporations which pay bribes to avoid compliance with the law employ violence to silence employees or concerned community members who renege on their financial obligations with banks are not responsible members of society.
The moral space of many Zimbabwean companies is in decay; hence unethical behaviour is commonplace. CG should address this cancer for the good of our country.
The corporate world is characterised by “prowling lions” that are “looking out for those to devour”.
Management of struggling firms are paying themselves very high salaries and a host of perks.
The Zimbabwean industries are at capacity utilisation levels of below 36 percent (2014) from 80 percent (1996)(Zimbabwe National Chamber of Commerce Report, August 2014), faced with biting working capital challenges coupled with rising finance costs.
The resultant effects are that workers go for long periods without salaries, unserviced loans and non-payment of statutory obligations to NSSA and ZIMRA.
The Corporate Governance and Remuneration Policy Framework of Zimbabwe was crafted to stem the undesirable effects of highly-priced Parastatal Executives, in a poorly performing economy.
The legislative route should be used as a last resort in the regulation of corporate activities.
CG provides for self-regulatory mechanisms which achieve parity among all stakeholders.
Executives can forego some of their perks, companies negotiate for loan restructuring with their banks, engaging the Ministry of Labour to negotiate for retrenchments and other viable work place arrangements.
However, history has shown that company executives need to be checked and monitored to avoid problems in our industry where 20 percent of the organisation consumes 80 percent of the wage bill.
The boards need to up their policing role to safeguard invested capital as well as protect stakeholders from the “prowling lions”.
At present, the “guards” certainly look to be on leave.
CG has come of age in respect of the literature and legislation in various jurisdictions.
The Companies Act and related legislations provide the necessary direction in the implementation and embrace of CG.
The Cadbury Report (United Kingdom), King Report on Corporate Governance of South Africa, Basel Committee on Banks Regulation, Supervision and Licensing are useful reference points for best practice.
The Zimbabwean National Code on Corporate Governance and efforts by professional bodies like the Institute of Directors of Zimbabwe, Institute of Chartered Secretaries and Administrators, Public Accountants and Auditors Board of Zimbabwe and others, assist in the promotion of corporate integrity, ethical behaviour and transparency.
It is time all stakeholders ‘‘came to the party’’ for this year to live as a ‘‘complement’’, we all wish it to be.
Albert Dhafana is an Organisational Development Practitioner
Mobile: 0738 501 476
email: [email protected]
blog: albertdhafana.blogspot.com
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