adminacceptance of the need for legislation designed to manage the corporate governance and business ethics terrain.
The apparent need to increase the financial transparency and accountability of firms and institutions particularly those that are of national significance, and in the publicly traded companies cannot be overemphasised.
The recently reported gross abuse of corporate governance processes at Renaissance Merchant Bank by senior executives is a clear indication of the level of rot that has befallen our business sector, and shows the need for tougher regulation.
Renaissance Merchant Bank is reported to have had depositors’ funds siphoned by its main shareholders in a way that is “akin to a declaration of dividends by shareholders from depositors’ funds”.
Affiliate organisations to the bank such as Afre Corporation and Rainbow Tourism Group have as a result been suspended from trading on the Zimbabwe Stock Exchange, and the ordinary shareholders in these firms are counting their losses.
Apparently the after-effects could have been more contagious and catastrophic to the banking sector and the general economy if it wasn’t for the swift action taken by the central bank and the Ministry of Finance in exposing the malpractices and securing a financial bailout for the bank.
Global examples of such corporate failures include the fall of the US energy giant Enron in 2001, through widespread accounting fraud and insider trading, and in Japan where the alleged securities fraud in 2006 instigated a stock sell-off resulting in temporary shutdown of the Tokyo Stock Exchange.
The recent world recession that was precipitated by bad corporate governance in the financial services sectors of the leading economies is another clear example.
These scandals were followed by the enactment of legislation such as the Sarbanes Oxley Act, 2002 in the US, and in Japan a financial reporting law known informally as J-SOX, because it was based on the mould of the US Sarbanes Oxley Act.
The aftermath of the world recession saw the implementation of stricter and tougher regulatory frameworks in the financial services sector of the USA and European countries.
Corporate integrity is definitely good for business. Greater transparency and accountability leads to greater efficiency and profitability in the firm.
Flexible and practical frameworks for integrating corporate governance and business ethics management help organisations use these tools to reduce costs and drive business performance.
By addressing corporate governance through legislation, the nation will propel companies to improve their own business performance, expand opportunities for growth, and contribute to national development.
Organisations that commit to business ethics and good corporate governance inevitably do better in the market place.
By building into their operations clearly defined and effective avenues for employees to report theft, fraud and other inappropriate workplace behaviours without fear of repercussion, corporations can realise real savings at grassroots level.
While petty theft, for example, may seem just that, when multiplied across tens or hundreds of cases over the course of a year it becomes a huge sum of money.
An effective ethics programme translates into an efficiently run organisation, which in turn translates into profitability.
When employees observe violations of company policies and procedures and poor business decisions being made by managers, the business environment in the country should make it possible to report this behaviour through clearly defined processes in the organisation which will lead in the punishment of the perpetrators.
In most cases, employees want to report misconduct but fear that management in their organsations may fail to respond positively to their concerns, or they fear that they may end up losing their jobs if they speak out or report the rot in the organisation.
Detection and preventing unethical behaviour not only serves an organisation the money it may be losing as a result of the misconduct itself, the organisation will secure even greater savings through a good reputation.
As corporate scandals have demonstrated around the world, nothing weakens investor confidence like allegations of corporate fraud or insider trading.
Legislation should be put in place in the country to guarantee a confidential reporting mechanism for all forms of workplace and organisation based misconduct, and to punish individuals and organisations found wanting.
The world over, it has become apparent that there is an unstoppable and ever increasing global awareness that a corporate culture of integrity anchored on sound and prudent national management of the corporate governance and business ethics environment through well crafted legislation will provide return on investment.
Company executives should be obliged by national legislation to prioritise company efforts that propagate good corporate governance and business ethics values so as to drive business performance and promote integrity.
So the future of business ethics programmes around the world is not overtly difficult to predict.
While corporate scandals continue to drive the need for such programmes, ultimately it is the economic advantage these programmes provide that will sustain and grow them in the future.
As a result, dynamic and effective ethics programmes will become the rule rather than the exception.
The best the Government can do to promote this unavoidable business reality is to put in place legislative infrastructure and regulatory frameworks that promote good corporate governance in the whole economy.
- Bradwell Mhonderwa is the Managing Consultant of Business Ethics Centre, a Corporate Governance and Business Ethics Management firm. Phone 04-293 2948, 0712 420 090, 0772 913 875, or email [email protected]
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