Public entities to prepare board charters, codes of ethics

ZimCode (joint Secretariat of ZIMLEF, IoDZ &SAZ)
The Public Sector Corporate Governance Bill (henceforth “the Bill”), in clauses 26- 31, addresses the need for entities to conduct their business in accordance with provisions set out in the board charter and code of ethics.

The same is extensively addressed by the ZimCode in chapter 3, principles 56; 59; 80 and 85. However, public entities have to apply these principles to the extent that they apply to their entities.

A board charter can be defined as “written policy document that clearly defines the respective roles, responsibilities and authorities of the board of directors (both individually and collectively) and management in setting the direction, the management and the control of the organisation.”

The ZimCode indicates that the board charter sets out the key values and principles of the Board of directors. It provides a concise overview of the role and responsibilities of the board of directors; powers of the board and board committees; separation of roles between the board and management; and the practice of the board in respect of corporate governance matters.

A board Charter is subject to the provisions of the Companies Act, (Cap 24:03), the entity’s Memorandum and Articles of Association and any applicable law or regulatory provision.

The Bill states that the board has to prepare a board charter, while the chief executive officer (CEO) prepares a code of ethics for the entity based on the organisation’s core values and standards.

Clause 26 (4) further indicates that both the board and CEO should consult the employees and the general public in formulating the Board charter and code of ethics.

The board charter and code of ethics need to be approved by the line minister first before sending it to the Office of the President and Cabinet, which shall transmit the same to the unit.

According to clause 27 of the Bill, the contents of the Board charter and code of ethics shall give effect to the following principles-

(a) The promotion and maintenance of a high standard of professional ethics; and

(b)Efficient and economic use of available resources; and

(d) Responsiveness to the needs of the people of Zimbabwe, including the prompt and sensitive processing of complaints by members of the public with respect to the entity’s interaction with them; and

(e) Co-operation with governmental institutions and other public entities; and

(f) Openness and transparency in the internal workings and procedures of the public entity concerned, and in its dealings with the public; and

(g) The maximising of the human resources of the public commercial entity;

(h) Commercial viability, in the case of a public commercial entity;

The identified principles enable directors to understand and formally commit to the objectives of the entity being guided by the contents of the charter and code of ethics.

Therefore it can be used as an important induction tool for new directors. It also enables the board to provide strategic direction to the entity and regularly measure progression by the board itself, management and all employees.

Entities that do not make use of board charters and code of ethics may end up in confusion over roles and deliverables since there will be no guiding document to clearly show what the expected outcomes are.

These two policy documents play a key role in providing guiding procedures on managing conflicts, relations with shareholders and various stakeholders.

This is why both the ZimCode and the Bill strongly encourage entities to formulate and be guided by them.

A Board charter should be readily available on an entity’s website and this is in line with the provisions of the ZimCode on information disclosure and transparency.

Furthermore, the Bill states that both the Board charter and codes of ethics should be readily available for inspection by members of the public free of charge. In this regard these policies should be available on an entity’s website and at their offices.

The ZimCode and the Bill highlight that the Board charter, code of ethics and other organisational governance policies need to be reviewed and updated regularly so as to ascertain their relevance.

Best practice recommends an annual review of any organisational policy. Clause 29 of the Bill indicates that the Board and CEO may respectively amend the entity’s charter and code of ethics at any time as long as they follow procedures outlines in clauses 26; 27 and 28.

It however remains the duty of the line Minister to monitor the entity’s compliance with Board charters, codes of ethics and Good Corporate Governance Codes.