Restore good corporate governance

do not operate in a vacuum.
Governance of corporations and propagation of ethical business conduct in businesses should become a central item on the Government’s public policy agenda.
The Government should commit itself towards creating an environment that builds good corporate governance in the business sector and public institutions.
The scandals and inappropriate behaviours characterising the corporate sector and public institutions in the country demonstrate that lax regulatory institutions and enforcement policies including poor standards, are clear contributing factors to the corporate governance decay in the country.
The implication of these shortfalls towards economic growth and national development cannot be overemphasised.
Businesses are part of the society in which they operate, and it is clear that they in large measure influence the norms, values and cultures of these societies.
Corporate social responsibility demands that companies should conduct business responsibly by contributing to the economic health and sustainable development of the communities in which they operate, thus helping to shape the destiny of these communities.
This business reality cannot be ignored by the State hence the need for the Government to take an active role in moulding an effective corporate governance infrastructure in the country.
Evidence shows that in countries where corruption and deficient legislative and administrative arrangements are the norm, it is difficult to achieve good corporate governance hence economic success.
The Companies Act needs a complete overhaul to make it relevant to existing business dynamics, and in order to enhance corporate governance processes in the business sector.
Input on changes including that of sectoral or industry legislation should come from all stakeholders.
People want the Government to build robust public institutions, which exhibit an unwavering commitment to tackling and controlling corruption of any form in the country.
A strong legislative and regulatory framework and the maintenance of an environment which facilitates private sector activity will ensure sustained economic growth and development.
Government should view business, labour and civil society as key national players and unavoidable partners in crafting corporate governance legislation and productivity enhancement policies for the country.
A genuine collective effort by the national players will bring synergies that will result in a prudent management of the macroeconomic environment, increasing Government transparency, and improving the investment climate in the country.
Of course, Government efforts in crafting corporate governance legislation and other governance enhancement tools should be well considered.
Regulatory reforms that over-react, or that address symptoms while ignoring underlying causes can be costly and counter-productive.
Serious thought should also be placed on ensuring total commitment to Government business by both politicians and public officials.
Obviously it does not make sense to speak of improving corporate governance processes in the country while at the same passing laws that dampen investment, scaring away possible investors and keeping them fence sitting for a long time.
Government should be weary of experiencing widespread loss of investor and public confidence in its ability to prudently resolve the nation’s challenges which can result in its diminished legitimacy.
Government’s task should be to restore corporate integrity and market confidence without stifling the dynamism that underlies an economy coming out of a conflict.
In order to promote corporate governance reform in the country, Government should spearhead joint conferences and seminars with the business sector, labour and civil society.
Such conferences and seminars should be able to bring together Government officials, business leaders, academic researchers and experts in various fields to discuss fundamental public policy challenges in relation to building sound corporate governance infrastructure in the economy.
While currently the Government shares regulatory authority and oversight with various sector or industry-based self-regulatory institutions, these existing self-regulatory arrangements are obviously not sufficient, and Government needs to keep a bird’s eye view over the whole business topography scrutinising it and implementing tougher regulation.
Government regulation should take the form of specific rules that direct companies, their directors, their lawyers and auditors on exactly what is acceptable and unacceptable.
The Government should thus assume a greater and more direct role in regulating businesses in the country.
This effort will bring sanity to a sector that suffered serious damages as a result of the prolonged recession and economic meltdown in the last decade.
Much as rules have the danger of allowing corporate actors to find ways to comply with the letter of the law while circumventing its spirit, rules application provide the basis upon which companies can then develop industry-specific and company-based self regulatory frameworks to manage their corporate governance processes, thus fulfilling the spirit tenets of the law.
Of course for some, self-regulation is ineffective as it is akin to assigning a hyena to guard a goat pen.
They consider it as lacking real teeth as exemplified by numerous non-compliance cases in different business sectors where sector rules are violated with abandon.
However, while existing self-regulatory institutions may partly be blamed for inherent corporate misdemeanours in the business sector today, it does not follow that self-regulation is ineffective and should be abandoned.
Instead, the solution should be to change the internal governance structures of self-regulatory institutions, grant them new powers or increase their resources, or modify the degree and type of Government oversight they receive in order to make them more effective.
Yes, it is indisputable that self-regulatory institutions have always proven their grit in professional bodies than in corporate set-ups in the country most probably because its violation in that sector will result in the cancellation of an individual’s practising licence.
Self-regulation has satisfactorily been practised in professional bodies like accounting, law, engineering, health professions, etc, even during the tumultuous period in the country.
But it is important as well to appreciate that self-regulation is the cornerstone of any sound corporate governance and business ethics management effort in both private and public institutions.
l 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]