Chronicle EditorZimCode Secretariat—
Over the past decade, stories on corporate governance have increased in frequency and public salience of corporate scandals. As a measure of public attention, media coverage of corporate governance issues has increased sharply since year 2000. The public outcry over the recent scandals has made it clear that the status quo is no longer acceptable.The public is simply demanding accountability and responsibility in corporate behaviour.
The scandals themselves demonstrate that lax regulatory institutions, poor corporate governance standards, and selective application of the law can have huge implications for the economy and for the public.
Therefore the Government through its various departments has to ensure that it restores public confidence in the economy by taking effective action in the form of reformed regulatory systems, improved auditing, encouraging application of the ZimCode and stepping up law enforcement.
This is in tandem with its key role of creating an enabling environment for businesses to thrive.
The ZimCode highlights that, to ensure economic vitality the Government has to play a central role in providing and promoting an enabling environment for businesses to thrive.
An important aspect in this area is for the Government to provide relevant infrastructure and basic services that companies can utilise in carrying out their business.
Poor road networks, erratic water and electricity supplies always negatively affect the establishment and growth of businesses.
Without adequate basic services and infrastructure corporates are then forced to develop their own which is usually beyond their budgets. It then compromises on the quality of products or services that they send to the markets and their profit margins are eroded. Consequently their investment into proper corporate governance systems is reduced which can eventually affect the overall business performance.
If the Government provides basic services that corporates can utilise it is indirectly contributing towards good corporate governance of which the benefits are well known.
Increasing the uptake of ZimCode by corporates contribute towards creating good business environments whereby all corporates are guided by its principles that emphasise integrity in all business transactions.
Though the ZimCode is not mandatory, if the government which controls over 60 percent of the economy is seen abiding by its principles, it sends a good message to everyone.
If the government demonstrates the good values and ethics through the companies it has controlling stakes in, it is easier for other private players to emulate. It also gives the Government credibility when it assesses the compliancy level of other corporates and can easily press companies to provide adequate explanations for non-compliancy because it would be walking the talk.
The role of government in corporate governance goes beyond the crafting of rules and regulations to the active involvement of government in evaluating whether these regulations are encouraging economic growth, promoting the protection of investors, shareholders and the public at large.
The government should be in a position to assess if the voluntary corporate governance codes are bringing sanity to corporates. If the results predict a positive impact then the government through its various departments has to make it a priority to encourage corporates to adopt some principles of the ZimCode over and above other rules and regulations.
The Government should ensure the ease of doing business by assessing the validity of its regulations in order to reduce red tapes in the formal sector. Excessive regulations have created room for corruption and underhand deals which makes the cost of operating businesses in the country very high.
It will take effective Government action in the form of prosecutions and jail sentences to end corruptions at all levels.
Government should also consider reducing the time and cost required to start a business and acquiring the necessary permits so as to reduce corruption.
A very important role for the government even outside the guidelines of the ZimCode is that of being a law enforcer.
When companies get into disputes or when scandals occur the expectation is for the government to ensure justice prevails, the guilty are punished and the innocent are vindicated.
This is such an important aspect which can then give substance to corporate governance. Government responses to scandals should be well considered and effective. Corporate leaders involved in scandals should be given fair trials and upon gathering enough incriminating evidence they should be given sufficient jail time as well as paying fines.
Prosecutions can have life-altering effects on individuals, corporates and society at large. The fear of prosecution and the associated consequences can force corporates to adopt the right principles. But when the Government constantly turns a blind eye on corporate scandals it gives the impression that anyone can get away with anything and these impressions last long in the public’s mindsets.
Prosecution send a message to the broader public, no wonder Voltaire argued, “In this country, It is well to kill from time to time an admiral to encourage the others.”
The task of Government is to restore corporate integrity and market confidence, even if it means ‘killing’, without stifling the dynamism that underlies a strong economy.
For more information on the ZimCode contact: [email protected]
Online Reporter