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Chapter 3 of the ZimCode addresses the Board of Directors and Directors, and sections 56; 59; 80 and 85 highlights the role and function of the board that has to be guided by a board charter.
In particular section 56 clearly articulate what the board charter should include and this guides the board, management, shareholders and stakeholders on their roles and function.
As highlighted in section 56, every board should have a charter. A board charter can be defined as “A 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 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.
This board charter is subject to the provisions of the Companies Act, (Cap 24:03), the Company’s Memorandum and Articles of Association and any applicable law or regulatory provision.
The board charter should be readily available on the company’s website and this is in line with the provisions of the ZimCode on information disclosure and transparency.
It follows that when a new board is appointed; they should take some time to understand their role as guided by the board charter and continuously improve it to suit the circumstances that are developing within their company.
In the event that the previous board had operated without one, efforts should be made to ensure that a charter is developed.
The contents of the charter make it easy for the board to establish clear roles and responsibilities in discharging its fiduciary and leadership functions.
It addresses the role of the board and its function as the ultimate decision making body of the company. The charter highlights specific powers reserved for the board and those it delegates to the management of the company.
In this regard, the board delegates its day to day powers and duties to the chief executive officer and to the other executives who in turn will make further delegations in accordance with the company structure.
The charter addresses the composition of the board and its committees.
In this regard the constitution of the board in terms of size and skills is determined by the nature of the company’s business and its subsidiaries.
The board should ensure that it comprises a diverse mix of skills and expertise critical for effective oversight on the management of the company.
The board should be composed of Non-Executive Directors (NED) and Executive Directors and the NEDs should be in the majority. The apointment of NED board chair is recommended and remuneration of all directors including the CEO is provided for in the charter.
The selection criterion for directors is clearly set out and a succession plan is included.
The role of the board chair and the CEO has to be clearly articulated in the charter so as to avoid unnecessary interference and assumptions. There should be a clear mutual understanding of roles, delegations and boundaries which allows each party to respect the other’s responsibilities, contributions and expectations.
The CEO and management specifically expect from the board clearly stated performance objectives and defined boundaries of authority. Without this direction, the CEO is left to speculate on what the board wants him/her to achieve.
Companies that do not make use of the board charter may end up in confusion over roles and deliverables since there will be no guiding document to clearly show what the expected outcomes are.
Therefore the role of the CEO, company secretary, other executives and board members has to be enshrined in the charter so that all parties are clear on what they are expected to deliver.
The charter highlights the need for the board to access information and seeking independent advice on various matters in order to discharge its duties effectively.
It has to provision for board trainings and evaluations where members are equipped with necessary information for effective performance on the Board as well as assessing their effectiveness individually and as a team.
The charter also addresses procedures on managing conflicts, relations with shareholders and various stakeholders.
The charter highlights the need for the board to develop a code of conduct for all its employees and directors. This comes handy when conflict arises, as well as encouraging staff and other stakeholders to bring out information helpful in enforcing good corporate governance practices.
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