Why we need checks and balances

after major shareholder John Moxon assumed the executive chairman’s post.
The announcement said that Beaumont had left the group to pursue personal business but the resignation was likely to have been influenced by the fact that the group could not have both an executive chairman and a chief executive within its structures.

Good corporate governance practice does not ascribe to executive chairmanship because executive chairpersons wield more power because they double as CEO and chairman.
An executive chairman post is not a favoured set up because it does not separate powers as the executive chairman can influence the board as well as management of the company.
There are no checks and balances, as the executive chairperson cannot evaluate himself or herself.
Given this background, it becomes clear than when one becomes an executive chairman when they are also a shareholder, their sole interest is to have a hands-on approach and have the power to influence decisions without anyone blocking his or her way.

In this case let me try and define the difference between an executive chairman and a non-executive chairman.
An executive chairman is a full time office holder who typically leads the board and also takes a hands-on role in the company’s day today management.
An imbalance of the “checks and balances” of corporate governance is created when the role of chairman and CEO is combined.

A non-executive chairman is a part-time office holder who sits and chairs the board meetings of a company, and also usually provides support and advice to a chief executive officer.
This position usually entails fulfilling a similar function on a number of ancillary board committees, as well as being a political figurehead of the company.
Well I think that explains it, but I understand that it is still a debatable issue here in Zimbabwe and with the National Code on Corporate Governance coming up this year we hope some of these issues would be addressed.

However, there are other cases where we have seen an executive chairman assuming the position of a non-executive chairman followed by the appointment of a substantive CEO.
During the year, TA Holdings shareholder, Shingi Mutasa stepped down as executive chairman and became non-executive chairman in a bid to bring transparency to the group.
In another case Patterson Timba assumed the position of non-executive chairperson at Renaissance just before inter party transactions and underhand dealings were exposed at the bank.

This clearly shows that board appointments and board structures are a pertinent issue we have to deal with because shareholders, policyholders and the transacting public will continue to be shortchanged.
What is surprising is that most corporate scandals in the country are happening under the nose of regulators and internal and external auditors.
Is it that the regulators are sleeping on the wheel or those internal and external auditors are forced to play the messenger role?

Where are the auditors today when all this is happening in companies, especially the internal ones who are first tasked with identifying and rectifying risks in corporates to protect the investments of shareholders?
Internal audit is the fourth pillar of sound corporate governance and directors of companies have managed to belittle audit committees to make sure they do not have the powers to report on what is happening in companies.

The investing community has also queried the number of boards some executives sit on.
In Zimbabwe it is very possible that one executive can sit on about 10 boards, the reason why some executives are invited to all these companies has something to do with their political clout.

Do we really need that in our economy? Should it be about who you know or about doing things according to the book?
However, the corporate world has also gone political, they also want political protection. The existence of the “Old Boys Club” has also created this vicious circle which keeps recycling the same old names.

It is clear that more than 90 percent of internal audit functions do not take management to task because they get their mandates from the same board of directors that they might be questioning. Given this scenario it means that internal audit will not expose their directors.

External audit has proved to work better because it is normally done after something has been detected.
One day I overheard an external auditor asking his colleague on what he was going to audit after the firm that was being audited had provided free transport, meals and allowances for an event that he attended.

As a way forward it has always been suggested that internal audit systems should be made strong and independent.
I understand in Ghana there is a law that empowers auditors and protects them from being bullied.

I think as a way forward it’s high time we push for the inclusion of such legislation in our constitution.