Morris Mpala, MoB Capital
CORPORATE governance by definition refers to a system by which companies are directed and managed.
It influences how the objectives of the company are set and achieved, how risk is monitored and assessed, and how performance is optimised.
Good corporate governance structures encourage companies to create value (through enterpreneurism, innovation, development and exploration) and provide accountability and control systems commensurate with risks involved.
(Principles of Good Corporate Governance and Best Practices Recommendations, 2003).
Author Gabrieelle O’Donovan goes on to say “the perceived quality of a company’s corporate governance can influence its share price as well as the cost of raising capital.
Quality is determined by the external market forces plus how policies and processes are implemented and how people are led. External forces are, to a large extent, outside the circle of control of any board.
The internal environment is quite a different matter, and offers companies the opportunity to differentiate from competitors through board culture.
To date, too much of corporate governance debate has been centered on legislative policy, to deter fraudulent activities and transparency policy misleads executives to treat the symptoms and not the cause”.
There has been high profile collapses of a number of financial firms in Zimbabwe. The only person that suffered was the poor depositors with no recourse at all even with the depositors’ scheme that was being run by RBZ.
One would think these unfortunate events will lead to religious interests in Corporate Governance in most Zimbabwean companies both private and public listed companies but alas corporate governance is just but window dressing written on paper but unfortunately not practiced.
The blame squarely lies on the board (owners for SME’s) and at the heart of the problem is the company secretary whether knowingly or unknowingly by not executing his/her duties accordingly.
The role played is being undermined by these events, which if the secretary were to carry their duties properly would not have had companies folding at alarming rates.
Otherwise if all was alright with the companies secretary we will have seen them resigning before these businesses close signaling their integrity.
Companies fall because of corporate governance issues, which is the sole responsibility of the company secretary.
In a nutshell a company secretary is an officer appointed by the directors of a business to ensure the legal obligations and corporate legislation is complied with.
In school noisy students were always called to order by their respective class prefects and in some extreme cases the prefects had power to mete instant justice on the wayward students.
In a meeting when members don’t follow set rules and regulations the sergeant in arms calls members to order and instills some sense of decorum or else they eject the offending members.
At tertiary institutions when students run riot you send in the anti-riot police to restore law and order.
In the army when discipline issues arise they send the military police to tell the mutinous group “gentlemen let’s behave”.
By the same token in the business world the person tasked to monitor other senior executives so that they toe the line in terms of corporate governance and compliance is the company secretary.
The company secretary is the police for management and the board.
He upholds law and order to business management principles, rules, procedures and guidelines as statutory mandated through best practices recommendations.
Below are company secretary’s main roles:
Organising, preparing board meeting and AGM’s
Maintaining statutory books
A link to relevant company stakeholders
Advisory function as to legal, governance, accounting, tax implications policies
Monitoring and implementing relevant legislation, regulatory requirements in line with any changes on the environment
Overseeing compliance issues on legal and statutory requirements. Developing and overseeing systems for compliance
Takes responsibilities for the health and safety of employees and managing issues related to insurance property
Liaison officer for advisors and external regulators
Maintaining shareholders register and monitoring changes in shareholding composition of the company
Settling dividends and managing share options
Taking role in share issues, mergers, demergers and takeovers
In SME’s the role is reduced to:
Monitoring and administration of pension schemes
Overseeing insurance issues
Overseeing contractual agreements with suppliers and customers
Managing office space and property. Acts as an HR person.
PR issues and financial management
Despite a clear distinction and relevant schools of corporate governance, companies still continue to fail on compliance and corporate governance issues. The reasons behind the lack of effectiveness by company secretaries are but not limited to:
Lack of spine
Generally, the lack of grit in the executing of duties when a spade has to be called spade despite who brought you into the organisation. You need amadoda sibili to carry their duties without fear or favour and protect the company’s interest.
Lack of integrity
Secretaries that are not career driven, lack value systems, at times by and large due to poverty the secretary doesn’t not uphold values associated with the international best practices and corporate governance.
They look the other way when violations are being committed by the company and its members and board included.
Glutton and greed
In some instances the company secretary tends to benefit from the shenanigans they tend to forgo to do what is right in terms of compliance and corporate governance for their own benefit. They willing fully form part of decadence.
Companies at times are old boys club where company secretaries are easily influenced to forgo their mandated duties so that they are loyal to certain individuals or those that “employed them”.
Lack of knowledge
Simple put the company secretary does not know what he/she is supposed to be doing therefore what will be happening will be beyond their scope.
Literally they don’t know their role.
The future of businesses lies in compliance, corporate governance and risk management policies of each respective company.
If businesses can now start to walk the talk on the above issues then can we also reap benefits that come with good corporate governance ie business growth and perpetuity.
Talk is cheap there is need to uphold values that have been put on paper that it becomes culture for business right from the board to the lowest employee in the company with company secretaries forming the critical point persons for most issues as mandated by their job descriptions.
This culture of embedding values has to be cultivated across from emerging firms, SME’s and major corporations, the government and even at individual level to avoid fly by night business empires.
Needless to say other stakeholders like external auditors, advisors have to come to the party and give accurate business state of affairs that will aide business analysis for investment purposes or the lack of it therefore.
There are three things needed to solve this cancerous scenario that has been spreading across the globe even bringing down major corporations like Enron and it is integrity, integrity and integrity unfortunately this cannot be taught at any school under the sun.
IF YOU LIVE IN BYO PLEASE CONSERVE WATER.
IF YOU LIVE IN ZIMBABWE PLEASE USE ELECTRICITY SPARINGLY:SOS(SWITCH OFF SWITCHES). IF YOU LIVE ON PLANET EARTH PLEASE PRESERVE THE ENVIRONMENT
Morris Mpala is managing director of MoB Capital (Pvt) Limited, a microfinance institution offering loans, micro-insurance and advisory services to small to medium enterprises as well as individuals.