Corporate governance code limits multiple directorships

The proposed corporate governance code for Zimbabwe, work on which was recently completed, is expected to limit the number of boards an individual can serve on, DHM Legal Practitioners senior partner Canaan Dube told chartered secretaries on Friday.

Addressing delegates at the three-day Institute of Chartered Secretaries and Administrators in Zimbabwe annual conference at the Elephant Hills Resort in Victoria Falls, Mr Dube said the code stipulated that board members should not normally serve on more than six boards.

"The new corporate governance code for Zimbabwe stipulates that board members should not serve on more than six boards. Should the threshold be exceeded, the board member concerned should proffer good and sufficient reasons demonstrating ability, availability and capacity to shareholders.

"In addition, the board chairman should not chair more than four boards and, should the threshold be exceeded, then the board member concerned should proffer good and sufficient reasons demonstrating ability, availability and capacity to do so," he said.
 
Mr Dube added that the code also requires that a chairperson must not chair more than four boards of listed companies. He said directors who are appointed for the professional skills they have, such as lawyers, accountants and engineers, should not be allowed to provide professional services through their firms to the company.

"Any term of office beyond 12 years, made up of four three-year terms, for an independent non-executive director should be subject to a rigorous review by the board.

"No election or dismissal of any director should be left to the whims or caprices of the dominant, controlling or majority shareholders.

"No chief executive officer should fulfill the role of the chairperson and where he does, the principles enunciated in the code on independence should apply.

"The retired CEO should not be a chairman of the board but could be a member after three years from the date of retirement, again subject to both board and shareholder approval.

"CEOs of subsidiary companies may not be board members of their holding companies. The CEO of the holding company shall also not chair boards of subsidiary companies although he or she may be a non executive director thereof," he added.

Mr Dube went on to say that during the period of economic turmoil from which Zimbabwe is presently emerging, businesses worked primarily on the basis of day-to-day survival.

He said strategic planning was considered an unnecessary expense, financial planning became a rhetorical pastime and the basic principles of corporate governance became irrelevant.  

"The sole imperative of business management became survival from one day to the next.

"That period is almost over and businesses in Zimbabwe are faced with a different environment; one in which there is a need to reconnect with the wider international business and financial community.

"Businesses need capital to rebuild their operating capacity and to replace aged plant and equipment. That capital is going to have to be found to a large extent from international rather than domestic sources.

"The behaviour of corporate entities and their leaders needs to be monitored and evaluated in terms of some approved governance compliance framework," he said.

He explained that there are three types of frameworks for corporate entities, the first being a legislation based framework, where corporates are expected to comply or else face legal sanctions for non-compliance. 

The second type of framework, he said, is a voluntary framework. The third type, which he said Zimbabwe fits into, is a framework based on both the law and a code.

"Until now there has not been a national code of corporate governance for Zimbabwe as comprehensive as the King I, II and III in South Africa. 

"Zimbabwe is a country in transition.  Investment capital is needed for this transition to be worthwhile and both international and local investors will want to be assured that corporate entities in Zimbabwe are well governed," he said.

Mr Dube pointed out that all the stakeholders involved in the crafting of the code were  focused, committed and dedicated to coming up with a code which is not only suitable for the Zimbabwean environment but also one that ensures sustainable economic development.

"We all continue with the journey until the national code on corporate governance becomes and remains a living reality, continuously shaping Zimbabwe's corporate terrain for the better," he said.