Corporate governance values should be embedded in corporate DNA

Good corporate governance should be embedded within an organisation's corporate DNA, not be a policy document filed away in a cabinet, Institute of Chartered Secretaries and Administrators in Zimbabwe president Glovah Madzima told chartered secretaries on Friday.

Opening the institute's annual conference in Victoria Falls, he urged chartered secretaries to raise the standards of corporate governance and ensure that the organisations they work for have embedded corporate governance values.

"Values, culture and ethics are the cornerstones of business integrity and good governance practice.  If our organisations are to practise good corporate governance in letter and spirit , the right values, culture and ethics must be embedded into the corporate DNA.  

"It goes without saying then that it is our role as chartered secretaries to ensure that our organisations have embedded these values and where they do not exist we should advocate that they be incorporated and used in our organisations.  

"These must not only be looked at as things to have in policy documents which are nicely shelved in the cabinets but things we value and live by on a day to day basis.  We must work on raising the standards of corporate governance in our corporations," he said.

Mr Madzima said raising corporate governance standards was important for attracting the foreign direct investment that the country badly needed.

"We are told and we know that good foreign direct investment flows to countries and companies which the investor has trust in.  That trust can only come if the corporate governance standard in all its facets, which include good business ethics and risk management, is practised by the proposed recipients of the foreign direct investment.

"Weak corporate governance frameworks reduce investor confidence and can discourage outside investment," he said.

He added that chartered secretaries should play their part in raising corporate governance standards at a micro level. He said that the large number of chartered secretaries in the country should be able to make an impact at national level so as to improve the corporate governance at a macro level.

"It is generally argued that a country's investor appeal is influenced by a number of factors, including its fiscal and tax policies, the institutional framework for trade and investment and good governance," he said.

He added that, along with traditional financial criteria, the governance of a corporation was an essential factor that international investors took into consideration when deciding how to allocate their investment capital.

"Corporate governance is therefore one key element in improving economic efficiency and growth as well as enhancing investor confidence.  

"The presence of an effective corporate governance system within an individual company and across an economy as a whole, helps to provide a degree of confidence that is necessary for the proper functioning of a market economy," he said.

He emphasised that raising corporate governance standards could not  be achieved by structure or process check-lists alone or by the existence of corporate governance policies in cabinets.

"Governance is not only a compliance exercise.  It incorporates the behaviours of the people involved, both the leaders and the led. It must be in the culture of the organisations starting at board level.  If us, the leaders are seen to be walking the talk then our subordinates will gladly follow.  

"Our management skills are a function of our personal competencies and how we behave.
As governance professionals and leaders we must also always remember that our organisations operate in society for society.

"They do not exist and operate in a vacuum.  Because of this we need to remain conscious that the various stakeholders for our businesses have their own expectations which they rightfully expect to be fulfilled," he said.  

Business leaders needed to understand, he said, that the prosperity of their companies was influenced by those they worked with, including those who were "reluctant colleagues"  forced by different needs to work together.   

"The workers, government, suppliers, customers, regulatory authorities and so on are some of the reluctant colleagues.  They work with us but do not necessarily share our objectives. For example, while we want to create a profit maximisation situation for our shareholders, the workers may have a totally different objective.

"Of course most stakeholders need pride, hope, wealth and power, dignity and respect together with a satisfying return on their investment, both financial and material.  Even society needs its return for the trust it invests in your company," he said.  

Mr Madzima added that companies should not limit themselves to creating shareholder wealth and increasing profits for the shareholder.  They should take an interest in how other stakeholders benefited from the business as well.

He said it was from this basis that the institute had chosen 'Enhancing Stakeholder Value through Good Corporate Governance' as the theme of its annual conference.

"It is from this basis that we chose as an institute to look at our theme as one that should focus on how the whole group of stakeholders are expected to benefit from our business.  

" It is a realisation that the value of our business cannot be divorced from where we are, who we stay and interact with, who buys from us and who is affected by our operations.  

"All these stakeholders want value from the business, and our purpose here is to see how good corporate governance can enhance that value.

"It may therefore be true that if our stakeholders sink, then in the long term we are likely to sink with them. 
"Likewise we have a symbiotic relationship with our stakeholders; if we do well they should also do well.  We should, as business leaders strive to create a win-win situation by making use of good corporate governance principles in our business," he said.