MIDLANDS STATE UNIVERSITY CORPORATE GOVERNANCE ASSIGNMENT

MACC704

NHLANHLA SIBANDA R1914915T

CHIDO MUTOWO R1915699V

LINDA HAZVINEI BHOBHO R1915480Q

BESTER CHITATE R151531J

MAZVIITA NYAMUBAYA R1912935N

TONGAI NYAMBUYA R0433108

HATIFARI M CHINGARANDE R1814662G

ARNOLD KANYIMBIRI R1917380A

AUGUSTUS MUNYORO R1917425R

PATIENCE CHIKASHA R1911965F

Question: Referring to the case study develop a Cooperate governance policy that addresses
governance concerns raised in the case study.

Characteristics of Good corporate governance

 Accountability This relates to the notion that an organization has a requirement to report
and converse ,explaining what it has been doing and the decisions that it has made .The
organization has to be accountable to its shareholders.

 Transparency- This relates to the fact that the decisions made in the organization and the
activities being conducted should be clear and not be questionable in this regard.The
actions that have been taken should be abreast with the law and if any assumptions have
been adopted they have to be clear.

 Fairness -fairness means protect shareholder rights, treat them equitably, provide
effective redress for violations.The company must be fair and balanced and take into the
account the interest of all of the company's stakeholders. In this sense, the rights of
eachof the groups of stakeholders must be recognized and respected.
 Independence-procedures and structures are in place so as to minimise or avoid conflicts
of interest. Having independent directors and advisors that are free from internal
influence. For good corporate governance, it is important that all decisions are made
objectively with the best interest of the enterprise in mind and without any undue
influence from large shareholders or an overbearing chief executive officer.

 Responsibility-In a corporation, managerial responsibility means that the management be

responsible for their behavior and have means for penalizing the mismanagement. It also
means putting in place a system that puts the company on the right path when things go
wrong
 Social Responsibility-A well run organisation must also be ethical and be responsible
with regard to environmental and human rights issues. As such, a socially responsible
company would be non-exploitative and non-discriminatory.
 Sustainability-This notion says that the organization has to conduct its processes in a
manner that meets existing needs without compromising the ability of future generations
to meet their needs. It means having regard to the impact that the business operations
have on the economic life of the community in which it operates. It includes
environmental, social and governance issues.

Governance concerns raised in the case study

 Weak systems of Internal control that should have found out about the 500 000 that was
set by the board
 Corruption and corruption on the Crowhill stands
  Parastatals becoming a feeding trough for Ministers
 Not adhering the Auditor Generals report
 No clear transparency and disclosure-Reappointment of Marisa Director General at
Potraz
 Board committees that are ineffective-500 000 restriction
 Lack of independence of top management and board members-Chairperson of Potraz
 Systematic patrionage and plunder of resources
 Nepotism in appointing of individuals to management positions in parastatals
 Ethics violations on the appointment of members and directors by the minister to various
organizations under the ministry
 Conflict of interest/Independence as the chairperson of POTRAZ had internal influence-
Crowhill stands
 Oversight function/self interest buying CEO property
 Political interference-Linked to late Former President Robert Mugabe’s family
 Poor board composition and structure as appointments are not based on merit-CEO
appointed without banking experience
 Self interest threats
 Coercision to use a bank with huge debt-Telecel and other parastatals being forced to use
the bank and failing get the money to pay for its Trading Licence

Cooperate Governance Policy

 This is formulated to ensure that parastatals and state owned enterprises are managed in a
transparent, ethical manner promoting good business practices .This will promote at all
times sound corporate governance culture and proper corporate governace practises

1.0 Appointment and Recruitment in Boards of State Enterprises and Parastatals

 With reference to the Public Entities Corporate Governance Act Section 11 it states that
the Minister shall appoint members of the board of directors of public entities. The
constitution of Zimbabwe (2013) further alludes that the Minister appointed by the
President to serve the cabinet has powers to appoint individuals to the board of all the
parastatal which falls under their respective ministries.
 Section 9 of the Constitution of Zimbabwe further points out that “The state must adopt
and implement policies and legislation to develop efficient, competent, accountable,
transparent and financial probity in all the institutions and agencies of the government at
every level and in every public institution. Thus the performance of a State Enterprise and
Parastatals largely depends on the capabilities and performance of its board.
 The performance of state enterprises and the parastatals eagerly depend on the capabilities
and performance of its Board therefore it is important that the directors should be appointed
through a formal, robust and transparent process that reflects broadly the diversity of the
 stakeholders Zimbabwe Code (2014) .It should be advertised so that various experts in their
relevant fields can apply and get fare appointment.

1.2 Board composition

 Boards constitute the fundamental base of corporate governance in the Parastatals and
have responsibility to ensure their success. Each State Enterprise or Parastatals shall be
headed and controlled by an effective and efficient Board, comprising of executive and
non-executive directors of whom the majority shall be non-executive directors in order to
ensure objectivity in decision making.
 Board Officials shall observe the highest standards of integrity and ethical conduct and
shall act with honesty and propriety. Their personal and professional conduct should, at
all times, command respect and confidence in their status as officials of an organisation
and should contribute to the good governance .
 The composition of the board should reflect a diversity of skill set ,backgrounds,
experiences and expertise that can assist them in performing an oversight effectively.
 The board composition should ensure that the board can attend the common interests of
parastatals, They should avoid a conflict of interest. Conflicts of Interest which allude to
outside activities, political activities ,employment ,gifts and hospitality.
 Conflict of interest is a situation or circumstances in which past or present private
interests of board members influence or may influence the objective and impartial
performance of their official duties. In this regard, private interests include any advantage
for themselves, personal acquaintances, as well as any present or past activity or activities
the engagement in which may interfere or conflict with his/her official duties or status or
bring the organisation into disrepute.
 Board members must not allow the performance of their official duties to conflict with, or
be affected by, possible or prospective employment with, or the rendering of services to,
an outside entity. Therefore if a Board member is seeking or negotiating for or has
received an offer of employment or appointment outside of the Parastatal it is key to that
there will not be a conflict of interest and should properly disclose such interests.
 The composition should comprise Executive and Non executive Directors, notably a
balanced board composition should have no gender disparities. There should be equal
representation in the boards
 The organisation’s annual report shall provide information to illustrate the expertise of
the members of the board ,and information on their record of attendance at Board
meetings

1.3 Board Functions and Roles

 chairing meetings of non-management directors (executive sessions)

 presiding at the annual meeting of stockholders
 briefing the Chief Executive Officer on issues raised in executive sessions
  scheduling Board meetings, setting Board agendas and strategic discussions and
providing a review of pre-meeting materials delivered to directors
 overseeing Board, committee and senior management evaluations and succession
planning
 managing the Board’s oversight of risks
 recommending appropriate governance policies and practices
 overseeing the avoidance of conflicts of interests
 recommending Board committee and committee chair assignments
 overseeing the process for selecting new Board members
 calling meetings of the Board and stakeholders
 chairing the Corporate Governance Committee
 conducting/overseeing the annual evaluation of the committees and the Board
 carrying out other duties requested chairman of the board as a whole.
 Declarations of Interests. On at least an annual basis ,each director shall present to the
Board a declaration of interests ,setting forth such director’s business affiliations with
third parties. Each declaration of interests shall include, without limitation ,any
relationship between the directors and (other than the Company) with which any other
directors and/or officers are affiliated, as a potential or actual conflict of interest could
arise in such situations.
 Each director shall present to the Board an updated declaration of interest promptly after
entering into a new affiliation or changing a pre-existing affiliation. The Secretary shall
keep a register of the declarations of interests made by the directors, and such register
shall be reviewed by theBoard from time to time and at least annually for completeness
and accuracy.
 Risk Oversight is also an intergral part of the Board in State Enterprises and
Parastatals.The Board oversees risk management at the Parastatals hence make informed
decisions thereon. It exercises direct oversight of strategic risks to the company and other
risk areas are not delegated to one of its committees

1.4 Financial Reporting

 The board shall focus on the Integrity and clarity of the organisation’s financial reporting
and other disclosures about corporate performance.This may involve the financial
reporting risk and to manage investments and other risks that are inherent to the
organisation
 The board should be satisfied that the company’s financial statements accurately present
its financial condition and results of operations, that other disclosures about the
company’s performance convey meaning information about past results as well as future
plans.
  The Auditor General’s (2018) highlighted that there was no transparency in the
preparation of financial statements and the most employees in parastatals were not
adhering to proper financial and management accounting reporting rules and regulations
to ensure relevance and faithful representation.
 And also to ensure that that the company’s internal controls and procedures have been
designed to detect and deter fraudulent activity.

1.5 Structure of Audit, Nominating and Remuneration committees

 An effective committee structure permits the board to address key areas than may be
possible at full board level. This then ensure that the board performs at full functionality.
 Decisions about committee membership and chairs should be made by the full board
based on recommendations from the nominating committee
 An effective Board must conduct itself with honesty and integrity and above all should
act in the best interest of the company Zimbabwe Code (2014

1.6 Nominations Committee

 The Nominating and Governance Committee shall develop a process whereby the Board
of Directors will annually review Board and committee performance, including the
conduct of Board and committee meetings, to provide input on means of improving the
effectiveness of the Board and its committees.
 This is the first committee that shapes other committees by identifying individuals who
are knowledgeable, integrity and best fit with the organizational culture through research
and investigation of potential members before nomination.
 There should be a review annually the composition of the board, including an assessment
of the mix of the directors’ skills and experience.
 To evaluate whether the board as a whole has the necessary tools to effectively perform
its oversight function in a productive and associated function
 In addition a succession plan should be availed by the committee to ensure that there are
people who are competent enough to replace the board members as well as the
evaluation of the performance of the board periodically

1.7Audit Committee

 This is a committee that consists of independent non executive directors who regularly
review the preparation of financial statements and its financial reporting processes. The
Audit Committee assists the board of directors in fulfilling its responsibility for oversight
of the quality and integrity of the accounting, auditing, and financial reporting practices
of the organisation, and such other duties as directed by the board.
  This committee appoints the Head of the Internal audit and is responsible for the
implementation of the internal audit function as well as the appointment of the external
auditors.Internal auditors in the organization report to this board with regard to financial
matters that will be taking place in the organization.

 The audit committee will have the necessary resources and authority to discharge its
duties as they see fit. In discharging its oversight role, the audit committee is empowered
to investigate any matter brought to its attention.
 The audit committee will have access to the company’s books, records, facilities, and
personnel. Any communications between the Committee and legal counsel while
obtaining legal advice will be privileged communications of the organisation, and the
audit committee will take all necessary steps to preserve the privileged nature of those
communication.
 The committee should oversee the implementation of audit recommendations, responding
to audit related question as well as presenting the audited financial reports to the main
board

1.8 Remuneration committee

 The committee to comprise of non-executive members of the board with majority being
independent non-executives.The remuneration committee shall be responsible for striking
a balance in rewarding the executive members and the organizational resource needs.This
committee needs to maintain its utmost confidentiality and they reward the executive
directors based on performance.

In conclusion the above mentioned corporate governance frame work is of tantamount

importance in ensuring that the characteristics of corporate governance have been met and State
enterprises and Parastatals may be run effectively
Corpoarate Governance Concerns

- Corruption and abuse of office

- Growth of a cartel in the ICT sector (all organisations under the ministry of Information
Communication Technology and Cyber security
- Appointment of a number of familiar members from Metbank to various organization
under the ministry of Information as executives by the minister
- Lack of independence
- Poor board composition and structure as appointments are not based on merit-CEO
appointed without banking experience
- Self interest by Metbank CEO Bvute involving selling his stands to Metbank which he
then used to settle the bank’s debt with Zimdef.
- Coercion to use a bank with huge debt. Telecel and other parastatals being forced to use
the bank and failing get the money to pay for its Trading Licence
-

Corporate Governance Policy

1. Clearly defined appointment, tenure conditions of service of board members of public

entities.
- No person is to be appointed as a member of the board for a term longer than four years,
and the appointment may be renewed for only one term.

2. Remuneration of non-executive members of public entities

- For the purpose of ensuring that, so far as is practicable, the remuneration fixed for non-
executive members of public entities are fair and appropriate, due regard being had to the
members' qualifications and experience and the functions they are expected to perform;

3. Restriction on remuneration of board members of public entities

4. Resignation of board members of public entities

- Where a board member of a public entity resigns, the head of the line Ministry shall
endeavour to ascertain from the member the reasons for his or her resignation, and any
findings made by the head of the line Ministry in that regard shall be communicated
without delay to the Unit.