This is the vivid re-collection of the momentous occasion in Zambia. This is how it all started. In the cold winter month of June 1998, Zambia – Commonwealth Programme on Corporate Governance and the Commonwealth Association for Corporate Governance in collaboration with the Commonwealth Fund for Technical Co-operation and the Institute of Chartered Secretaries and Administrators (Zambia Association) oragnised a 3 day workshop at Intercontinental hotel in Lusaka. The workshop attracted key stake holders from across a spectrum of various sectors of the Zambian Society with different professional backgrounds. Government of the Republic of Zambia Officials, Businessmen and women, Parastatal Companies, Commissions, Agencies and Civil Societies were present.
Mr. Michael Gillibrand was a Special Adviser – Management and Training Services Division at Commonwealth Secretariat. Mr. Mohan V. Thomas was Chairman of the Institute of Chartered Secretaries and Administrators whereas Mr. Geoffrey Bowes was the Executive Director for Commonwealth Association for Corporate Governance. The three day interactive and power point slide presentation (remember that Microsoft PowerPoint slide presentations using projectors with fancy animations sounding like type writers or emergency car breaks had just been introduced in Zambia) was both educative and enlightening!
Among the notable presenters who inspired the audience (workshop participants) was a fine gentleman by the name of Boyman Mankama from the neighbouring Country Zimbabwe. The man was so passionate about Corporate Governance not only in Companies but Government Institutions. This was the time Comrade Gabriel Mugabe – His Excellency the President of the Republic of Zimbabwe had just passed a law on Land reforms in that Country and the “Zimbabwean White Farmers” had started trooping away from that Country to neighbouring Countries including Zambia. The resounding round of applause was phenomenal. The author of this article has kept notes from various presenters of the workshop for posterity and future generations to be inspired as well.
One most important and cardinal action point and way forward of this ground breaking workshop was a firm resolution to assemble a “TASK FORCE” on the formation of the INSTITUTE of DIRECTORS (IoD) in Zambia. This collection of fine brains and minds was established in June 1998 by the Institute of Chartered Secretaries in Zambia with the specific responsibilities of drawing up a Code of Ethics/Code of Conduct (COE/COC), the constitution, rules for the IoD of Zambia and incorporating the Organisation.
The work of the Task Force was studied and debated extensively by the panel of professional Lawyers, Accountants, Bankers and those from the Law Enforcement who distilled the thoughts, drafts, and recommendations into the Code of Conduct and Corporate practices in Zambia.
The Chairman recoded his thanks and appreciation for the Work done by the Task Force Team members and the Committee. The task Force among others had an enviable task of studying the Codes of Best Practice, the various constitutions which were received from the Institutes of Directors in New Zealand, Zimbabwean and South Africa. Hundreds of Hours went into the wading of physical papers, files, reports, documents, the Studies of the Literature, the Codes of Conduct, the Codes of Ethics, Corporate Governance and what it entails. Various research papers and journal publications, constitutions from the republics of South Africa, Zimbabwe, The United kingdom, Australia and New Zealand were reviewed with the asp rational recommendations from which the Code of Ethics, Code of Conduct and the ultimately the Constitution to form IOD in Zambia evolved. Just to confirm that there were no effective Internet browsing and bandwidth was not broad enough to Google search on such subjects. Hence, there was heavy reliance on some paperwork, published articles, magazines, journals, land telephone lines and physical letters moving correspondence through the Post Offices and messengers to communicate with others in-country and our colleagues who were outside the Countries.
- Some Salient Lessons learnt was that corporate governance in South Africa was institutionalised by the publication of the King Report on Corporate Governance (“King Report 1994”) in November 1994. Mervyne E. King (S.C.) was the Chairman of the Committee.
- The King Committee on Corporate Governance was formed in 1992, under the auspices of the Institute of Directors, to consider corporate governance, of
increasing interest around the world. You will recall or read the History of South Africa that this coincided with profound social and political transformation at the time with the dawning of democracy and the re-admission of South Africa into the community of nations and the world economy.
- The purpose of the King Report 1994 was, and remains, to promote the highest standards of corporate governance in South Africa. Unlike its counterparts in other countries at the time, the King Report 1994 went beyond the financial and regulatory aspects of corporate governance in advocating an integrated approach to good governance in the interests of a wide range of stakeholders having regard to the fundamental principles of good financial, social, ethical and environmental practice.
- In adopting a participative corporate governance system of enterprise with integrity, the King Committee in 1994 successfully formalised the need for companies to recognise that they no longer act independently from the societies and the environment in which they operate.
- A distinction was clearly made between accountability and responsibility: One is liable to render an account when one is accountable and one is liable to be called to account when one is responsible.
- We learnt that the modern approach is for a board to identify the company’s stakeholders, including its shareowners, and to agree policies as to how the relationship with those stakeholders should be advanced and managed in the interests of the company.
- Corporate discipline is a commitment by a company’s senior management to adhere to behaviour that is universally recognised and accepted to be correct and proper. This encompasses a company’s awareness of, and commitment to, the underlying principles of good governance, particularly at senior management level.
- Transparency is the ease with which an outsider is able to make meaningful analysis of a company’s actions, its economic fundamentals and the non-financial aspects pertinent to that business. This is a measure of how good management is at making necessary information available in a candid, accurate and timely manner – not only the audit data but also general reports and press releases. It reflects whether or not investors obtain a true picture of what is happening inside the company. Remember that the Zambia Privatisation Program was at its peak during that period.
- Independence is the extent to which mechanisms have been put in place to minimise or avoid potential conflicts of interest that may exist, such as dominance by a strong chief executive or large shareowner. These mechanisms range from the composition of the board, to appointments to committees of the board, and external parties such as the auditors. The decisions made, and internal processes established, should be objective and not allow for undue influences. This reminds me of the Once Mighty Director General of the ZIMCO Group of Companies and the Mighty Chairman and Chief Executive Officer of the once Mighty ZCCM who were very powerful in Dr. Kenneth David Kaunda’s era
- Individuals or groups in a company, who make decisions and take actions on specific issues, need to be accountable for their decisions and actions. Mechanisms must exist and be effective to allow for accountability. These provide investors with the means to query and assess the actions of the board and its committees.
- With regard to management, responsibility pertains to behaviour that allows for corrective action and for penalising mismanagement. Responsible management would, when necessary, put in place what it would take to set the company on the right path. While the board is accountable to the company, it must act responsively to and with responsibility towards all stakeholders of the company.
- The significance of corporate governance is widely recognised, both for
National development and as part of international financial architecture, as a lever to address the converging interests of competitiveness, corporate citizenship, and social and environmental responsibility.
- Corporate Governance is also an effective mechanism for encouraging efficiency, fighting financial crime, corporate fraud, abuse of official positions, combating bribery and corruption. By the way Anti-Corruption Commission (ACC) was invited to this workshop and Mrs. Agnes Kayobo Ngandu – The Director of Corruption Prevention and Community Education Division and the Senior Manager and Head of The Corruption Prevention Department then Kunda Emmanuel Kalaba were among those present. Their contribution during the workshop was very useful.
- Communities and countries differ in their culture, regulation, law and generally the way business is done. In consequence, as the World Bank has pointed out, there can be no single generally applicable corporate governance model. Yet there are international standards that no country can escape in the era of the global investor.
Thus, international guidelines have been developed by the Organisation for Economic Co-operation and Development (OECD), the International Corporate Governance Network, and the Commonwealth Association for Corporate Governance. The four primary pillars of fairness, accountability, responsibility and transparency are fundamental to all these international guidelines of corporate governance.
- Boards must apply the tests of fairness, accountability, responsibility and transparency to all acts or omissions and be accountable to the company also but responsive and responsible towards the company’s identified stakeholders. The correct balance between conformance with governance principles and performance in an entrepreneurial market economy must be found, but this will be specific to each company.
- The board is the focal point of the corporate governance system. It is ultimately accountable and responsible for the performance and affairs of the company. Delegating authority to board committees or management does not in any way mitigate or dissipate the discharge by the board and its directors of their duties and responsibilities.
- The board must give strategic direction to the company, appoint the chief executive officer and ensure that succession is planned.
- The board must retain full and effective control over the company, and monitor management in implementing board plans and strategies.
- The board should ensure that the company complies with all relevant laws, regulations and codes of business practice, and that it communicates with its shareowners and relevant stakeholders (internal and external) openly and promptly and with substance prevailing over form.
- The board should define levels of materiality, reserving specific power to itself and delegating other matters with the necessary written authority to management. These matters should be monitored and evaluated on a regular basis.
- The board should have unrestricted access to all company information, records, documents and property. The information needs of the board should be well defined and regularly monitored.
- The board should consider developing a corporate code of conduct that addresses conflicts of interest, particularly relating to directors and management, which should be regularly reviewed and updated as necessary.
- The board should have an agreed procedure whereby directors may, if necessary, take independent professional advice at the company’s expense.
- Every board should consider whether or not its size, diversity and demographics make it effective.
- The board must identify key risk areas and key performance indicators of the business enterprise. These should be regularly monitored, with particular attention given to technology and systems.
- The board should identify and monitor the non-financial aspects relevant to the business of the company.
- The board should record the facts and assumptions on which it relies to conclude that the business will continue as a going concern in the financial year ahead or why it will not, and in that case, what steps the board is taking to remedy the situation.
- The board should ensure that each item of special business included in the notice of the annual general meeting, or any other shareowners’ meeting, is accompanied by a full explanation of the effects of any proposed resolutions.
- The board should encourage shareowners to attend annual general meetings and other company meetings, at which the directors should be present. More particularly, the chairpersons of each of the board’s committees, especially the audit and remuneration committees should be present at the annual general meeting.
- A brief CV of each director standing for election or re-election at the annual general meeting should accompany the notice contained in the annual report.
- Every board should have a charter setting out its responsibilities, which should be disclosed in its annual report. At a minimum, the charter should confirm the board’s responsibility for the adoption of strategic plans, monitoring of operational performance and management, determination of policy and processes to ensure the integrity of the company’s risk management and internal controls, communications policy, and director selection, orientation and evaluation.
- Non-executive directors should be individuals of calibre and credibility, and have the necessary skill and experience to bring judgment to bear independent of management, on issues of strategy, performance, resources, transformation, diversity and employment equity, standards of conduct and evaluation of performance.
The board should meet regularly, at least once a quarter if not more frequently as circumstances require, and should disclose in the annual report the number of board and committee meetings held in the year and the details of attendance of each director (as applicable).
- The company secretary, through the board, has a pivotal role to play in the corporate governance of a company.
- The board should be cognisant of the duties imposed upon the company secretary and should empower the company secretary accordingly to enable him or her to properly fulfil those duties.
- In addition to extensive statutory duties, the company secretary must provide the board as a whole and directors individually with detailed guidance as to how their responsibilities should be properly discharged in the best interests of the company.
- The board is responsible for the total process of risk management, as well as for forming its own opinion on the effectiveness of the process. Management is accountable to the board for designing, implementing and monitoring the process of risk management and integrating it into the day-to-day activities of the company.
- Every company should engage its stakeholders in determining the company’s standards of ethical behaviour. It should demonstrate its commitment to organisational integrity by codifying its standards in a code of ethics.
- “Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals…the aim is to align as nearly as possible the interests of individuals, corporations and society.” Sir Adrian Cadbury – ,Corporate Governance Overview, 1999 -World Bank Report .
- It is now generally accepted by multinationals operating in various jurisdictions that “demonstrating concern creates an atmosphere of trust and a better understanding of corporate aims, so that when the next crisis comes (and these are inevitable for big companies) there will be a greater goodwill to help the company survive”
As a younger man then (with full of energy and eager to learn from the Elders and Chief Executives sitting for the first time in one of the posh Board Room recently refurbished), I was personally inspired to work on this Task Force Committee by the fact that so many prominent Zambian with very prominent positions obviously with very busy work and social schedules to attend to, gave of their precious and valuable time on honorary basis. Meetings were held at Zambia Privatisation House (ZPA) now Zambia Development Agency (ZDA) near the New Government Complex House offices after official working hours. Meetings would run from 18.30hrs running all the way up to and beyond 22.hrs depending on the agenda items on a bi-weekly basis. None of the Task Force members even attempted to claim or recover their personal disbursements in drafting the Zambian COE, COC and the Constitution of the IOD. Those days “sitting allowances” in workshops and meetings was in the in thing during the Frederick Titus Jacob Chiluba’s rule as the President of the Republic of Zambia. We all proudly sacrificed and did it for the love of mother Zambia.
As of September 14th 1998, the Interim Task Force members who used to meet at Zambia Privatization Agency Board room after 18.00hrs and worked tirelessly to ensure IOD was created were; Mr. Patrick D. Chisanga – Chairman, Mr. Kenneth Chibesakunda, Ms. Joyce Muwo, Mrs. Mary T. Ncube, Mr. Mohan Thomas, Mr. Kunda E. Kalaba, Mrs. Elizabeth Jere
- Mr. Michael Daka
- Mr. Stephen Ndhlovu,
- Mr. Charles Mate
- Mr. Satish Gulati
- Dr. Herrick Mpuku
- Mr. Luke Mbewe
- Mr. Robert Mwambwa
- Mr. Mumba Kapumpa
- Mr. Isaac Ponde
- Mr. Fabian C. Lukashi (Secretary).
As Zambians are no doubt fully aware, “we have successfully put together a Constitution for the IOD of Zambia and we have also incorporated it as a Company limited by guarantee under the Companies Act. In short, we have delivered our mandate in full, In thanking you for the excellent work done, I think that it is also appropriate that I should announce the formal dissolution of the Task Force, In consequence, I am by copy of this letter advising the Chairman of the ICSA (Stephen Ndhlovu, FCIS) to proceed with the appointment of an interim Board of Directors of the Institute so that it can commence functioning” stated Mr. Patrick D. Chisanga (FCIS) who was Chairman – Task Force on the formation of the Institute of Directors in Zambia on 10th February 2000.
In normal societies similar to ours, all the above should be “Honoured” with at least life “HONOURALY” membership of the IOD Zambia for being pioneers and Founding Fathers and Mothers of IOD Zambia which was established in the new millennium – January 2000 to be specific. It is not too late to ask or consider. This is the best way we can honour and say excellent and or job well done for your selfless sacrifice and unflinching support for the two (2) year long period of hard work which ensured that the desired result of formation or creation of the IOD is established and flourishes in its operations in Zambia. I just thought of putting the record straight for the new generation and generations to come.
Corporate governance is at the heart of most of the issues that have arisen thus far in Zambia and beyond. The Task Force members were very passionate about this subject. In the information age everyone, willingly or not, is a member of the global market place: concepts like Globalisation were just reaching Zambia and proponents like Messrs. Elias Chipimo Junior and the late Mebelo Mutukwa argued that as members of this global club, everyone lives in a borderless world, not one as envisaged by the World Trade Organisation with no geographic trading borders but one where information crosses borders with the “click of a mouse”. Relying on this information, capital flows across geographic borders as if they were nonexistent. Zambia just has to play her part.
In more than 70 Countries I have visited globally in my life, I have come to conclude that any information being channelled out from any Country must be trustworthy before an investor can convince other partners and before arriving at any life changing decision to move money and invest the same somewhere else on this earth. The measurement for this trust and confidence is the quality of the governance of the company imparting the information. The implications for companies are profound. Simply by developing good governance practices, Chief Executive Officers, Chief Financial Officer, Risk Director, Legal and Compliance Managers, Corporate and Company Secretaries and other Senior Managers can potentially add significant shareowner value. It should be apparent to the Policy makers and regulators in recognising that the creation of a good governance climate can make countries, especially in the developing and emerging markets, a magnet for global capital. Companies not only need to be well-governed, but also need to be perceived in the market as being well governed. We surely need more Zambian Companies to be listed at International markets. They can start at Lusaka Stock Exchange (LUSE) and go further on other International Markets.
If there is a lack of good corporate governance in a market, capital will leave that market with the click of a mouse. The recent Foreign Exchange rates speak volumes.
As Arthur Levitt, the former Chairperson of the US Securities and Exchange Commission has said, “If a country does not have a reputation for strong corporate governance practices, capital will flow elsewhere. If investors are not confident with the level of disclosure, capital will flow elsewhere. If a country opts for lax accounting and reporting standards, capital will flow elsewhere. All enterprises in that country – regardless of how steadfast a particular company’s practices may be – suffer the consequences. Markets must now honour what they perhaps, too often, have failed to recognise. Markets exist by the grace of investors. And it is today’s more empowered investors that will determine which companies and which markets will stand the test of time and endure the weight of greater competition. It serves us well to remember that no market has a divine right to investors’ capital”
The collective desire for each and every company registered and incorporated in Zambia by the Patents and Company Registration Agency (PACRA) is that each company (including Small and Medium Enterprises (SMEs) should demonstrate its commitment to its code of ethics by communicating with, and training, all employees regarding enterprise values, standards and compliance procedures; creating systems and procedures to introduce, monitor and enforce its ethical code; assigning high level individuals to oversee compliance to the ethical code; assessing the integrity of new appointees in the selection and promotion procedures; exercising due care in delegating discretionary authority; providing, monitoring and auditing safe systems for reporting of unethical or risky behaviour; enforcing appropriate discipline with consistency; and responding to offences and preventing re-occurrence.
It is our ardent hope and prayer that one day, some International Organisations, major investors and institutions would come to Zambia and say Zambia has the best governance of listed companies in emerging economies. That would be fundamental and adequate reward for our work if in the future, Zambian Directors of our Lusaka Stoke Exchange (LUSE) listed Companies and those unlisted companies continue to be recognised as practitioners of good corporate governance. It will be better than adequate if all affected companies including the SME implemented the Code of Corporate Practices and Conduct their Business in accordance with vision of the Task Force Committee. It sounds farfetched but it is doable.