Definition continued

3.Corporate governance involves the determination of minimum

obligations of an organisation toward various stakeholders (Jerry
et al,1997).
4. Corporate governance means leadership sustainability and
corporate citizenship(King 111,2009).
5.Corporate governance involves a set of relationships between
company management ,its board , its shareholders and
stakeholders (OECD ,1992).
6. Corporate governance is concerned about ethical principles,
values, practices, that facilitate ,holding the balance between
economic and social goals, between an individual and communal
goals. The aim is to align as nearly as possible the interests of
the individual, and the cooperation of society within the
framework of sound corporate governance (African Union).

Objectives of corporate
governance
i) That a properly structured Board
capable of taking independent and
objective
decisions is in place at the helm of
affairs;

Objectives (cont).
ii) That the Board is balanced as regards the
representation of adequate number of
non-executive and independent directors
who will take care of the interests and
well being of all the stakeholders;

objectives
iii) That the Board adopts transparent procedures
and practices and arrives at
decisions on the strength of adequate information.
(iv) That the Board has an effective machinery to
subserve the concerns of
stakeholders;

objectives
(v) That the Board keeps the
shareholders informed of
relevant developments
impacting the company;

objectives
(vii) That the Board remains in effective control of the
affairs of the company at all
times.
The overall endeavour of the Board should be to take
the organisation forward, to
maximise long-term value and shareholders wealth.

Key issues in corporate

governance
1.Financial reporting and auditing.
2.Directors remuneration.
3.Decision making powers.

Key issues (cont).

4.Risk taking.
5.Communication between
the directors and
shareholders.

APPROACHES
THE SHAREHOLDER VALUE APPROACH
It is a management philosophy that
regards maximisation of shareholders
equity as its highest objective. It
attempts to increase this value by
following policies that :
1. enhance the firms earnings,
2. increase the market value of its
shares, and
3. increase the amount or frequency of
the dividend paid .

Stakeholder value approach

It is a management philosophy
that regards maximisation of the
interests of all stakeholders and
the community as its highest
objective. It follows policies that:
1.minimise cost and waste while improving
the quality of its products.
2.enhance the skills and satisfaction of its
employees, and
3.contribute to the development of the
community from which it draws its
resources and sustenance.

The enlightened shareholder

approach
This is a philosophy based on the premises
that the directors of a company must
pursue the interests of the shareholders in
an enlightened and inclusive way. The
directors should look to the long term and
not just to the short term. Managers
should have regard for the interests of
other stakeholders in the company.
Managers should be aware of the need to
create and maintain product relationships
with a range of stakeholders.

Stakeholders in corporate
governance
1. Stakeholder Definition: A
stakeholder is anybody who can
affect or is affected by an
organisation, strategy or project.
They can be internal or external.
2.Stakeholder may refer to:
Stakeholder (corporate), an
accountant, group, organization,
member or system who affects
or can be affected by an

Stakeholders (cont).
Internal stakeholders: Individuals
who reside inside the company as
board members, executives,
managers, employees, and trade
unions .
External stakeholders include
shareholders or stockholders as well
as governmental bodies,
communities, financiers.

INTERNAL STAKEHOLDERS
stakeholder

Main role

Claims and
interests

Directors

Responsible for the

actions of the
corporation Directors
control company in
best interest of
stakeholders.

Pay
Performance linked
bonuses
Share options
Status
Reputation
Power

Company secretary

Ensure compliance
with company
legislation and
regulation and keep
board members
informed of their legal
responsibilities .
Advise board on
corporate governance

Pay
Performance linked
bonuses
Job stability
Career progression
Status
Working conditions

Stakeholders (cont).
stakeholder

Main role

Claims and
interests

Sub-board
management

Run business
operations
Implement board
policies

Pay
Performance linked
bonuses
Job stability
Career progression
Status
Working conditions

Employees

Carry out orders of

management

Pay
Performance linked
bonuses
Job stability
Career progression
Status
Working conditions

Employee
representatives e.g.

Protect employ
interests ,--.

Power
Status

External stakeholders
stakeholder

Main role

Claims and
interests

Auditors

Independent
review of
company's
reported
financial
position

Fees
Reputation
Quality of
relationship
Compliance
with audit
requirements

Regulators

Implementation
and monitoring
of regulation

Compliance
with regulations
Effectiveness of
regulations

Government

Set and
maintain laws
with which all
companies
must comply

Compliance
with laws
Payment of
taxes
Level of

External stakeholders
(cont).
stakeholder

Main role

Interests and
claims

Stock Exchange

Set and maintain

rules and regulations
for companies listed
on the exchange

Compliance with rules

and regulations
Fees

Small investors

None limited power

Maximisation of
shareholder value

Boards ????
EXAMPLES

PRIVATE
SECTOR

PUBLIC SECOR NGO-SECTOR

Profit making

Non commercial Non-profit

Industries,
firms, IBM,
CocaCola,
Barclays Bank,
Delta
Corporation

Parastatals,
ZESA,
GMB,NSSA,ZBC
,PSIMAS,ZIMRA,
All universities.

Care , World
Vision ,Msasa
Project, Connect

Structure and
size

Boards
appointed by
shareholders.

Boards
appointed by
government
ministers

Boards
appointed by
members at a
meeting.

Composed of
external and
internal boards
of directors.

Composed of
internal and
external board
members.

Composed of
trustees or
governors

Boards ???
Roles and
duties

Total control
and authority
over
organisations
mission and
purpose.
Overseeing
the
management
of resources.

Controls the
organisations
activities.
Determine
organisations
mission ,VISION,
manage
resources,
Supervise CEO.

Duty of loyalty,
duty of care,
attend
meetings, read
board papers.

Accountability

To the
shareholders
and other
stakeholders
such as,
customers,
creditors,bank

To the minister
and the public at
large, tax payers,
civic, interest
groups .

To stakeholders

BOARDS ???
Sources of
funding

Shareholders,
both individual
and institutional
,other
investors

Government
ministers
through
Parliamentary
votes and tax
payers money.

Donor agencies,
fundraising
from well
wishers .

History of corporate governance in

UK
In the UK, corporate governance has developed over
a number of codes that have been enforced by the
stock exchange.
The Cadbury Report (Financial Aspects of
Corporate Governance)
Issued in 1992 - contained a Code of Best Practice
for various aspects of corporate governance.
The Greenbury Report (Study Group on
Directors Remuneration)
Issued in 1995 - contained a Code of Best Practice
for determining and accounting for directors
remuneration.

HISTORY OF CORPORATE
GOVERNANCE (cont).
The Hampel Report
Issued in 1998 - to counter the rise in 'checklist'
style reporting, report contained a list of principles
of good corporate governance to be applied.
The Combined Code on Corporate Governance
(Combined Code)
Final version issued in 1998 (revised and reissued
in 2003) - incorporates all recommendations of the
Cadbury, Greenbury and Hampel Report and has
been incorporated into the Listing Rules that listed
companies have to follow.
Other developments:

History (cont).
Other developments:
The Higgs Report: Review of the role and
effectiveness of non-executive directors
(Higgs Report) and Audit Committees:
Combined Code Guidance (Smith Report)
Published in 2003 - contained best practice
guidance relating to non-executive directors
and audit committees respectively. While
companies may find it helpful, this guidance
has no formal status and companies are not
required to follow it when applying the
Combined Code. However, some elements
of these two reports were included in the
revised version of the Combined Code,

History( cont).
Internal Control : Guidance for
Directors on the Combined Code
(Turnbull Report)
Issued in 2003 - provides guidance to
companies on how to apply the
section of the Combined Code
dealing with internal control

Challenges to weak corporate

governance reforms in Zimbabwe:
Challenges to weak corporate
governance reforms in Zimbabwe:
Weak, inefficient and inadequate legal and
regulatory framework for enforcing rules
and laws politicians do not obey the laws.
They are untouchables, and above the law.
Institutionalised corruption.
Politicians shielding law-breakers.
A culture of political patronage.

Challenges to weak corporate

governance reforms in Zimbabwe:
Widespread poverty, high unemployment
does not create an environment in which
business in conducted transparently. Issues of
accountability and ethics are easy to ignore.
Professionalism is not encouraged. Those who
blow the whistle are victimised and not
protected.
Collapse of moral values. Zimbabwe is a
religious society. The pastors have turned
religious institutions into havens of corruption

Challenges to weak corporate

governance reforms in Zimbabwe:
Education system failing to inculcate
moral values in the youth. The
education system has its own
challenges hence it cannot teach
moral values of honesty, integrity,
and rectitude in young people. Infact,
students lean the concept of
corruption in schools.

Challenges to weak corporate

governance reforms in Zimbabwe
Promotion of gender issues. The doctrine of
gender, equality between men and women
has created unnecessary competition
between men and women. The competition
has resulted in the breakdown of the moral
fabric in society. Women are no longer
interested in teaching their children the
virtues of being honesty, truthful, kind,
reliable and considerate. Instead, they see
men as their enemies.

Company lawyer-duties
Research
Identify and discuss any 5 duties
of the company lawyer in
corporate governance.
END