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The bill advocates equal numbers of men and women on all boards

By ZimCode Secretariat
The ZimCode is driven by the desire to embrace good corporate governance practices in Zimbabwe. The ZimCode recognises law as the foundational source of corporate governance on which voluntary codes are built.

Hence when the Public Sector Corporate Governance Bill, henceforth the Bill, comes into law it will give effect to most principles of the ZimCode that public entities used to administer at an ‘apply or explain’ basis.

The Bill once passed into law will be a bold step by the government in regulating corporate governance standards considering that the Companies Act, Chapter 24:03 needs to be reviewed as it is silent on corporate governance among other things. Once the Bill becomes law it effectively means that the principles outlined in the ZimCode that public entities used to choose to apply or not, will now be mandatory.

Providing explanations for failure to apply will not suffice because once it becomes law it will be compulsory for all public entities to comply with all its precepts. Just like any other law there will be consequences for not complying and violators will face possible jail terms among other penalties.

Public Sector Corporate Governance Bill, part III (Appointment, tenure and conditions of service of boards of public entities) clause 11 will regulate the appointment of members to boards of public entities. It will regulate board terms, board composition, appointments, skills mix, gender balance, regional representation and so forth.

Some of the corporate scandals that have been experienced in the public entities emanated from the lack of good corporate governance in these areas highlighted above hence the need to put guidelines.

The ZimCode being a voluntary code had provided guidance in these areas but some entities had not applied them since they were not compulsory. However, under Clause 11 of the Bill board members will not be allowed to serve for more than two four-year terms, a total of eight years in all.

This is a step further from the ZimCode’s principle 104 which had room for review for independent non- executive director’s term exceeding nine years. The Bill curbs board member tenure to a maximum of eight years. This is to give room to refresh the board by making new appointments.

Clause 11 of the Bill indicates that persons that will be selected as non-executives will have to be appropriately qualified and experienced before they can be appointed to a board and that the board needs to have an appropriate diversity of skills.

The ZimCode highlights the skills, capacity and competence of candidates in principle 85 (e & iv), 94 and 95. Some boards fail to effectively carry out their duties because of the calibre of the members who will be lacking in experience, skill and expertise to discharge duties of the board. This is why both the Bill and ZimCode saw it necessary to regulate appointments to the board.

The Bill is also progressive in terms of gender equality as it states that, “There will have to be equal numbers of men and women on all boards”. While the ZimCode had propagated for gender equality in board appointments this Bill will make it compulsory for every public entity to have a fifty-fifty representation of men and women on the board. It will give effect to principle 94 of the ZimCode which states that “Every Board should consider whether its size, diversity and demographics make it effective.

Diversity relates to academic qualifications, technical expertise, relevant industry knowledge, experience, nationality, age, race and gender” and the Bill further asserts that Zimbabwe’s regions will also have to be equitably represented on them and this fosters inclusiveness.

According to clause 11 of the Bill no one will be allowed to serve on more than two boards at a time. The ZimCode principles 98 and 99 had put the threshold to not more than six board sittings for members and not chairing more than four boards.

Multiple directorship in spite of its purported benefits has been identified as a source of rot in many entities as directors who serve on multiple boards become so busy that they cannot monitor management adequately, which then leads to high agency costs. Accordingly, directors who serve on multiple boards would be overcommitted, and as a consequence, they tend to shirk their responsibilities.

This could be the reason why the Bill takes a hard stance on this issue and puts the limit to only two board sittings though if a person is on the board of a public entity and also on the board of its subsidiary, that will count as membership of only one board.

Clause 11 of the Bill highlights that vacancies on a board will have to be filled within 90 days. This will go a long way in guiding entities in fulfilling their mandate as it will limit the time span that entities used to spend operating with improperly constituted boards whose resolutions could be reversed thereby hampering progress.

The Public Sector Corporate Governance Bill is a deliberate effort by the government to put in place appropriate legal and regulatory frameworks that are enforceable in order to promote good corporate governance. It gives effect to the ZimCode to the extent that it applies to public entities.

For more information on the ZimCode contact: [email protected]