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By ZimCode Secretariat

Key messages:

The importance of disclosure

Holistic and integrated reportingICT Policy

Information management and disclosure is of vital strategic importance in any company.In a world that is increasingly mobile, interconnected and interdependent, the ability to manage information effectively can help a company to make the right decisions and thereby achieve its objectives.

Corporate Information, when it is shared, supports the decision-making process. It helps to build up the collective intelligence that is critical to the company’s long-term development. All stakeholders need comprehensive, transparent and relevant information to help them make the right decisions and achieve their own targets.

The ZimCode lays out the principles on corporate information management and disclosure. Accordingly companies are requested to disclose certain information to the shareholders, statutory bodies, various stakeholders, and the community at large so that all interested parties are aware of the operations of the company.

Of importance is that relevant information should be made available to all stakeholders and directors without compromising the confidentiality and commercial sensitivity of such material.

It is the duty of the Board to establish systems for the management, disclosure and security of the company’s information. While it is very important for companies to adequately share information, it has to be done in a systematic way that ensures that all stakeholders are satisfied. The approach to information management and disclosure system has to be guided by the five (5) Ws + H formula.

A company needs to ask these six questions before sharing its information. That is, WHAT is being disclosed about the company and its activities, WHY is the disclosure being made, WHO bears the responsibility to disclose, to WHOM is the disclosure made, WHEN should the disclosure be made and HOW is the disclosure made.

It is very important for companies to understand why they have to disclose information. Information disclosure is necessary for the company to remain trustworthy in the eyes of its stakeholders and to attract investment. Disclosure has its strategic advantages. It can deter financial scandals and foster efficiency in the allocation of resources within the company.

Reliable and timely information increases confidence among decision-makers and enables them to make good business decisions directly affecting growth and profitability. Disclosure helps public understanding of a Company’s activities, policies and performance with regard to environmental and ethical standards, as well as its relationship with the communities where the Company operates.

Broadly speaking, a company has to disclose its financial and non-financial information except confidential information. This means a company has to disclose major share ownership and voting rights. Names of shareholders who own more than 5 percent of the issued share capital either individually or collectively as well at the identities of persons who control the company should be disclosed. This is an effort to curb tax evasion by some company owners as well as unearthing corrupt activities that could otherwise not be directly linked to the companies they own.

The company should disclose its board structures, size, and skills mix and attendance frequency of its members. The number of independent non-executive directors and its definition of independence should be disclosed. Each board member should disclose to the board their main assets upon joining the board and continuously updating the board on any changes. The board also has the duty to disclose reasons for resignation or dismissal of any board member, as well as external auditors if that has happened.

The results of the board performance and management evaluation should be made available to stakeholders. This gives shareholders an insight on the capabilities of the board and it goes a long way in attracting investment into the company.

Disclosure on remuneration should include compensation for directors and senior management. These include salaries, benefits, stock options and pensions. Fees and any other reimbursements paid to non-executives should be highlighted. The total cost of remuneration and expenses of each board member among other things should be highlighted as well.

Executive remuneration is usually considered a “company’s secret” but it would help to quell the dissensions by just being transparent to stakeholders on this issue.

The company should disclose to its shareholder and stakeholders the essentials of its dividend policy especially reasons for non-payment of dividends if none were paid.

Every entity should disclose its Company certificate indicating the extent of compliance with best practice codes. It should indicate how corporate governance codes and policies are being implemented and giving adequate reasons for non-compliance. The company should disclose accounting policies as well as how it maintains adequate accounting records and an effective system of internal control.

It is the directors’ responsibility to prepare financial statements that fairly represent the state of affairs of the company. Financial statement are only disclosed when approved by the Board chairperson and signed by the CEO and CFO.

Companies are encouraged to disclose their information at least half yearly and more frequently in the case of material developments affecting the company. Standard information concerning the company such as management and ownership structure, board of directors, audit and annual reports, company objectives should be readily available on the company’s website.

The company’s disclosure system should clearly highlight those with duties to disclose and those who have right to receive information. Ideally, the management discloses information to the Board. Internal and external auditor functionally reports to the Audit Committee and Board chair but administratively to the CEO and management when carrying out the audits.

The Board chair discloses results of board evaluations to board members and its shareholders. Shareholders and other stakeholders should have an opportunity to inspect corporate books, records, minutes of board meetings, stock registers as well as annual reports and financial statements.

Disclosure can be oral or written but must be holistic and integrated. It has to be driven by the triple bottom line concept — 3Ps, planet, people and profit. Selective disclosure is discouraged; an entity should disclose both negative and positive results to its stakeholders so that they can fully understand the company’s performance.

Modern communication channels such as print, electronic, web based and internet communication, in addition to convenience have brought new challenges. Therefore, the CEO has to appoint a person responsible for the management of ICT, which entails managing the company’s information disclosure and security systems. ICT related risks should be mitigated by regularly improving the company’s ICT policies and ensuring that it is being implemented at all levels. ICT risks should not be taken lightly therefore the Board has to oversee the company’s ICT policy to ensure that the company derives benefits from it, yet the risks being fully managed.