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ZimCode Secretariat

Chapter 3: Boards of Directors and Directors (Series 4)

Key messages:

Role of Board Chair, CEO and Company Secretary

Executive Remuneration

The previous segment on the Board of Directors and Directors explored the role of the board in unison. It highlighted the Board’s oversight role over the management as well as its role as guardians of the shareholders’ investment. In order for the board to actively perform its duties there is need for explicit clarity of duties for directors and management. The National Code on Corporate Governance (ZimCode) provides guidelines for these roles and responsibilities as well as suitable candidates to undertake these appointments.According to the ZimCode, the full board for public and listed companies comprises of the board chair, the company secretary, the chief executive officer (CEO) and directors. The majority of directors in the board should be non-executives so as to get external views from executives who are not “emotionally attached” to the company.

The board’s composition and size is usually determined by the size of the company and nature of business being undertaken. However, ZimCode encourage gender balance in the board so as to cater for different viewpoints.

The chairperson of the company is the leader of the board of directors. It is encouraged for the board chair to be a non-executive director so as to promote independent judgement. The ZimCode outlines that it is the chairperson’s responsibility to ensure that the board operates efficiently and effectively by getting the best out of all its members.

The chairperson should promote regular attendance and full involvement in discussions. The board chair decides the scope of each meeting and is responsible for time management of board meetings by ensuring that all matters are discussed fully.

The board chair encourages constructive debate but also effectively manages conflicts of interests that may arise in the board. The chair sets the ethical tone of the board by encouraging professional interaction and teamwork among the board members.

The board chair acts as a liaison between the board and management. He/she provides independent advice and counsel to the CEO and ensures that good relations are maintained with the company’s shareholders and strategic stakeholders. As recommended by the ZimCode, the board chair should not be a member of audit committee and should not chair risk or remuneration committees.

This is done to safeguard the independence of these committees and to ensure that the chair does not undertake conflicted roles. The board as a whole is subject to an annual evaluation by an external consultant so as to ensure that it is adequately fulfilling its mandate.

In the same manner, the board chair is evaluated by the board members to assess his/her independence as well as their ability in executing the board chair’s roles and responsibilities.

These assessments are shared with the shareholders and appointing authorities so that they can understand how the company is being run and make changes if necessary. The failure of a company to achieve its goals can be blamed on the whole board, and in particular the chairperson for failing to provide strategic guidance to the management.

The CEO is the leader of the executive team and is responsible for the day to day management of the company. This position is nearly always occupied by an executive director. The CEO attends board meetings in his/her capacity as a director.

According to the ZimCode, the CEO and other senior executives are appointed by the board and are accountable to it. Their appointment is based on merit, skill, experience and other specifics required by the company and the ZimCode also encourages gender sensitivity when board undertakes these appointments.

It is the responsibility of the CEO to ensure that the company’s business is properly managed with the proper frameworks, company strategies, budgets as approved by the board. The CEO ensures that a corporate culture that promotes ethical standards, integrity, and sustainability is promoted. The CEO established a proper organisational structure appropriate for the achievement of company strategies.

He/she ensures that a safe working environment is created and all mandates are effectively implemented within the agreed time-frames. The CEO chairs management meetings, monitors and reports performance to the board.

However, the board has the mandate to review the performance of the CEO and taking action if they believe that performance is not up to their expectations.

The company secretary plays a pivotal role in the company. This office involves working with the board, CEO and management to ensure that company goals are achieved within the proper guidelines of good corporate governance.

It is the board’s mandate to appoint a company secretary based on their qualifications and experience so as to fully utilize their skills beyond minute taking.

The company secretary is also referred to as the chief compliance officer in some circles due to the nature of the office which ensures that the company complies with the law and non-binding codes.

According to the ZimCode, the company secretary plays various roles including being an administrator, advisor, a conduit as well as providing counsel.

This is because board and senior management meeting are organized through this office, ensures the flow of information to the board, management and stakeholders and raises any matters that may warrant attention of the board.

The company secretary provides sound advice on various issues as well as technical advice to the board and management.

The company secretary sits on various committees to properly record minutes and circulates them. He/she is responsible for the compilation and circulation of board packs and ensures that resolutions of the board are fully implemented.

Since it is the mandate of the board to select, monitor, evaluate and compensate senior management it follows that the board has to come up with an acceptable remuneration plan for them.

The ZimCode suggests that both executive and non-executive directors should not be involved in determining their remuneration. Committees of the board should not determine the non-executive directors’ compensation because they are both conflicted.

It strongly recommends that executives should not to be given obscene packages as this can compromise on the value and interests of the company. Remuneration has to be performance based and sustainable to the company.

Therefore, an independent Remuneration Committee should be established to assist the board in setting and administering remuneration policies and specifics concerning such committees are stipulated.

However, directors and CEOs’ remuneration package has to be fully disclosed in order to satisfy the principles of disclosure and transparency as outlined in the ZimCode.

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