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Good corporate governance is achieved through adopting a reporting system structured to provide accuracy, transparency and accountability.

Corporate political disclosure is necessary for the efficient functioning of capital markets and also serves as a risk management tool for shareholders, management and directors.

Disclosure of corporate political spending is necessary not only because shareholders are interested in receiving such information but because the information is also vital for corporate accountability and other oversight mechanisms. Most companies claim that this spending is necessary to protect certain business interests, but there is lack of transparency surrounding these corporate political activities.

Chapter 6 of the National Code on Corporate Governance (“ZimCode”), clause 351, clearly states that it is inappropriate to divert corporate funds, assets or profits to political causes.

Therefore, it is important for each company to have an articulated policy, which provides a means for evaluating benefits and risks of political spending, determining a rationale for the expenditure, measuring whether such spending is consistent and aligned with company’s overall short and long term goals.

Clause 352 of the ZimCode clearly states that company directors, officers and employees must avoid situations that compromise their impartiality. The majority of board members are politically affiliated, yet, however, most of them do not have an intimate knowledge with regards to political spending and the associated risks.

There is therefore, need for board members to attend director tutorial programmes and conferences on political spending and corporate governance. These forums will equip directors with guidance in navigating their decisions and in determining the impact of political spending on stakeholders, the firm’s long-term interests, issues in which the company may have a stake and the needs of the society in which the company operates and this will further help them in conducting effective oversights.

Clause 261 further recommends that disclosure relating to the company and its business in all its varied forms, content, pitch, explicitness of language, relevance, impact, and accessibility to all stakeholders is pivotal to the culture of building confidence, accountability and trust within the company.

Disclosure is necessary for the company to remain trustworthy in the eyes of its stakeholders and to attract investment. It also assists stakeholders to make informed decisions relating to the company’s activities.

There are some corporations who oppose public disclosure arguing it might harm companies’ interests. Companies that use political spending to benefit their bottom lines should not oppose disclosure of that spending.

If the activity is beneficial to corporate value, publicising it should attract investors who agree with the strategy.

Therefore, disclosure of such information is necessary so that shareholders can evaluate whether a corporation’s assets are being utilised in the best interests of that entity.

Shareholders are the owners of the company and they deserve to know where their money is going. Currently, it is too easy for one person in corporate management to secretly spend company money on pet political projects. Disclosure would empower shareholders to engage in oversight and ensure that political expenditures are in the firm’s interest. Transparency will also help to curb corruption and this will further enhance good corporate governance practices.

Corporations should have self-governance in political spending as this helps protect not only the company and its shareholders but also the political process and the broader society on which enduring business success ultimately depends.

Perhaps the upcoming roll out in the provinces would also help clarify how directors can play a more rigorous and informed role when it comes to political spending. Transparency disclosure will also hold directors and executives accountable when they spend corporate funds on politics in a way that departs from shareholders’ interests.

Therefore, mandatory rules are needed to ensure that all public companies provide investors with adequate information about whether and how their money is spent on politics. Public disclosure prevents companies from masking their spending thus allowing the public to know the sources of electoral advertising and their motives.

Without knowing who is behind the efforts to sway them, voters cannot make truly informed decisions and we lose one of the last remaining checks on corruption by special interests.

Disclosure requirements deter actual corruption exposing large contributions and expenditures to the light of publicity and making them harder to hide. Accurate public reporting is the first step to a system that is fair, effective and delivers for everyone. As one author once said, “Sunlight is said to be the best of disinfectants”.

This article is prepared by ZimCode (Joint Secretariat of ZIMLEF, IoDZ & SAZ). For more information on the Zimcode contact: [email protected]

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