Multiple directorships under scrutiny

HARARE - Zimbabwe is crafting a national code on corporate governance which seeks among other things to stop multiple directorships on corporates which experts say lead to conflict of interest.

Currently, most companies have what industry experts claim are skewed structures which allow board members to sit on more that one company — leading to reduced effectiveness and independence.

The new policy specifically recommends that one should not occupy more than five directorships or chair more than one board of a public company.

Institute of Directors Zimbabwe (IoDZ) chairperson Johannes Mudzengerere, who is backing the code, noted that companies tend to look for few well-known persons to seat on their boards.

“Having the same people on various boards will certainly limit the effectiveness of boards as you are bound to have restricted skills or expertise pool, increased conflict of interest and reduced independent judgement,” he said.

Mudzengerere said boards require diversity in experiences, skills, expertise, age, gender and nationalities because of globalisation.

He pointed out that corporates should look for new skills to broaden their ability.

“If companies or boards look beyond the people who are generally known, they will discover a lot of talent and expertise that can contribute to the effective performance of boards.” Zimbabwe Leadership Forum (Zimlef) managing consultant Tsitsi Mutasa said multiple directorships are a problem not only in Zimbabwe, but the world over.

In Zimbabwe, she said, the trend points to inadequate or ineffective board recruitment processes and systems coupled with ineffective board performance evaluation practices.

“Factors underlying this trend are numerous but they all have their roots in weak corporate governance structures and processes and lack of director integrity which leads to individuals accepting numerous board appointments at the expense of the said organisations,” she said.

“Those who favour the notion cite talent availability but in reality the problem is not lack of talent.”
The Zimlef administrator said the board recruitment processes observed to date, leave a lot to be desired as are the few voluntary non-focused board performance evaluations.

Mutasa said the entire process of nominating leading to selection is flawed as a handful of names tend to be in circulation and when the not-so-well-recognised names are proposed they are not considered.

These are instantly shot down as a result, the same people are found on numerous boards, observed Mutasa.

“Sadly for Zimbabwe this is worsened by the fact that no one takes into account previous performance,” added Mutasa.

“Only recently a well-known board member moved from one failing institution to chair another failing institution. This in my view defies logic and begs the question, what  are we expecting the individual to accomplish within the new institution?”

Mutasa said the recycling of ideas as a result of the appointments impacts company performance on a number of levels mainly through growing conflicts of interest which can also be viewed from a number of angles as well as diluted or compromised director commitment in terms of time and effort.

Best practice, she added, recommends that one dedicates about 25 percent of their time to a board.

“So if one is sitting on multiple boards then we question the amount and the quality of time and effort that the individual is dedicating to those organisations.”

Securities Commission of Zimbabwe chief executive Tafadzwa Chinamo could not be reached for comment, particularly on listed company boards, at the time of going to print.

Among those who sit on different boards is Harare mayor Muchadeyi Masunda who did not resign from his corporate appointments when he became mayor to avoid possible conflict of interest.

Masunda chairs Old Mutual, John Sisk and Son board, Siemens, Atlas Copco, Harare Inner-city Partnership and Coates Bros.

He is a director for Bindura Nickel Corporation Meikles, deputy chairperson Zimbabwe Platinum Mines, HIB Holdings and Zimbabwe Alloys among other companies.

Prominent lawyer Sternford Moyo is co-chairperson of the Human Rights Institute of the International Bar Association, chairperson of Stanbic Bank Zimbabwe Limited, chairperson of Schweppes Zimbabwe Limited, chairperson of the Zimbabwe Revenue Authority and director of several companies including a local media company and Portland Holdings Limited.

Masunda and Moyo cannot be faulted in the absence of a policy which reduces multiple directorships.

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