DEPARTMENT OF ACCOUNTING AND I&S

MUNHUMUTAPA SCHOOL OF
COMMERCE

NAME REG NUMBER

BALOYI HIKESILE M170276

DZIRUTSVA NEOLINE C M174095

FUMBI CALISTO M178798

KUTSVARA LENIENCE M167345

MAFUNDU CHARMAINE T M179612

MAKUVA WILLIE P M179622

MASUKU SPENCER M M178498

MUTENGERA FAITH N M171653

SIBANDA WILLIAM T M179565

MODULE CORPORATE COVERNACE

COURSE CODE AC410

PROGRAMME BCOMM ACCOUNTING (CON)

QUESTIONA

Governance issues that have been raised in the extract together with solutions to the
Governance challenges.

(O'Donovan, 2006) Defines corporate governance as “an internal system encompassing

policies, processes and people, which serves the need of shareholders and other stakeholders
by directing and controlling management activities, with good business savvy, objectivity,
accountability and integrity. Sound corporate governance is reliant on external market place
commitment and legislation, plus a healthy board culture which safeguards policies and
processes.” The aim of corporate governance is to make sure that firms that are not run by
their shareholders are well organised and run to the best interest of the shareholders and other
stakeholders.

In relation to the extract NSSA management did not have clearly defined roles and
responsibilities because the Management did not adhere to the advice that they were given by
the Authority’s Risk and Management Department that the risk of default was high and
deemed to be financially weak. The management did not practise good corporate governance
practises because, instead of reducing the risk of investment and engage in effective risk
engagement they actually risked NSSA’s investments by investing at Metbank despite the
advice they got from risk and management’s department and that the board had not approved
the investment. The roles of the principal officers were not clearly defined therefore managed
to instruct Metbank to utilise treasury bills without the approval of the board. In order for
NSSA to practise good corporate governance they should clearly separate the roles and
responsibilities of the board chairs and CEO’s so that the officers should not make decisions
which are not in their scope of authority.

NSSA appointed an investment expert who was not ordinarily resident in Zimbabwe and this
was contrary to the requirements of the NSSA Act [Chapter 17:04] and there was no
clearance or waver from relevant authorities and this meant that this was against the
authority’s policies and it prejudiced the authority an excess of $20000 on expert fees and
expenses, this shows that the principals did not act in the best interest of the authority and that
their decision was biased. This shows that they did not make this decision in accordance to
the good corporate governance practise of integrity and ethical dealing. The principals made
this decision without the best interest of the authority at hand and showing that there was
maybe conflict of interest in the officers and this can give room to nepotism, corruption and
insider trading thus showing us that the controls and procedures of the authority are weak and
they need to be improved starting from the top of the hierarchy going down the chain of
command.

We also realize that the board chairman is also the chairperson of investment and
procurement subcommittee showing that there is conflict of interest and this can lead to abuse
of office since s/he is able to influence all the decisions in both the board and in the
subcommittee and this might open up to corruption and we might see that he is awarding
tenders to close friends and family since he can influence both the board and the procurement
subcommittee. The best corporate governance practise is the separation of duties in an
organisation in order to avoid conflict of interest in the same person for the long term benefit
of the organisation and this improves integrity of the company because it helps to improve
the accountability question in each of the principals.

In addition there is the lack of accountability. This was highlighted by investments made by
NSSA with MetBank despite the fact that the Authority’s Risk and Management Department
had recommended against this investment. This went against the core principles of corporate
governance of accountability where the board should establish formal and transparent
arrangements for applying the corporate reporting, risk management and internal control
principles. To solve this problem the organization should prioritize risk management. This
will enable the board to establish an effective system for risk oversight and management
which will led to better decision making and accurate cost-benefits or risk reward decisions.

More so, another issue of governance raised in the case study is the abuse of powers and this
is contrary to the principle of responsibility. This is shown by the appointment of the
investment expert to the investment committee which is contrary with the NSSA Act
[Chapter 17:04] section 13 (4) (b) which provides that the Board may appoint as members of
any committee, on such terms and conditions as the Board may fix, persons who are not
members and also the audit also established that the Board Chairman was also the
Chairperson of the Investment and Procurement subcommittee. Every company should be
headed by an effective board which is collectively responsible for the long- term success of
the company. There should be a clear division between the running of the board and the
executive responsibility for the running of the company’s business. No one individual should
have unfettered powers of decision. This means that the roles of CEO and Chairman should
not be performed by one person as that concentrates too much power in that person. The
chairman is responsible for leadership of the board. So suggestion to the organization would
be to appoint Non-executive directors (NEDs) to the board and they should constructively
challenge and help develop proposals on strategy. NEDs sit in a board meeting and have full
voting rights but do not have day-to day executive or managerial responsibility. Their
function is to monitor advice and warn the executive directors.

The last issue highlighted in the case study is the lack of transparency. This was highlighted
in the recruitment of ICT employees which required potential employees to apply before they
can be considered. In the case study 3 individuals were drafted in the final 4 which neither
applied for the job nor showed interest there in for wanting the job. This went against the core
principles of corporate governance of transparency. To solve this problem the organization
should focus on the human resource department which is the responsible party when it comes
to recruitment. The organization should assess if their human resource manager possess all
skills needed for the profession especially the HRM knowledge and expertise which is an
essential HR skill. Previous work experience or an educational background in Human
Resource Management or Industrial- and Organizational Psychology are very helpful. HRM
knowledge helps in doing most of the other skills and competencies. It helps to understand
recruitment and selection which is an important operation in HRM, designed to maximize
employee strength in order to meet the employer's strategic goals and objectives. It is a
process of sourcing, screening, shortlisting and selecting the right candidates for the required
vacant positions.
Bibliography
Mohr, A. (2019, 7 9). 3 Reasons to Separate CEO and Chairman Positions. Retrieved from
Investopedia: https://www.investopedia.com/financial-edge/0912/3-reasons-to-
separate-ceo-and-chairman-positions.aspx

O'Donovan, G. (2006). Then Corporate Culture Handbook: How to Plan, Implement and
Measure a Successful Culture Change Programme. Liffey Press.

OECD. (2015). Corporate Governance and Business Integrity. In OECD, Corporate

Governance and Business Integrity: A Stocktaking of Corporate Practises. 0ECD.
QUESTION B

There has been an explosion of high profile scandals in Zimbabwe’s state owned
enterprises and departments. Examine the possible causes of these scandals

Political interference

There is an unquestionable linkage between Zimbabwe’s governance of State owned

enterprises and politics. Zvavahera & Ndoda (2014) is agreeable with this view as he posits
that, this is a result mainly of the state's participation in the assigning of SEPs boards of
directors often riddled with politics of patronage and cronyism rather than merit. As such, it
is an undeniable fact that parastatal organisations usually have to satisfy a complex range of
political, financial and social objectives, which subject them to external constraints and
influences (ECSAFA, 2014). Inspite of the interference through the appointment of Board of
Directors, politicians also interfere in running of these State owned parastatals.

To note is the Willowgate scandal. Numerous predatory activities by some cabinet ministers
in the distribution of motor vehicles at one of the state owned vehicle assembling plants.
Implicated ministers included Ndlovu, Political Affairs Minister Maurice Nyagumbo,
Defence Minister Enos Nkala and Minister of State for Political Affairs, Frederick Shava had
been given early access to buy foreign cars at the Willowvale assembly plant in (Perlez,
1989)  In some cases, the cars were bought wholesale and resold at a 200% profit (Maier,
1989). the prominent GMB scandal of 2000 in which the then Minister of Agriculture and the
permanent secretary defrauded the ministry of million dollars and were arrested, jailed and
later released, and the fast track land reform multiple farm ownership scams, are cases in
point (Ncube & Maunganidze, 2014).

(Chugudu, 2020) Is of the view that here should be independence by Boards from political
interference as a matter of fact as it compromises and complicates the corporate governance
structure and service delivery. The view is supported the government through responsible
(Ncube & Maunganidze, 2014)ministries has a responsibility to select a board of directors
which is vibrant, developmental and upright. The question is, how effective will that person
be? Is it a matter of us as a nation failing to identify other people who can also lead these
parastatals and boards than appointing and recycling a few even if they have failed before?
With this being the case, one safely argue and conclude that political interference is one of
the factor that contributes to bad corporate governance in Zimbabwe.

Unethical conduct by Top Management

The King three report on corporate governance states that the ethics of corporate governance
requires all deliberations, decisions and actions of the board and executive management to be
based on the following four ethical values underpinning good corporate governance. These
four values are responsibility, fairness accountability and transparency (Institute of Directors
in South Africa, 2009).there have cases and scandals of corruption in in Zimbabwe which is
against the values mentioned above. (ECSAFA, 2014) Postulates that corruption, abuse of
power or public office for private gain, and other types of financial irregularity are widely
recognised as a serious problem in parastatal organisations and the wider public sector.

Cases of corruption and abuse of power have been rampant in Zimbabwe. Most notably is the
Premier Service Medical Aid Society (PSMAS) case where the company was paying the
CEO $500,000 in salary and allowances against the background of PSMAS failing to meet its
obligations to contributors and was debt ridden? Top management for (PSMAS) were
gobbling US$1 million in basic monthly salaries. The PSMAS annual wage bill rose from
US$15 547 171 in 2011 to US$33 413 373 in 2012, almost half of which was paid to the top
14 managers. The most painful fact is that all these practices were happening at a time when
the society was failing to pay doctors and other debtors. This is against the values of Ethics
which require fairness to be applies by top managers. The above case however proves
otherwise as managers elicit benefits for their own personal aggrandisements.

The other case worth mention is the ZBC scandal. It was revealed through public media that
the ZBC bosses were pocketing hefty salaries. The CEO was getting $44 500 per month
amid revelations that the ordinary ZBC employees had spent 7 months without receiving their
salaries (Ncube & Maunganidze, 2014). Although ZBC never made any money sustain the
bonus payments for the CEO. Muchechetere bonus payments came at a time the cashless
ZBC was wallowing in a US$ 40 million debt and was failing to pay workers (Rusvingo,
2014). (Zhou, 2012) Denotes that while most incumbent public enterprise managers in
Zimbabwe may have sound qualifications; they basically lack the relevant skills require to
uphold integrity and ethics. making reference the ZBC case Ncube & Maunganidze (2014)
laments that Taking anything above US$20 000 in Zimbabwe under current economic
conditions borders on issues of ethics more than technical especially considering that
employees went more than half a unpaid. He further laments that getting $230 000 as in the
case of PSMAS is not just being callous but that totally devilish considering that the general
public that struggle to pay the medical contribution, yet denied help in pharmacies and
hospitals since the society is debt ridden .This clear violation of the ethical values mentioned
and Top managers at Zimbabwean parastatals has exhibited such behaviour.

Board of Directors

1. Appointment.

The appointment of SOEs board of directors is the responsibility of the Minister in

charge with public enterprises ministry. (Misheck Mutize, 2020). The problem of a political
minister appointing a board is that, political and personal interests in identifying the board
members, rather than the professional attributes of the would-be board members can
influence the minister’s choice. Evidence on the ground was that, in some boards, members
are selected on the basis of tribe, region of origin, political factional lines and friendship
rather than competence and qualification (Muzapu, Havadi, Mandizvidza, & Xiongyi, 2016).
Ncube & Maunganidze (2014) have the same conclusion as they observed that NRZ and ZBC
are typical examples cited. Appointments seem to be based on favouritism and not
competence

A case worth mention is the Harare City council case which is in dire need of proper road
maintenance with the sewer system extremely bad. Garbage and refuse collection is currently
position a health threat. In the issue of service delivery, one must take note of the stakeholder
theory which states that that a company’s managers should take decisions that take into
consideration the interests of all the stakeholders. It focuses more on accountability, corporate
responsibility and power over society, hence concerned with the relationships between the
enterprise, the individual and the state (Chugudu, 2020). Poor service delivery therefore
proves beyond reasonable doubt the incompetency of directors who are failing to provide for
all stakeholders.

Another case to note is the recent ZESA case. Despite stern warnings on re-appointing former
board members to the ZESA board and creating an all-powerful executive chairpersonship
post, government ignored those warnings and violated the Public Entities Corporate
Governance Act enacted in May 2018 (Bhoroma, 2020). The Act in Section 11 (2) of the act
states that no person shall be re-appointed to a board if he or she has already served on that
board for one or more periods, whether consecutive or not, amounting in the aggregate to
eight years. The national code of corporate governance of Zimbabwe contained in the same
act states explicitly on three separate points that the chairperson of the board of directors
should not double up as the state entity's chief executive officer in order to ensure separation
of powers.

The allegations on the Executive chairman which include self-allocation of vehicles for
personal use, Authorising an expenditure of ZWL$10 million for Christmas parties in
Hwange and Kariba in 2019 without the approval of the board, unilaterally installing solar
equipment at his residence in Borrowdale using ZESA funds, to mention but a few
(Department of Presidential Communication, 2020) with this being the case, one can opine
that vesting all powers to one person is clear sign a rotten corporate governance system which
explains the allegations on the ZESA boss.

1. Remuneration.
There are problems in the remuneration of directors mainly due to lack of accountability and
lack of transparency which has decayed corporate governance in Zimbabwe. Remuneration of
directors must be disclosed so as to ensure Transparency which is one of the concepts of good
corporate governance. This however has not been the case with Harare City Council directors
who were also giving themselves hefty salaries against a backdrop of poor service delivery.
The table below shows the remuneration of Directors and managers while employees went
for 7 months without pay.

Harare City Council Director Remuneration

Position Salary
Director Waste Management $34 299.00
Director Capital $36 999.00
Director Housing $36 999.00
Director Health Services $33 410.00
Town Clerk $37 642.00
City Treasurer $36 999.00
 Chamber Secretary $34 299.00
Director Roads and Public Works $36 999.00
Director Water $36 999.00
Source. Herald 23 January 2014

This was as a result of lack of transparency in remuneration. A remuneration committee must

be appointed. The function of this committee should be to make recommendations to the
board in respect of remuneration packages for executive directors. This can be discussed and
negotiate in the presence of all committee members such that the board will provide full
disclosure of director remuneration on an individual basis in their annual reports. This
publication of director remuneration will help show transparency and all stakeholders will
know these packages and satisfy whether they are reasonable or practical. (Ncube &
Maunganidze, 2014)

Week enforcement and consequence regimes

Although corporate governance requirements through the various laws, regulations and codes
and standards are well documented and form a good base for good corporate governance
practices, weak compliance and ineffective enforcement regimes prevail .in some cases, there
is no enforcement at all (State Enterprises Restructuring Agency (SERA), 2015). This is in
addition to the general lack of deterrent consequences in practice for transgressors, thereby
leading to repeated non-compliance with the existing corporate governance requirements,
Ncube & Maunganidze, (2014) observes that History is replete with numerous cases that
range from systemic corruption to outright looting which have been matched with either
selective application of the law or willingfull blindness on the part of the State. This is
Transgressors have only been arrested and later released but nothing has been done to recover
the looted funds. Basing on this view one can safely argue that there is week enforcement
when it comes to corporate governance hence there is need for the Law to take a strong hand.

Weak compliance
Inspite of weak enforcement by the state, there is also little compliance when to comes to
corporate governance framework, codes, Laws and standards In as much as compliance is
concerned, A very good example is in the Case of ZESA holdings mentioned above where Dr
S. Gata was appointed by The President of the Republic of Zimbabwe through the Minister of
Energy’s office to the board Chairperson and the CEO At the same also for the second.
Although the Act Public Entities Corporate Governance Act states that one cannot be a CEO
and the Chairperson of the board, it has been ignored and violated. Chimbari (2017) opines
that, the unwillingness by corporate executives in SOEs to adhere to the Corporate
Governance Framework for State Enterprises and Parastatals in Zimbabwe is clear evidence
that self-regulation will not work for public sector corporate governance in Zimbabwe
anytime in the foreseeable future. He father postulates. Cases of non-disclosure are also
rampant yet the frameworks, acts and code for corporate governance requires disclosure so as
to ensure transparency and accountability. Chimbari (2017) on this argument concludes that
the solution to Zimbabwe’s public sector reforms for good corporate governance does not lie
in a code that would operate voluntarily on a “explain or comply” basis, but perhaps in a
legislative solution rules-based and legally binding. With this being Case, it is clear that it is
because of weak compliance to corporate governance Laws by top management that we have
bad corporate governance practices in Zimbabwe.

Nepotism policy
Nepotism is a common accusation in Zimbabwean parastatals where a relative of a powerful
political figure rises to power, without the necessary qualifications, which are necessary for
positions. Political nepotism affects the granting of special favours by political collaborators
in public organizations. The appointing of political persons on the boards of public
organizations is the norm is SOE's. Now, the phenomenon of political nepotism has taken
deep roots in SOEs and is nothing less harmful than family nepotism. This phenomenon, but
in the political mentality, is also installed to the general public. Demi, A., (2014), estimates
that the politicization of public organizations had started since the declaration of
independence.

Favouring relatives on the basis of family ties, which more precisely means nepotism, in one
way or another in most cases allows the hiring of relatives without merit and adequate
qualification with the later consequences for the institution and the society itself. According
to the Kosovo Democratic Institute (2014), central public organizations have been the most
suitable for rehabilitation and accommodation of party militants. Political and family
influences contributed to the employment of approaches in different positions at public and
state institutions, employment included all the important sectors of the country; Employment
in public administration, employment in management staff at the ministry, the employment of
relatives in departments, important sectors of the country, employment in the security bodies,
employment agencies, employment in public corporations, employment in public media
(Gjinovci, 2016). According to the organization Arise (2007), Kosovo is going politicization
total administration, which is in complete contradiction with Zimbabwean criteria for the
reform and construction of civil administration and the continuation thereof would deepen the
economic crisis in Zimbabwe and will undermine stability its economic, political and social.
Political parties in power to frame policy kin and client were based phenomenon all those
political forces that have been in power over the years.

Inappropriate employment has (had) a negative impact for the country and beyond.
Therefore, no established preliminary criteria for employment, but employment by group
influences, tribal, or clan affect the arrival of people in positions without merit, the negative
impact; the country's economy for integration, with negative impact for justice, and the
negative impact on society itself. With which criteria would determine the terms and
conditions for the establishment of labour relations, which saw the completion of which
criteria, should not be made any admissions, meeting the criteria of employment or
promotion, there have been almost no once properly, this had repercussions on the
advancement of the organization and development of the public sector. So, on the "criteria"
nepotism and professionalism it has not been possible to establish the proper authorities and
state portfolios and professional administration. Because only the; Powerful administration,
and Professional experience led me to the right people can build successfully on the
Economic development field and in every field of life.

2 Family Nepotism
Perhaps, in most countries of Africa we have not found that state bodies and government
hiring and designation of officials in leadership positions of political and economic to do
without public tenders, through which the real appreciation of staff experience and
professional skills. By eliminating the effects by family ties, as has happened and is still
happening in Zimbabwe Nepotism family (clan), more time is being launched on the
appointment to the highest state and to lower levels at the municipal administrations. To take
only the example of the appointment of senior public officials / public, will understand that
almost no one is labelled based on fulfilment of the conditions set by the law, namely the
contest, to be appointed or elected to these positions, the minimum work experience. In
Zimbabwe errors in employment began with the establishment of general administration and
here lies the fatal error that made Zimbabwe together after government. Once, instead
brought temporary acts of normative and legal conditions for employment, ranging from
office clerk more simply to the post of president of the country, making professional selection
of applicants for admission to work, what happened today is continuing, namely employment
and appointment of people, not by legal and professional norms, but on the basis of family
nepotism. But this has happened in several public representations, diplomatic majority. For,
Abdala, M. (et. all, 1994), whether employees are in competition with any individual eligible
to advance their probability is very low. Therefore, taking into account legal violations that
have been made in terms of hiring people without merit and without meeting the criteria
competitive, we should not wonder why today these countries dominates economically
backward, with a population of poor in the extreme, youth unemployed.

Kayabaşı, Y. (2005) believes that the phenomenon of preferential treatment is also considered
a "form of corruption" that appears in the decision-making process, it is at once one of the
main problems of public bureaucracy Nepotism within organizations, where the employee is
employed because of their family ties. It is generally seen as unethical, as by employers and
employees. According to the Institute for Development Policy (2014), the appointment of
board policy, has led to these people, to make room for the other militants of political parties
risking their complete capture of partisan elements.

However, for the most part, nepotism can be seen simply in terms of giving people priority in
exchange for favours the later, allowing them to get out within an organization. Not treating
them same way as everyone else. Boadi, G.E. (2000), believes that while developed countries
have adopted laws which are considered as preventive measures against such preferences,
while in developing countries such practices continue to be part of everyday life. Nepotism in
his narrow sense of the word, refers to relatives, her interpretation of these days can tend to
involve friends or simply favouritism in general. Public opinion survey by the institute for
criminology and criminology show results on the ground. To the question "Were you or
someone of your family, victim of nepotism or mobbing”. The results are somewhat related.
53% of respondents deny have been victims of these phenomena, whereas 42% of them say
that they or someone in their family had been a victim of nepotism or mobbing in different
time periods.
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