Beyond corporate governance talk

Much has been said and written about corporate governance. To a greater extent, it appears corporate governance is mostly linked to or associated with enterprises in the private sector.

Sadly, in our context, there has been little or no talk of corporate governance related to public enterprises.

The situation is compounded by the clear political interference by authorities in the running of affairs of some public or State-owned businesses.

This is evident, for example, in the recruitment of top brass, especially chief executive officers (CEOs) and their boards. True, some of the enterprises are strategic, but we can still do better.

Many advocates of improved corporate governance argue for separation of powers and transparency.

They say the posts of CEO and board chairperson should not be held by one individual because such an arrangement is not healthy as it concentrates power in one individual, leading to poor corporate performance in most cases.

The King Report III, the South African corporate governance code, also emphasises the importance of separating roles of CEO and chairperson of the board: “The board should elect a chairperson of the board who is an independent non-executive director. The CEO of the company should not also fulfil the role of chairman of the board.”

There has been a renewed interest in corporate governance since 2001 when the world witnessed high-profile collapses of large corporations such as Enron and MCI Inc. in the United States with business schools and executives being abuzz with talk of corporate governance practices.

There are many misconceptions regarding corporate governance. In a nutshell, corporate governance should go beyond issues of disclosure to improve decision-making in business enterprises and make the boards accountable for their decisions.

Perhaps, Deloitte & Touche’s corporate governance services division, in one article published last year on the topic, ably outlined the importance of corporate governance: “The misconception [about corporate governance] is the tendency to see corporate governance mainly as a requirement for annual report purposes, a tendency to treat corporate disclosure as an end in itself. We believe this is putting the cart before the horse and, taken to extremes, could result in organisations seemingly complying with good corporate governance, but in truth deriving very little benefit from it.”

Closer home, I recently celebrated the role Business Unpacked played in influencing change in the set up of the wholly government-owned Malawi Savings Bank (MSB). Today, MSB has a new board of directors chaired, for the first time, by an outsider.

Traditionally, MSB, due to its 100 percent State ownership, has been chaired by the Secretary to the Treasury (ST). However, this raised corporate governance concerns, especially in the event of one doubling as CEO and ST, thereby, automatically chairing the bank’s board.

What is more pleasing in the statement announcing the new MSB board is the fact that the new set up is “in pursuit of good corporate governance to allow the bank implement its business strategy…” This was my argument during previous entries which, I must confess, stepped on some raw nerves. But that is now water under the bridge as I have the last laugh.

That said and done, I feel it is time government embraced corporate governance in all of its enterprises if, as a shareholder, it is to realise its worth instead of forever subsidising their operations.

This should start from the top. It should start with open and competitive recruitment for director generals/CEOs of State enterprises. For example, I have always wondered why positions for CEOs for parastatals such as the Electricity Supply Corporation of Malawi (Escom) and the water boards are openly advertised yet the same government, through the head of the Executive, the President, hand picks people to similar positions in other State-owned ventures. Why the double standards? Could it be far from the truth to suggest this is one reason many State-owned enterprises perform poorly as the appointees, despite having proper qualifications, see their role as first and foremost to please the appointing authority?

There are 14 million of us in this country. Unemployment rate is very high. There are many brilliant young men and women, some with post-graduate qualifications in business administration from reputable universities, who are loafing yet, given a chance, they have the potential to turn-around some of the ailing State enterprises.

If we cannot open such positions to all who qualify and continue our hand-picking of senior managers, I foresee continued losses by government-owned businesses.

Parastatal CEOs should be hired on merit, given targets and goals to achieve if we are to move forward.

Boards of directors are the stewards of the shareholders. The boards make decisions on behalf and in the interest of the shareholder and they are accountable to the shareholders. This is the bottom line in corporate governance.