ZQMS-ARC-REC-002

ASSIGNMENT COVER

REGION: HARARE

PROGRAMME: BCOMM-HHIR INTAKE: 31

FULL NAME OF STUDENT: GWETA MILCAH PIN: P1883948G

MAILING ADDRESS: gwetamilcah@gmail.com

COURSE NAME: CORPORATE GOVERNANCE COURSE CODE: BHIR206

ASSIGNMENT NO. 1 DUE DATE: 20 SEPTEMBER 2019

ASSIGNMENT TITLE: __________________________________________________________

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MARKER’S COMMENTS: ______________________________________________________

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OVERALL MARK: _____________ MARKER’S NAME: ________________________

MARKER’S SIGNATURE:_______________________________ DATE: _________Issue Date

Providers of corporate finance whether they are individuals or pension funds, mutual funds, banks or other

financial institutions, or even governments require assurances that their investments will be protected and will

generate returns. These assurances are at the heart of what effective corporate governance is all about.

Corporate governance in strategic management is of great importance where values are as important as rules.

The success of an organization in ensuring the best performance of resources for the stakeholders in an

organization is earmarked by good corporate governance. It is corporate governance in strategic management

that determines how a company is controlled and directed, which strategic decisions can be decided as well as

the formulation of internal rules and policies of an organization. Strategic decisions should be aligned with the

company’s values and as such strategic management and corporate governance are intertwined. It is the failure

of corporates that gave birth to corporate governance for example the failure of renowned companies like

World Com, Adolphia Communications, Enron just to mention but a few. This assignment is going to explore

the key elements of corporate governance, that is, discipline, transparency, independence, accountability and

responsibilities.

DEFINITION OF KEY TERMS

Corporate governance

Organization for Economic Cooperation and Development (OECD, 2004) says “Corporate governance

involves a set of relationship between a company’s management, its board, its shareholders and other

stakeholders. It provides a structure through which objectives of the company are set and the means of

attaining those objectives and monitoring performance are determined”.

among various participants of the organization in determining the direction and performance of the

corporation.

Discipline

Corporate discipline is a commitment by a company’s senior management to adhere to behaviour that is

universally recognized and accepted to be correct and proper. This encompasses a company’s awareness of,

and commitment to, the underlying principles of good governance, particularly at senior management level.

Corporate governance ensures that corporates adhere to the culture, society and organizational paradigm.

Corporate governance minimizes wastages, corruption, risks and mismanagement. It is understood that all this

cannot be achieved if there is no corporate discipline where earnings becomes everything and there is gross

loss of ethics and the emergent of bad culture

Transparency

Transparency means openness, a willingness by the company to provide clear information to shareholders and

other stakeholders. For example, transparency refers to the openness and willingness to disclose financial

performance figures which are truthful and accurate. Transparency is the means with which the outsider is able

to make a meaningful analysis of a company and its actions. It refers to both information about the financial

position of a company and non-financial issues, such as the direction the company is taking, its strategic

objectives and so on. A transparent company is therefore one the investors understand. If investors can

understand a company from the information the company provides, and if they believe that information, the

necessary trust between investors and the company should be established. Transparency ensures that timely
accurate disclosure of all material matters, including the financial situation, performance, ownership and

corporate governance is made. Financial statements are prepared in accordance with international financial

reporting standards (IFRS).The company’s registry filings are up to date. High quality annual reports are

published. It is through corporate governance that the Board of the company has an obligation to give an

explanation or reason for the company’s actions and prospects. Corporate governance calls for the Board to

present a balanced and understandable assessment of the company’s position. Interests of shareholders must be

safeguarded and they must exercise their rights but not to abuse them in order to ensure efficiency in the use of

resources. . Everything that is done by the stakeholders should be transparency and best performance of

resources for stakeholders is of importance. Where there is no transparency in corporate governance, there is

likelihood of risks for example as evidenced by Telecel Zimbabwe’s majority shareholder, Jane Mutasa who

was reported to have duped the second largest telecommunication company of US 1,7 million airtime fraud

something that is not expected from a major shareholder of an entity. This alone symbolizes that there is an

ineffective board at Telecel Zimbabwe hence for the need for transparency in corporate governance in the all

organizations. Stakeholders should be informed about the company’s activities, what it plans to do in the future

and any risks involved in its business strategies.

Disclosure of material matters concerning the organization’s performance and activities should be timely and

accurate to ensure that all investors have access to clear, factual information which accurately reflects the

financial, social and environmental position of the organization. Organizations should clarify and make

publicly known the roles and responsibilities of the board and management to provide shareholders with a level

of accountability. Transparency ensures that stakeholders can have confidence in the decision-making and

management processes of a company.

and groups (all stakeholders) about the company without giving away company secrets.

Accountability

Corporate accountability refers to the obligation and responsibility to give an explanation or reason for the

company’s actions and conduct. The board should present a balanced and understandable assessment of the

company’s position and prospects The board is responsible for determining the nature and extent of the

significant risks it is willing to take The board should maintain sound risk management and internal control

systems. The board should establish formal and transparent arrangements for corporate reporting and risk

management and for maintaining an appropriate relationship with the company’s auditor, and The board should

communicate with stakeholders at regular intervals, a fair, balanced and understandable assessment of how the

company is achieving its business purpose Individuals who take decisions in the company and take actions on

behalf of the company on specific issues should be accountable to the decisions they take. Management is

accountable to the Board and the Board is accountable to the shareholders. Boards of directors are

accountable to their shareholders and both have to play their part in making that accountability effective.

Boards of directors need to do so through the quality of the information which they provide to shareholders,

and shareholders through their willingness to exercise their responsibilities as owners (Cadbury

1992).Shareholders should be able to assess the actions of the board of directors and the committees of the

board, and have the opportunity to query them.

When there is no corporate governance, there is a likelihood of greediness that will lead to disparity among

senior managers and other employees for example as had been witnessed at Tel One in May 2013, where six

(6) managers were suspended for diverting the company’s benevolent funds to a microfinance institution,

prejudicing employees. This was exposed after the appointment of the Managing Director who had better
oversight, responsive and accountable to the entity. Companies are accountable to the people in order to

promote green business. Individuals or groups in a company who make decisions and take actions on specific

issues need to be accountable for their decisions and actions. The duties of directors and functions of the board

include being held accountable for the performance and impacts of the organization, the relevance and

reliability of corporate reports and the integrity of the integrated report Mechanisms must exist and be effective

to allow for accountability for example annual general meetings. But accountability is a two-way process—

directors must provide the necessary information for example through annual financial statements and

opportunities to shareholders to be able to hold the directors accountable for their actions. As discussed above,

shareholders have responsibilities as owners. Current developments in corporate governance imply that

management is not just accountable to shareholders but to all stakeholders.

Responsibility

With regard to management, responsibility pertains to behaviour that allows for corrective action and for

penalizing mismanagement. Responsible management would, when necessary, put in place what it would take

to set the company on the right path. While the board is accountable to the company, it must act responsively

to and with responsibility towards all stakeholders of the company. A manager is responsible for his/her

decisions and actions should be subject to corrective measures. Mismanagement should be penalized. An issue

in corporate governance is therefore is whether directors should be liable for their performance to stakeholders

and shareholders in particular. For example, should shareholders re-elect all the board directors each year.

A Key issue in corporate governance is to decide who should have responsibility. Executive managers are

responsible for the operations of the operations of the business, and the ultimate responsibility rests with the

CEO. The BOD also has responsibilities and it is a principle of good governance that the board should. It is the

CEO of the company who is responsible for the final decisions but his decisions are the culmination of the
ideas, information and analysis of others. The Board is responsible for supervising the successful management

of the organisation’s business and has authority and obligation to protect and enhance the assets of the

corporation in the interest of shareholders and the public mission. When there is no individual responsibility,

management tend to be inefficient and ineffective. The Board of Directors is given authority to act on behalf of

the company. They should therefore accept full responsibility for the powers that it is given and the authority

that it exercises. The Board of Directors is responsible for overseeing the management of the business, affairs

of the company, appointing the chief executive and monitoring the performance of the company. In doing so, it

is required to act in the best interests of the company. Accountability goes hand in hand with responsibility.

The Board of Directors should be made accountable to the shareholders for the way in which the company has

carried out its responsibilities.

Independence

Independence is the extent to which mechanisms have been put in place to minimise or avoid potential

conflicts of interest that may exist, such as dominance by a strong chief executive or large shareowner. These

mechanisms range from the composition of the board, to appointments to committees of the board, and

external parties such as the auditors. The decisions made, and internal processes established, should be

objective and not allow for undue influences. Independence is of particular relevance to a company’s non-

executive directors and professional advisers. These are considered to be independent when they can be

expected to express their honesty and/or professional opinion in the best interests of the company.

Independence can be threatened by having some connection to the company or dependency on goodwill of the

company or its management, so that personal interest can affect the individual’s opinions. A non-executive

director will not be independent if, for example, he or she has recently been a senior executive of the company

or he or she represents a major shareholder. An auditor may not be independent if the audit firm relies on the

company for a large percentage of its annual income. Independence may also be undermined by familiarity: If
a non-executive director or auditor has known the company’s management for a long time, he or she may

develop personal friendships that blind them to management’s failings. Independence ensures that procedures

and structures are in place so as to minimize or avoid conflicts of interest. The decisions made and internal

processes established should be objective and not allow for undue influences or overt personal motivation to

prevail. That is, the company should be run for the benefit of all stakeholders.

Conclusion

The key term corporate governance, accountability, independence, discipline, transparency and responsibilities

were defined. The terms were explained and examples given. Independent directors play an important role in

Corporate Governance. However, there is need to balance all the explained terms to succeed. A well-run

organization must be structured in such a way that all the above explained elements are catered for and can be

seen to be operating effectively by all the interest groups concerned. Corporate governance is a broad ranging

term which, among other things, encompasses the rules, relationships, policies, systems and processes whereby

authority within organizations is exercised and maintained.

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Johannesburg

2. Dube, C F (2008) Corporate Governance – non-Executive Director’s Independence – Fact or Fiction :

Mambo Press – Harare

3. King, Mervyn and Lessidrenska, T (2009) Transient Caretakers Making Life on Earth Sustainable

4. Collier, J R (2000) Corporate Governance - Macgraw-Hill, New York

5. Singh, S (Dr) (2005) Corporate Governance Global Concepts & Practices – 1 st Edition – Excel Books,

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