The Sunday News
THERE are various opinions about the value and benefits of corporate governance to corporations globally including here in Zimbabwe. The application and upholding of the principles of sound and good corporate governance offer numerous benefits and advantages to corporations.
Good corporate governance is beneficial and valuable to organisations because it eliminates numerous risks which include misleading or false financial statements and reports, and prevents companies from being dominated by self-serving and self-seeking chief executive officers (CEO) and board chairpersons. Good corporate governance also protects investors. It also contributes to sustainable development by delivering economic, social and environmental benefits for all stakeholders.
Trust Academy offers professional courses in collaboration with The Institute of Administration and Commerce (IAC) and Midlands State University (MSU), which provide extensive training on Corporate Governance. By equipping employees with necessary knowledge and skills, this helps companies to curb corporate scandals.
Corporations that comply with best practice in corporate governance are also more likely to achieve commercial success. This is directly linked to the held belief that “good governance and good leadership and management often go hand-in-hand”.
Well governed companies will often develop a strong reputation and so will be less exposed to reputational risks than corporations that are not so well managed. Sound corporate reputation adds value to the firm’s products by giving them competitive advantage in the market place. In addition, good reputation is responsible for attracting best workforce, investors as well as customers for the company.
Good governance has the advantage for the firm in that it encourages investors to hold shares in the company for longer term periods, instead of treating shares as a short-term investment to be sold for a quick profit. Corporations benefit from having shareholders who have an interest in their longer-term prospects.
Within a company, whether publicly-held or not, corporate governance provides directors the tools they need to ensure efficiency, accountability and sound decision-making. Strengthened reporting requirements demand improved accounting procedures and stronger internal control systems, which in turn provide managers and directors the tools they need to control expenditure and gauge revenue.
By increasing the transparency, quality and regularity of financial reporting, managers can be held more accountable for the decisions they make and the performance that results. Poor performance or activities that divert company resources into non-profitable activity can be quickly identified and remedied.
The increased accountability of corporate directors through the duties of care and loyalty required by good corporate means that strategic decisions affecting performance and risk are made with greater care and consideration for owners.
What duty of care and loyalty means is that directors should make best-informed decisions in the interest of a company. As seen in recent years, the markets, shareholders, and regulators have increased their scrutiny of director performance, creating demand for qualified directors and institutions that can provide them with training, information and networking opportunities.
Corporate governance is also important for state-owned enterprises. Not only do good governance practices increase productivity and competitiveness of State enterprises, they also help to ensure that public funds invested in these enterprises are not mismanaged and are spent effectively. By creating more transparent and economically viable state-owned enterprises, corporate governance also helps to ensure that services are delivered to the public. Further, as State enterprises often provide a bulk of employment in some emerging markets and a variety of essential public services, good corporate governance helps to prevent failures with devastating social impact. The value of sound corporate governance is that it is used in developing economies as a means of improving efficiency in State-owned companies as well as a mechanism to improve their attractiveness to investors, thus, increasing their prospects.
By their non-transparent nature, state-owned companies are often plagued by political patronage, corruption and waste, which limit their ability to modernise and build responsive and efficient systems of operations.
Effective and sound corporate governance in the State-owned companies sector focuses first and foremost on making the State an effective owner, by establishing clear and simple lines of political and social accountability, improving board selection and quality, and contributing to the development of clear corporate strategies that reward efficiency and professionalism. This thrust invariably makes corporate governance a strong tool of reducing corruption and self-dealing by senior in the State-owned companies.
In family-owned corporations, corporate governance is valuable because it fosters increased professionalism in the management of the firm, especially in emerging economies such as Zimbabwe. At the same time good governance motivates higher degrees of formalisation of work processes and improved decision making.
Trust Academy is inviting the corporate world to engage with us in selecting the best course to better equip themselves and their employees on corporate governance.
Abigail Kadzutu and Rejoice Moyo are Customer and Information Service Officers with Trust Academy Bulawayo and can be reached on email: [email protected] and Landline Numbers: 09- 883674, Mobile Numbers: 0774564234, 0715553483.
