Corporate Governance: A shared
responsibility
Monday, 19 September 2011 02:00
Companies are non-state actors, which exist, have resources, means and aptitude,
to make good and bad decisions which impact individuals and societies. Societies or
communities have an interest in what companies do and how they are governed.
Each of these impacted persons, individually or collectively, in one way or the other
places a demand on corporate governance.
Through a combination of democratisation, press freedom, increased consumer
sophistication information and communication technology, there is now greater
awareness of what corporations should do. There is also greater expectation how
companies should be governed.
Corporations are becoming accountable to larger cross-sections of communities.
Therefore gone are the days when corporate governance was thought of as a board
and senior executive's concern, but that it a common good which requires shared
responsibility. Do companies get the leadership they deserve?
Companies are not democracies. They do not elect their chief executive officers or
boards of directors. Leadership is appointed. Often organisations can only hope on
the skillfulness, integrity and quality of interaction of appointed leadership.
However, in today's businesses, it is unlikely that a single person can provide all the
necessary leadership on different issues. The "John Wayne School of Leadership",
which suggests that an individual who has the experience, knowledge, skill,
charisma, vision, decision-making ability, interpersonal skills, respect, stature,
position, role etc. will provide the leadership to lead us out of this mess, is proving to
be a myth.
Corporate governance challenges and needs are dynamic and change by the day
depending on the type of organisation. For instance, leadership in multi-national
corporations are often faced with "unfamiliar" risks ranging from security, climate
change, global health issues such as HIV and AIDS and varying cultures, laws and
regulations, over and above standard corporate governance challenges. Small to
medium scale enterprises also attract specific sets of problems and needs.
These multi-dimensional corporate governance challenges require multi-skilled
leadership. Acts of leadership must come from all of us.
If it is true that we are all leaders in one way or the other, then it should follow that
corporate governance is a shared responsibility of all stakeholders. Anyone related
to an organisation, somehow has a role and responsibility in developing the
necessary corporate governance system.
As a leader in one dimension of the organisation, how are your levels or quality of
accountability, transparency, compliance, responsibility, integrity, fairness,
competence, truthfulness, obedience etc?
These individual or self-governance values are what collectively, either supply or
place a demand on the quality of corporate governance in an organisation. I have
seen good boards of directors frustrated out by ungovernable corporate cultures.
Thus organisations must be governable inorder for good corporate governance to
take root.
Religions have it that the way you are, is how you will be ruled and as a man thinks
in his heart so is he. This view is one of the pillars to values-based governance.
Outcomes of this type of governance include the stakeholder theory and corporate
social responsibility.
Values-based governance seems to be appreciated in more societies than the purely
legalistic, shareholder-based governance. How is the shared responsibility for
governance implementable?
First, it is important to remember that corporate governance graduated from
shareholder to stakeholder approach after the realisation that success of an
organisation also depends on a wider group of persons including government,
employees, customers, suppliers, creditors etc, rather than just shareholders.
Freeman and Phillips recognised this fact in, "Stakeholder theory: A libertarian
defence (2002)" and said that it is how well a company manages relations and
balances the interests of varied stakeholders, which determines the success of an
organisation.
So stakeholder relations plus shared responsibility will impact the quality of an
organisation's governance systems. An example of shared governance responsibility
is integrity. Integrity is closely associated with both, governance and leadership.
Duggar, in The Journal of Academic and Business Ethics mentions that a culture of
integrity creates a highly valued business environment; it impacts the quality of
corporate governance; and it provides a foundation for solid long-term financial
performance.
At individual level, integrity is those characteristics of an individual that are
consistently considerate, compassionate, evenhanded, transparent, honest,
trustworthy and ethical. Trust is closely associated with integrity. Individuals with
integrity are regarded as those who can be counted on to do consistently what is
"right" and what is expected of them.
They are reliable and predictable in dealing with others and with issues, and they are
defenders of what is fair, just, and acceptable. The role of leadership in good
governance is therefore to bring together people with shared integrity and trust
values. Equally important is for individuals to search for employers or companies
with similar values.
Strong relationships are based on trust, the more the trust the stronger the relations.
A good test case in Zimbabwe will be the outcome of WikiLeaks revelations,
currently doing the rounds. Whatever relations will remain intact after the saga would
have indeed passed the "trust" test.
It is in fact a norm for every relationship to be tested. After all, trust or mistrust is
earned directly or indirectly. Duggar also says that when there is "trust" in dealings in
or with a corporation it is usually because the leadership of the company has created
a culture of integrity. The relationship with the corporation becomes predictable,
reliable, and consistent in meeting stakeholders' needs and requirements. A
convergence of trust and integrity among others create conducive atmosphere for
good corporate governance. All because each stakeholder takes responsibility and
plays their part.
Value addition in shared responsibility is that stakeholders do not only benefit from
good governed organisations, but also take pride in being associated with them. This
means broader success, greater broader and broader power for all involved.
So does that mean leadership is absolved from its responsibility to make decisions
and lead? No, on the contrary shared responsibility in good governance creates
giants in a variety of ways. It could also attract lots of fans, even from far off land.
"Little" Lionel Messi of Barcelona Football Club in Spain, when alone on the street is
not as great a giant as when he is on the football pitch.
A young man with curable growth hormone deficiency, which proved too costly for
his Argentinean family and football clubs, would not have been noticed by Barcelona
FC, had he felt sorry for himself, ignored his talent, not had the integrity to be on time
for training, trusted and respected his coach father or been content to be just the son
of a football coach.
If "little" Messi had not had the discipline to know when to drink and when not, I am
not sure, this writer would have known, or heard of this talented young man. Skill,
discipline, integrity, character, trust and communication altogether, conspired and
little Messi won, Barcelona FC won, Argentina won, FIFA won, South Africa and the
Vuvuzela producers won as well as the Messi family.
However, the great legend Pele had this to say about Messi, "He's a great player. He
plays very well for Barcelona, but has failed to show his talent with the Argentina
team. Maybe he can at the World Cup?"
World Cup 2010 is now in the past and the performance of the Argentineans did not
showcase the celebrated Messi. What is it that Barcelona FC offers Leo Messi that
the Argentina national team does not? Better governance perhaps?
The Kaufman Governance Post in 2010 reported that, Maradona's disastrous
coaching trajectory in past years is well known. Prior to being asked to coach the
national team preparing for the South Africa World Cup in 2010, he had tried to
coach two club teams in Argentina, winning 3 games out of 23, with one of the teams
folding altogether.
Maradona had started coaching right after being banned from soccer for over a year
following the World Cup in the US in 1994, due to his recurrent doping.
During the qualifying stage prior to the 2010 World Cup in South Africa, Maradona's
team nearly failed to make it to the World Cup, in spite of playing against so many
less talented South American teams.
The stories surrounding Maradona's work ethic and lack of discipline as a coach are
also well known, and, together with his repeated bouts with drugs and alcohol,
provide very poor example to millions of soccer youth who know what a gifted player
he was in the past.
This illustrates that, good governance at institutional level, whether for a soccer team
or another organisation, is the ability of the team to attain results where the Whole
Exceeds the Sum of its Parts. In the 2010 soccer World Cup, countries like Ghana,
Uruguay, Paraguay and arguably South Korea, Japan, Slovakia, the US and Chile,
could have belonged to this group.
Among others: their achievements were not mainly due to numerous world stars in
their team, but their teamwork instead, showcased shared responsibility.
Italy, England, France and some African teams, excluding Ghana and South Africa,
are thought to have belonged to the group where the "whole-is-much-less-than-the-
sum-of-its-parts", and Argentina and Brazil were also be added to that group.
The quality of leadership of the coach, through the team's strategy, tactics, and
discipline, is critical in determining whether the whole exceeds or not the sum of its
parts. Therefore, it is not by mere fluke that football or soccer is the world's most
popular sport. People love it because it provides for a need in entertainment. Every
one of the stakeholders knows their roles and responsibilities.
Teams know when and how to prepare for a match, fans know what regalia to wear
and when to arrive at the stadium, and in the case Manchester United, Sir Alex,
knows how much gum to take.
The game is played in consistent field sizes throughout the world. Rules originally
codified in 1863, and have since developed, are known and apply equally to all. All
recognise FIFA as the mother body, which organises all World Cups. Human error
and weaknesses are what fail the game. If left alone without undue human
interferences, the soccer system is predictable, reliable, and fairly
consistent in meeting stakeholders' needs and requirements.
The only unpredictable is which team wins; no wonder betting creates fun to soccer
lovers. Everyone knows at the end of the game there must be a winner and a loser.
Penalty shootouts and goal aggregations settle stalemates.
Sadly, once "self" gets entangled with the governance of soccer, the game loses
objectivity. It is then, that we start to hear about match-fixing, corruption or soccer
hooliganism. Likewise, when corporate governance systems are

The writer is a researcher and governance consultant.
[email protected]
Corporate governance : An
antidote to corruption
Monday, 12 September 2011 02:00
Gertrude R Takawira
It has rendered to naught brilliant economic reforms. Most people hate it. A few
benefit from it. Yet corruption is strong enough to have replaced traditional economic
ethos of capital and production. No wonder the economic crises.
Like economics there is a supply-side and demand-side for corruption. The supplyside or the giver resides in businesses. Businesses pay the bribes. The demand side
or taker is predominantly government officials.
Government officials demand bribes. In most discussions corruption is often blamed
on government officials and seldom on the private sector. This is not to say that the
private sector is the sole supplier.
Literature is revealing that non governmental organisations are steady suppliers of
corruption in developing countries. The centre piece of supply and demand for
corruption in Africa and many advancing nations has been the many market oriented
economic reform, such as privatisation. Public sector procurement for a long time
now has attracted corrupt activities.
In trying to find a cure for corruption it is important to consider both the supply and
demand sides of corruption. Much has been said about the demand side and seldom
on the role of the private sector as a supplier of corruption.
The private sector is more cash liquid than the public sector, performance driven,
profit motivated and always short of time. No cost no gain is an established rule of
the profit game. Risk taking gives the game adrenalin.
Entrepreneurs outperform one another in pursuit of profits. This desperation, risk
inclination and willingness to pay whatever it takes render the private sector most
gullible to demanders of bribes.
In a survey carried out by the African Capital Markets Forum in Ghana during the
year 2000, it was reported that 86 percent of households saw corruption as a major
problem in the public sector, whereas 59 percent of households saw corruption as a
major problem in the private sector.
It was also found that many firms in Ghana made unofficial payments (44 percent) to
public officials with over a quarter (27 percent) frequently or always making such
payments. Unofficial payments constituted a regular feature of transactions between
business firms and public service agencies. 56 percent of firms reported that service
was frequently delivered once they made an unofficial payment.
Although there is not much statistics on the level of private sector involvement in
corruption in Zimbabwe, it is common knowledge that there is an increase in the
supply of bribes in the country.
How does good corporate governance reign in this corporate behaviour? Corporate
governance spells out the rules and procedures for making decisions on corporate
affairs. It also specifies the distribution of rights and responsibilities among different
participants in companies such as the board, managers, shareholders, and other
stakeholders.
In addition corporate governance reminds businesses that while profits are
important, businesses need ethics, customers and other stakeholders. Through
corporate governance, corporations are warned of the dangers of putting profits first.
Company leadership is also cautioned that when numbers become all-important,
almost any behaviour is justifiable as long as money is made.
Sound corporate governance standards reduce supply-side corruption by removing
systemic opportunities that breed corruption. Principles of accountability,
transparency, fairness and rule compliance help a good corporate governance
system spell out the procedures for carrying out activities and responsibilities in an
organisation.
The system does not leave room for uncertainty of roles and power.
An example of a good corporate governance mechanism is the transparency in the
provision of accounting information.
It helps reduce the level of corruption by increasing the probability of detecting
bribery acts. Better accounting practices make it difficulty for directors to hide bribe
payments.
However, if the shareholder encourages bribery then accounting information might
not be as effective in curbing corruption.
Why then do corporations with good corporate governance systems pay bribes? First
there has to be a conducive atmosphere for the supply and demand of bribery. This
can take place in broad ranges of business activities over which some government
officials hold discretionary powers.
Common among these are; where firms bribe public officials to avoid or reduce tax,
to secure public procurement contracts, to bypass laws and regulations, or to block
the entry of potential competitors.
On the surface bribery seems to be cost-effective for businesses because bribe
payment is often a fraction of the monetary value of the services rendered by the
corrupt officials.
The reason to bribe becomes even more compelling when public officials hold the
power to punish the firms for not paying the bribe, such as revoking business
licenses. Corporates are often duped to believe that the only cost of bribery is paying
the government officials.
However, global research is showing that there are hidden costs to bribery, some of
which can be fatal.
Xun Wu in "Corporate Governance and Corruption: A Cross-Country Analysis" states
that bribery exposes firms to substantial legal and financial risks in the future.
Governments may decide to nullify contracts that have been initiated or influenced
by bribery, or to blacklist the firms for future government projects.
In the past the government of Singapore banned five multinational companies
(Siemens, Pirelli, BICC, Marubeni, and Tomen), from bidding on any government
projects for five years after their consultant was convicted of paying bribes for utilities
construction contracts.
Perhaps the most vicious is that, when companies open their doors to corruption,
they may find it difficult to resist demands for bribery payments in the future.
Research is also finding that companies with a reputation for bribing their way out
are more likely to receive demands for higher bribe payment by corrupt officials,
sometimes for services that are normally free of bribery for other companies.
Bribe payment from firms with such a reputation may be perceived to be "safe" from
the perspective of the potentially corrupt officials, and these corrupt officials may
increase the level of bureaucratic interference in order to secure bribe payments
from these firms.
These companies become "ka mugodhi" or a private small mine for the officials.
Xun Wu goes on to explain that, as a result firms that hope to circumvent
government regulations may actually face an increased level of bureaucratic
interference.
Companies that pay more bribes face more, not less, effective red tape because
corrupt officials can often customise the nature and amount of harassment on firms
in order to maximise bribe collection.
Bribery undermines the companies' drive in developing long-term competitive
advantages. If managers realise that they can win business through bribery rather
than through providing better products or services, they will be busy courting
government officials rather than concentrating on developing the competitiveness of
their firms through innovation and better investment decisions.
This is detrimental to developing economies.
Corporate governance is not only about dealing with the internal governance of a
company but also with its relations to its suppliers, to its consumers, to its business
partners, and to the government.
Integrity and accountability are the values that guide the relationship between
owners, managers, employees, and other stakeholders.
Thus if the relations of the company, its suppliers and regulators are premised on
bribery and corruption, as stated above, it will be difficult for the company to resist
future demands for bribes.
A strong board of directors that prioritises the interests of shareholders can prevent
companies from giving bribes to public officials. Directors and managers determine
the corporate culture. Yet, they
often sign shady contracts, ignoring the negative implications. Non executive
directors are systematically appointed in relation to their ability to influence outcomes
with government relations. Such directors, instead of protecting the resources of the
company, become conduits for bribe payments.
While corruption offers companies short-term relief, good governance provides a
longer-term, victory. Victors are those who protect their reputation and their
shareholders.
Prudent investors need assurances that their investments will not be channelled into
unproductive activities. Entrepreneurs look for ways to attract investors to finance
their visions. The aim is to make profits and maximise the value of the company.
To achieve this, more and more corporations are coming up with corporate
governance reforms. Investors are looking for businesses that uphold values of good
corporate governance. Weak governance systems provide a good environment for
corruption to thrive.
Shareholders and investors in countries that are experiencing a high level of
corruption may receive double dividends from the improvement in corporate
governance. Companies with better corporate
governance have better prospects of growth and command higher valuation in the
market.
A McKinsey study showed that global investors are willing to pay more for bettergoverned companies
It is said that inorder to kill off a bad habit, starve it. Private sector has the muscle to
starve off corruption - stop supplying. Anti-corruption activists encourage private
sector to adopt good corporate governance.

The writer is a researcher and governance consultant.
Incorporate ethics in strategies
Tuesday, 30 August 2011 02:00
Strategic planning is a critical and integral element of good corporate governance.
Apparently, it is unimaginable to think of an organisation that can survive in this
volatile and highly competitive business environment without a workable business
strategy in place.
Through strategic planning, organisations consider where they are, where they want
to be, and how they will get there.
Strategic planning enables organisations to review past performance in a systematic
manner celebrating achievements and learning from their mistakes.
It enables organisations to prioritise objectives, deciding what most needs to be done
and how this will be achieved.
It encourages a better use of resources, and encourages organisations to be more
proactive and be in control than being simply carried along by events.
Strategic planning is an all encompassing process that is initiated by willing company
leaders, spread to all levels of the organisation and branded to produce the best
results possible.
With a sound strategic plan in place companies have a template against which they
assess their company actions and outcomes against their agreed targets.
As organisations shape their destiny through strategic planning, it has become
apparent that they seriously consider embedding ethics programmes in their
strategic plans to effectively manage unethical behaviour among staff members.
Besides curtailing misconduct and other forms of inappropriate behaviour, ethics
programmes help build company reputation and are a new frontier for competitive
advantage.
The world over, strategically embedded ethics programmes have become a key
success factor for organisations.
In many economies today, a firm's competitiveness is now also measured on the
basis of the existence of a formal ethics programme in its operational processes.
Ethics help to define a business strategy that will thrive even in difficult situations.
They are a cornerstone for building an enduring business model that looks beyond
profit to define and inspire employees and rekindling their commitment towards
achieving organisational goals.
Embedding ethics in strategic planning processes means incorporating values
management into the DNA of the company's business operations.
Company leaders should know that employees are more likely to trust senior
management and commit to the company when company shared values are
genuinely ingrained in the policies and activities of the company.
Ethics should be made part of the company's mission statement, and long-term
strategic plan as a way of integrating it into the business strategy.
According to Robert Finocchio, a professor at Santa Clara University in North
America, business leaders have to ask themselves the following questions in order
to integrate ethics into the company strategy,
l What do we stand for?
l What is our purpose?
l What values do we have?
Professor Finocchio goes on to give the following hints on embedding ethics to
company strategy.
l Obey the letter and spirit of the law when you do business. Explicitly articulate
ethical values as a key component of the strategy.
l Don't rely on regulations, manuals and audits as the vehicle to insert ethics into the
strategy. Emphasise principles more than rules.
l Be totally transparent with all stakeholders, and make that part of the strategy.
l Have a framework and process for the resolution of ethical issues. Have rewards
based on ethics. Make ethics training part of employee development.
To add to this, it is important for companies to make ethics performance evaluation
part of the organisation's overall strategy evaluation.
A simultaneous evaluation of the organisation's strategy and its ethics programme
will bring about synergies to the firm.
The simultaneous evaluation will provide management with insight into the
effectiveness of the ethics process, and whether it has fitted well with the overall
strategy.
The evaluation can take the format of known evaluation models such as the
renowned International Organisation for Standardisation (ISO) management systems
for quality articulation.
Strategic benefits accruing as a result of a properly embedded ethics programme
include increased company productivity and competitiveness, improved employee
and customer loyalty, reduced misconduct and enhanced community goodwill.
l Bradwell Mhonderwa is the Managing Consultant of Business Ethics Centre, a
Corporate Governance and Business Ethics Management firm. Phone 04-293 2948,
0712 420 090, 0772 913 875, or email [email protected]
Hwange board: A circus of
impressions
Thursday, 18 August 2011 02:00
Economic Agenda Takunda Mugaga
THE turmoil being instigated by some heartless directors in the corporate world
remains an anathema and a threat to the essence of shareholding.
Gone are the days when shareholders or proxies will head to the Annual General
Meetings with the hope of changing all the negatives, which might have dogged their
organisation prior to their meeting.
Annual reports could tell a near story of the happenings in their entities. Most of the
subjects normally discussed at the AGMs include adoption of financial statements,
approval of directors' remuneration, appointment of auditors and their remuneration
and of late redenomination of share capital after the de facto dollarisation of the
economy.
The quoted stocks are highly exposed to a narrow human resource base as one
director could sit on several different boards without bringing much to the success
and development of companies.
A host of companies remain culprits when it comes to adhering with corporate
governance laws, they have been blatantly disregarding shareholder interests with
most of the sitting directors turning AGMs into circuses of impressions.
The recent event at Hwange Colliery Company smacks of insincerity on the part of
the directors.
Board chairman Tendai Savanhu and his whole board needs to be reminded that
they are representing shareholders and it is the very same shareholders who can
recall them for duty.
The argument that the company performed fairly well under their administration does
not hold water as the switch to dollarisation was always a strategic period to which
recovery at corporate level was expected regardless of who was at the helm.
It is the duty of the present Government as a major shareholder to set a precedent
on corporate governance matters. As the company is struggling to recapitalise due to
the liquidity crunch that is currently threatening economic recovery, the solution lies
in reviewing the board and a bloated set-up as the one to be changed.
Government has a 37,1 percent stake in Hwange, followed by Mr Nick van
Hoogstraten's combined 26 percent stake. This is an opportune moment for the
Government to be indicative of its upholding of corporate governance whilst at the
same time preserving minority shareholders' interests.
The Hwange board should have learnt from the last AGM, where they were officially
recalled, that judicial channels do not have a space in shareholder meetings.
There is also Econet Wireless Holdings, besides having significant shareholding in
banks, insurance companies and leisure industry, the blue chip counter remains a
suspect when it comes to business ethics.
With over four million subscribers talking over their network, the giant continues
ducking ethics as the quest to defend its investments in different quoted counters
rages on. With a capital expenditure/earnings before interest, taxes, depreciation,
and amortisation of 89 percent, a dividend per share of US$0,14 and a basic
earnings per share of US$0,66, it will be so demoralising that such a market leader
cannot set a standard inasfar as adherence to corporate governance is concerned.
The unconvincing involvement of Liquid Telecom in their 50 percent acquisition of
Ecoweb leaves the market wondering about the shareholding structure of Econet
business.
The position of Mr Tawanda Nyambirai as a chairman and legal advisor of Econet
Group has set tongues wagging in corporate corridors.
The AGMs do come and go but the subject of conflict of interest remains an
anathema.
Boardrooms now comprise attorneys who are paid to defend the ill-activities of their
companies.
I recall vividly an incident at the Hwange AGM when Nick van Hoogstratens
vehemently dismissed a minority shareholder's views on a subject of interest.
His basis was the significant shareholding he holds in Hwange, which he believes,
gives him an unassailable lead in decision-making at board level.
Delta continues being a shining example in terms of corporate governance as its
chief executive Mr Joe Mutizwa remains a shining case study of how a company can
be managed.
Despite being a monopoly, Delta remains ethical in its approach to business. It is the
second largest taxpayer to the Government after Econet Wireless and has a
potential to become number one.
The stepping down of Mr Robbie Mupawose as Delta chairman and the coming in of
prominent Harare lawyer Mr Canaan Dube coincides well with the expected stepping
down of Mr Joe Mutizwa at the current financial year. His charming characteristics
resonated well with most analysts in the market as they naturally found favour in him.
Mr Mutizwa opined that his team remained optimistic even
in the midst of challenges that he identified as VUCA, which is short for Volatility,
Uncertainty, Complexity and Ambiguity.
Mr Savanhu should take a cue from the Delta scenario. He was at the helm of
Hwange since 2006 and in all fairness he has had his chance and should make way
for others as there is nothing sinister about him stepping down.
The inconsistency coming from both the Deputy Prime Minister Arthur Mutambara's
office and the Ministry of Mines concerning the postponement of the last AGM
smacks confusion and despondency.
There is no basis for Mr Valentine Vera and the board chairman to give conflicting
positions, we deserve better treatment as investors for continuous holding onto
board positions can only scare away investors.
Thank you and God bless you.

Christopher Takunda Mugaga
Head of Research
Econometer Global Capital
[email protected]
+263 772 340 353 +263 776 266 062
Ethical recruitment brings success
Tuesday, 02 August 2011 02:00
PEOPLE have become the most revered asset to an organisation as the discipline of
human resources management continues to grow.
One of the most significant dimensions of business ethics management is analysing
the attitude of a business towards its recruitment and selection policies.
Recruitment and selection is an area of decision-making that requires thorough
attention, and should be accompanied by best practice guidelines to ensure that the
risk of corruption and unfair practices are avoided completely.
A firm's recruitment and selection policies should be in tandem with expected ethical
ways of doing things, and should be in compliance with applicable laws, which may
require the firm to take cognisance of various issues.
These include equal opportunities, non-discriminatory policies, workplace diversity,
gender sensitivity, etc.
Proper staff recruitment and selection determines the present and the future growth
of the organisation.
An attempt to define staff recruitment and selection will show that it is a process
through which human resources are brought into an organisation.
It influences company productivity, its profitability, and significantly affects the overall
success of the organisation.
Proper staff recruitment and selection give emphasis to new employees' skills,
competency levels, and their degree of integrity.
Ethics plays a very important role during the recruitment of new employees.
Professional judgment dictates that organisations should anchor their recruitment
and selection processes on sound corporate ethical presuppositions.
One critical role of the HR practitioner is to recruit the required candidates at a
minimum cost, and ethical considerations in recruitment reduce the company risk of
liability and damage to its reputation.
Embracing ethics in staff selection means going beyond the minimum standards set
by law, and forming enduring recruitment and selection policies and processes that
attract highly skilled and competent people, and inspire employees to do more for
the organisation.
Staff recruitment and selection processes should comply not just with the letter, but
also with the spirit of the law.
Researchers agree that ethical hiring practices actually result in better employees
being recruited.
The widely held view that unethical behaviour in the workplace is a result of "bad
apples" or poorly socialised people who sneaked into the organisation through poor
recruitment and selection processes validates the need to do a thorough job before
deciding to offer someone a job.
Embracing sound ethical rules when hiring a new employee means using merit to
select a candidate.
It means disregarding unethical practices that condone discrimination on the basis of
gender, political affiliation, religion, age, disability, etc.
In cases where there is need for affirmative action to address previous imbalances,
these considerations should be well stated in the company's policy statement and
supported by law.
A good example is the Employment Equity Act of South Africa, which seeks to
achieve equity in the workplace by eliminating unfair racial discrimination that was
entrenched during the apartheid era.
It seeks to accomplish this through equitable ethnic representation of the South
African population in all occupational categories and levels in the workplace.
Sound recruitment hinges on practices that embrace the virtues of objectivity,
consistence, and confidentiality, avoiding manipulation, stereotyping and the
prejudice of the halo effect, which in most cases may result in attracting needless
risk through legal suits.
The criteria used for evaluating candidates should be stated and explained in order
to avoid unnecessary claims of bias in the recruitment process.
Objective evaluation results in the best employees being recruited while consistency
builds stakeholder confidence.
When an organisation recruits new employees, it should advise the applicants on its
true state.
It is unethical to mislead the applicant, allowing him/her to discover the truth only
after engagement.
Applicants should be given all pertinent information, including that which will
materially affect their future engagement and relationship with the organisation.
A good example is where a firm hires someone knowing fully well that the company
is in the process of being taken over by new owners.
Such a situation can result in the firm being sued for withholding important
information during the recruitment process.
The same applies when a company decides to recruit from organisations that it does
business with as its suppliers, customers and competitors.
A careless approach in this regard will bring to the fore serious ethical issues that
may be very damaging to the reputation of the company.
It is not advisable to proceed with such a recruitment if its clear that it will result in
the supplier feeling that you poached their good employee whom you got to know
through the working relationship you have with the supplier.
When you employ somebody from among your known customers it should not be
obvious in the eyes of the public that in so doing you are returning a favour.
It should also not appear as if you are trying to influence a future award of contracts
to the firm by having in your ranks someone who was with the customer before.
Employment of someone from your competitors if done without any regard for ethical
considerations can result in accusations of stealing trade secrets from your
competitors.
The pivotal role-played by the recruitment and selection process in an organisation
challenges the HR professional to anticipate problems, and carefully exercise due
diligence in executing the process in order to avoid needless costs and risks to the
organisation that comes with poor and unethical recruitment.
HR professionals must execute recruitment decisions grounded on informed ethical
thought as a vehicle for adding value to the firm's bottom line.
In a wider context, HR practitioners should assume responsibility for the
establishment of an agreed ethics mentality across the business that gives direction
on the expected conduct of staff in the organisation. Employees are on a daily basis
encountering ethical challenges in the workplace.
Human resources practitioners must perform their advisory role effectively by
recommending implementation of enterprise-wide ethics management programmes
in order to curtail workplace misdemeanors that have become the norm in both
public and private enterprises in the country.

Bradwell Mhonderwa is the Managing Consultant of Business Ethics Centre, a
Corporate Governance and Business Ethics Management firm. Phone 04-293
2948, 0712 420 090, 0772 913 875, or email [email protected]
Economic decline: A nation’s
curse
Tuesday, 12 July 2011 02:00
THE current debate on the purported marginalisation of Matabeleland region makes
interesting reading. In my view, this debate has clearly been provoked by the
absence of meaningful social development not only in Matabeleland, but also in the
country as a whole.
The country has not been experiencing significant social development for more than
a decade now.
Societies always yearn to fulfil their aspirations including social and economic goals
through social development, and when this is non-existent they understandably
become restless.
While the term development has tended to mean different things to different people,
in simpler terms it can be defined as an upward social movement from lesser to
greater levels of life quality and accomplishment.
Economically, development occurs when productivity rises, enabling people to earn
more, thus raising their living standards.
Development is generally measured through the existence of higher life expectancy,
higher literacy rates, higher incomes, and the existence of democracy, social
freedoms and equal access to national resources, among other measurables.
The concerns being raised by people in Matabeleland if looked at in this perspective,
are a genuine expression of frustrations that have built up in the country over the
years.
But where they clearly miss the point is when they insinuate that lack of development
is a result of marginalisation.
Contributing to the debate, former Midlands governor Cephas Msipa said: "Those
who are raising the alarm in Matabelelend should not assume that everything is
normal in other provinces, for the continuous closure of companies is also happening
in other provinces."
This is a correct observation. In fact, the whole country's industrial base has literally
shrunken to levels never imagined before.
The heavy industrial areas of Southerton and Workington in Harare today resemble
a ghost town as most factories have been forced to close or drastically cut down on
operations, and it is the same story in industrial sites of every town in the country
including Belmont in Bulawayo.
The fact that the few surviving firms are opting to do business in Harare than in any
other part of the country is simply a survival strategy.
At a micro level, shop owners in Harare are abandoning prestigious and once sought
after shopping malls like Westgate opting for the central business district where there
is a higher concentration of potential clients, as they hunt for the elusive dollar.
Life standards in the country have fallen heavily, and the economy is not creating
wealth.
Instead there has been an observable transfer of wealth to a few "well-connected"
individuals whose life standards have changed overnight and have become the envy
of the impoverished many.
Surely, there are many things that have gone wrong in the country and the worst act
of commission and omission has been to allow corruption to influence the distribution
of national resources.
This has resulted in some individuals claiming it all for themselves and their close
associates at the expense of national development.
Corruption has been allowed to destroy genuine aspirations of Zimbabweans to own
means of production and be productive.
While different societies may develop at very different rates and in different
directions under the same Government due to differences in social and cultural
orientations, Government's role in influencing development in societies is well
documented.
Besides creating an enabling environment through laws and public policies,
Government can initiate and propel social development.
Development in Third World countries has in most cases been through governments
than private initiatives.
Rapid economic advancement in South East Asian countries which has been
followed by even more stunning achievements in China show that development is
primarily premised on strong political will.
The massive investments in health and education Government undertook after
independence are some of the first forms of initiated social development
programmes that generated national pride creating awareness of greater
developmental possibilities in all communities, both rural and urban.
The pride and confidence generated by this remarkable and phenomenal
achievement helped spur a dramatic need to participate in national development by
all Zimbabweans, in the process attracting international development assistance into
the country.
But events of the last decade have seen the dampening of this developmental spirit,
and in some instances a complete reversal of the gains made since independence.
The formation of the Government of National Unity after a decade of political turmoil
and economic decline once again raised the people's hopes for social progress.
But these hopes remain an illusion as protagonists in Government continue to
quarrel showing lack of trust and commitment towards the full implementation of the
Global Political Agreement.
The business environment in the country has remained subdued, and the investment
euphoria that was spurred by the signing of the GPA has all but died down.
Zimbabweans, particularly the younger generations, are seeing and hearing about
social and economic development in neighbouring countries such as South Africa,
Botswana and Mozambique.
They are witnessing friends, relatives or others who were once of their class who
migrated during the peak of the economic decline in the country having rose rapidly
out of poverty into prosperity.
These issues are raising anxiety levels amongst the young generations in the
country, and in turn igniting a new awakening.
The country and the people of Zimbabwe have suffered for too long without any
meaningful development in their communities and the call that's being echoed
represents genuine need for positive social change.
People want the country's rundown infrastructure to start working once again and are
tired of excuses and empty promises.
The economic empowerment programme being championed by Government can be
a very powerful tool to transform communities and people's lives if due diligence is
given precedence in the programme's implementation, and when there is a
demonstrable will to adhere to best practices.
Allowing caste privileges to dictate who gets what only helps to build cynicism
around the noble agenda.
The younger generations are yearning for opportunities in which they not only
dream, hope or work for higher levels of accomplishment, but those aspirations
which are coalesced into a wider social developmental agenda.
The rising new concerns and aspirations amongst the people represent a new and
very powerful force for national development, which should be acknowledged and
nurtured and not overlooked or ridiculed.

Bradwell Mhonderwa is the Managing Consultant of Business Ethics Centre, a
Corporate Governance and Business Ethics Management firm. Phone 04-293
2948, 0712 420 090, 0772 913 875, or email [email protected]
Good governance beneficial
Thursday, 07 July 2011 04:00
By Gertrude R Takawira
ENRON is closely associated with corporate governance. This
company is best known for its bankruptcy and scandal in 2001. The
Enron case is considered to be the most notorious in US history.
Effects of the scandal were felt far and wide. Corporate governance
became a global craze.
Critics would ask, "Why now?" Corporate governance proponents, this writer
included, found one more case to support arguments for good governance.
During the10 years of my work as a governance consultant, I came across serious
skeptics of corporate governance.
Some said that corporate governance was irrelevant, while others wrote it off as
another form of colonisation or globalisation gimmick. The behaviour of some
transnational corporations did not make it easy to communicate the justice of my
cause.
In one of the missions in East Africa, I came across a book by John Perkins, titled
"Confessions of An Economic Hit Man". The book is about clandestine global US
government and corporate activities. Perkins was one of the Economic Hit Man
(EHM) highly paid professionals. In repentance, he reveals how the US took over the
world, including the inside of Enron.
Drawing from the Enron story, this article intends to show that no amount of good
governance will save corporations, which are designed to fail.
The inter-connectedness of political, economic and corporate governance is
discussed in light of the Arab uprising and the US vision.
Can corporate governance position African countries to "know thyself", as the
Western and Eastern empires bring global economic wars to our motherland?
The following is an excerpt of the Enron case from Confessions of an Economic Hit
Man: "MAIN was one example of a company that did not cope well in the changing
atmosphere of the energy industry. At the opposite end of the spectrum was a
company we insiders found fascinating: Enron.
One of the fastest-growing organisations in the business, it seemed to come out of
nowhere and immediately began putting together mammoth deals.
Most business meetings open with a few moments of idle chatter while the
participants settle into their seats, pour themselves cups of coffee, and arrange their
papers; in those days, the idle chatter often centred on Enron.
No one outside the company could fathom how Enron was able to accomplish such
miracles. Those on the inside simply smiled at the rest of us, and kept quiet.
Occasionally, when pressed, they talked about new approaches to management
about ‘creative financing', and about their commitment to hiring executives who knew
their way through the corridors of power in capitals across the globe."
"To me, this all sounded like a new version of old Economic Hit Man (EHM)
techniques. The global empire was marching forward at a rapid pace. For those of us
interested in oil and the international scene, there was another frequently discussed
topic: the vice-president's son, George W Bush. His first energy company, Arbusto
(Spanish for bush,) was a failure that ultimately was rescued through a 1984 merger
with Spectrum 7.
"Then Spectrum 7 found itself poised at the brink of bankruptcy, and was purchased,
in 1986, by Harken Energy Corporation; G W Bush was retained as a board member
and consultant with an annual salary of $120 000.
"We all assumed that having a father who was the US vice president factored into
this hiring decision, since the younger Bush's record of accomplishments as an oil
executive certainly did not warrant it.
"It also seemed no coincidence that Harken took this opportunity to branch out into
the international field for the first time in its corporate history, and to begin actively
searching for oil investments in the Middle East.
"Vanity Fair magazine reported - ‘Once Bush took his seat on the board, wonderful
things started to happen to Harken - new investment, unexpected sources of
financing serendipitous drilling rights.' In 1989, Amoco was negotiating with the
government of Bahrain for offshore drilling rights. Then Vice President Bush was
elected president. Shortly thereafter, Michael Ameen - a State Department
consultant assigned to brief the newly confirmed US ambassador to Bahrain.
Charles Hostler - arranged for meetings between the Bahrain government and
Harken Energy.
"Suddenly, Amoco was replaced by Harken. Within a few weeks, the price of Harken
Energy Stock increased by over 20 percent, from $4,50 to $5,50 per share.
"Even seasoned energy people were shocked by what happened in Bahrain. ‘I hope
G W isn't up to something his father will pay for, said a lawyer friend of mine. I was
less surprised than my peers, but I suppose I had a unique perspective.
"I had worked for the governments of Kuwait, Saudi Arabia, Egypt and Iran; I was
familiar with Middle Eastern politics. And I knew that Bush, just like the Enron
executives, was part of the network and my EHM colleagues had created; they were
the feudal lords and plantation masters."
It is easy to string through political, economic and corporate governance in this story.
This is about empire building. It is an on-going American vision, carried from one
generation to the next, beyond political differences.
It gets clearer as we watch current Arab uprising, being graced by visits to Egypt and
Tunisia from Congressmen McCain, a Republican, and Kerry, a Democrat, with
General Electric CEO Jeff Immelt, along with officials from Boeing, Coca-Cola,
Bechtel, ExxonMobil, Marriot and Dow.
Like many, I sometimes get incensed with the above.
However, today my stance is not to judge but to be a student. Foundations and
intentions determine the growth and robustness of corporations.
It seems that Enron's rise and fall was predetermined.
Much like the recent suicidal mission of Europe's Automated Transfer Vehicle (ATV),
Enron had a spectacular rise and fall.
It brought energy to "feudal lords" and in 2001 it came back crushing.
It is reported that ATVs can take to space stations more than seven tonnes of fuel,
food, water, air and equipment. On return they are filled with station rubbish.
Almost everything burns up on the fiery descent. Had Enron completed its mission?
Was the social cost comparable to station rubbish?
Enron casualties included: 22 000 employees. Even more baffling is that more
corporate failures were reported, culminating into global economic crises, in spite of
SOX. Was corporate governance being used to cover up dishonesty?
Even SOX, was it necessary? It is this deception which seems to annoy many. This
writer participated in governance reviews of several African countries. Discussions
with stakeholders are always paved with lots of cynicism.
The equation involving foreign direct investment (FDI) and Doing Business
indicators, what Africa could do to attract more FDI, trade, private sector
development, economic growth and governance; never seem to result in the poverty
reduction?
Poverty reduction or governance, which comes first?
Second lesson is having a common vision that is equally understood at all three
spheres of governance; political, economic and corporate. The American vision is
clear.
It transcends political divides. It is consistently upheld over generations. Impact of
this vision on for example, health delivery services is outside the scope of this article.
The cited book, further, describes this American vision as "one that is as old as the
Empire, but has taken on terrifying dimensions during this time of globalisation".
Regime change, huge debts, extortion, sex and corruption, are some of the
examples of tools used by EHM.
Please remember that when next you are tempted to beat each other up during
election time, you are just tools in the sight of EHM.
What is our strategy, in the face of on-coming economic wars? I believe there is
more that unites us than separates us.
Third lesson is found in Sun Tzu's saying, "know thy self, know thy enemy. A
thousand battles, a thousand victories."
I understand "knowing thyself" to entail self-governance.
We see this strategy in the rise of Chinese businesses and economy.
The Chinese are confident; they know and believe in themselves.
For a long time, they pretended to be ignorant, only to fall like a thunderbolt.
It caught the world napping. Corporations and institutions mirror who we are as a
people. For instance, the queues which we are all accustomed to, send clear
messages of inefficiency, as well as lack of dignity and respect for ourselves. It is
easy to respect one a people that respects itself.
How can we employ self-governance to know ourselves better?
Fourth lesson: It must not be assumed that any corporation from the West or East
and even the BRICS is necessarily run with good governance. However, without our
own standard of good governance, we find ourselves adopting standards from King,
Commonwealth, SOX, and Singapore etc. The result is confusion, lack of ownership
and misplaced anger.
When governance is used as a carrot and stick, conditionality in development
assistance, or weapon, then its real benefit is lost. Governance is a way of being.
Just as breathing gives life to animals, good governance gives life to institutions.
This terrain called the global village is getting desperate and vicious.
Friends are becoming enemies and enemies are becoming friends. Knowing thyself
is best. Without responsible corporate governance our corporations will be
swallowed.
On a lighter note, in June, I joined others in celebrating corporate fathers from all
parts of Zimbabwe and Africa, who in their own way uphold standards of
governance, and nurture businesses, through most trying circumstance.
Readers who know of such corporate fathers and mothers, please send their names
to the e-mail address below, not only to celebrate and acknowledge them, but for us
to learn from our best.
The writer is a researcher and consultant and can be reached at email;
[email protected]
Let good corporate governance
prevail
Wednesday, 22 June 2011 01:00
By Gertrude R Takawira
Types of firms normally take the form of legal environments in which corporations
raise capital. Corporate governance structures take the form of political
environments from which the firms emerge.
The outlook of corporate structures and governance in Zimbabwe is set to change
through the implementation of indigenisation and empowerment laws.
Equity participation, where 51 percent of ownership in companies will be indigenous,
is set to reinforce family owned entities as a major type of business in the country.
The concept of family owned business is one where there is a dominant family,
which owns and controls the business.
In addition, there is also a clearly established vision within the family grouping, to
keep business in the family across generations.
The word family, in this sense includes immediate and extended family members
including friends and associates.
Businesses being referred to here are major economic entities.
Family owned businesses are not a new trend in Zimbabwe or across global
economies.
Locally, dominant families in major business such as Econet, Kingdom, Croco
Motors and many others can be traced through to ownership and control.
Family owned businesses are ingrained in Asian economies. Corporate giants such
as Mitsubishi and Toyota in Japan or Samsung in South Korea are all family owned
businesses.
Famous global corporations, such as Ford Motor Company, Cadbury, House of
Rothschild, Fiat, De Beers, and Acer Computers were founded through family
ownership.
Although family owned businesses have been common to many economies for
centuries, this fact is not adequately reflected in the development corporate
governance.
For instance, the Anglo-Saxon model from which Zimbabwe derives its corporate
governance structures defines a company as a legal entity, separate from its owners.
Some environments might have successfully upheld this legal truth, but in
Zimbabwe, this is not always apparent. Over the years, the nature of Zimbabwe's
business environment has been changing.
The dispersed type of corporations gave way to more centralised family business
units where there is fusion of ownership and control, or even management.
As the country gears itself for a major economic shake-up through indigenisation,
there are concerns about corporate governance policies and frameworks.
Can the current corporate governance regime carry the new wave of family owned
businesses and the inherent governance challenges?
This article is intended to provoke debate on corporate governance problems
peculiar to family owned businesses, in light of the indigenisation process.
It highlights the concept of ownership and control; continuity; succession;
employment and economic power wielded by family owned businesses.
These discussions are based on the observation that in Zimbabwe, corporate
behaviour among family owned businesses tends not to separate ownership and
control, in a legal environment that assumes separation.
It is expected that through these discussions, policy makers and researchers will
stand informed to address corporate governance issues.
Current challenges being faced by the ReNaissance Group reveal some of the
nature of corporate governance problems inherent in family owned businesses.
Through observation, managerial omnipotence, through ownership and control is not
unique to ReNaissance Group.
This has become a general corporate behaviour in Zimbabwe.
This omnipotence can be seen in who actually has the last word on these four
principal activities of a business; direction through strategy formulation; executive
action including decisions on who should be employed; supervision and
accountability.
It has been said that one cannot be their own referee.
When supervision and accountability in business are carried out by one and the
same person, then this is a one man game.
Corporate governance assumes independent supervision as well as role clarity in
order to define accountability lines.
Where a shareholder or owner, controls and performs day to day tasks in the
business, such as the appointment of employees, then corporate governance
problems will exist.
More pertinent to the indigenisation and empowerment process are concerns about
entrusting ownership and control of national resources to family owned businesses,
which are accountable to themselves?
If family owned businesses are the future of this country, is it not prudent to craft
corporate governance policies, systems and culture that will enhance supervision
and accountability in these types of entities, this time not after a crisis, in order to
avert crises?
The Asian financial crisis of 1997 was attributable to uncontrolled corporate
behaviour of powerful family owned businesses.
Economic power wielded by family businesses can be enormous. In a study by
Claessens, Djankov and Lang using 1996 data, it was found that the top 15 family
groupings in Indonesia controlled a massive 61,7 percent of the total value of listed
assets, representing 21,5 percent of gross domestic product.
The same study also found that in the Philippines, the top 15 families controlled 55,1
percent of listed assets (representing 46,7percent of GDP) while in Hong Kong, the
top 15 families controlled 34,4 percent of listed assets (representing 84,2 percent of
GDP).
The Oppenheimer family for a long time now has carried massive influence within
the mining sector in Southern Africa.
The indigenisation process in Zimbabwe could either introduce new players and
therefore decentralise economic power, or fortify power in existing family owned
businesses.
Whichever way, this power should be harnessed for the good of all. Corporate
governance is one way in which corporate power may be controlled.
Continuity is of major importance in wealth creation and economic growth. Yet,
continuity is among the major corporate governance threats to family owned
businesses.
The demise of corporations brings about job losses, lost savings, lost businesses
and indeed economic stagnation or downturn, adversely affecting people or
stakeholders in one way or the other.
Going back to pre-independent Zimbabwe, brand names such as Farai Uzumba,
Ruredzo, Matambanadzo and others defined the transport sector of the economy.
Through lack of continuity, they missed on an opportunity to offer stability to the
socio-economic development of the country.
The transport sector is still struggling. This is a developmental concern.
Lack of continuity could be due to various reasons; such as the demise of founding
members, family conflicts and lack of interest in the business by other family
members.
Perhaps, most prevalent in Zimbabwe, is the absence of successors. The modern
day heirs are sent abroad for education, and a few come back.
Or, when they do, even fewer go into family businesses.
Family owned businesses are unique in that family governance often finds itself in
corridors of company business.
Family governance includes for instance, family traditions and values, family feuds
including divorce and inheritance and many other dynamics which weigh heavily on
the smooth running of the business.
This is why corporate governance systems are necessary, to systematically separate
family issues from business issues in order to ensure continuity.
An often quoted saying about Mexicans on family owned business is, "Padre noble,
hijo rico, nieto pobre".
This means father, the founder works and builds the business, the son, the rich takes
it over and is poorly prepared to manage and make it grow, but enjoys the wealth.
The grandson inherits a dead business and bank account.
Succession is a corporate governance concern and, it is key in the success or
otherwise of family businesses.
Even the mafia is aware of this fact and often grooms successors to ensure that
family values and interests are protected.
Economic growth without employment growth is futile.
Employment in family owned businesses is not always based on merit, but on
lineage and association.
If not carefully managed, growth of family owned businesses could result in higher
unemployment and marginalisation of talented people.
It is in the interest of the family and the business to have clear cut employment
policies on employment and promotion of staff.
Non-family members should remain motivated to work hard and remain in the family
owned businesses.
Culture is also an important catalyst for sound corporate governance.
It is clear that family owned business take on the culture of a family unit, which in
turn takes on the culture of the community or society.
Using Hofstede culture terminology, the culture in Zimbabwe is mainly collective. The
Anglo-Saxon model has an individualistic tone, even when the stakeholder aspect is
added on.
Given the pot pourri of ideologies, skills, experiences, trading partners and many
others that have since shaped the business culture in Zimbabwe, the writer believes
that there is need for more studies to help redefine the Zimbabwean business
culture.
I suggest this in corporate governance, because the current single tier system of
corporate governance seems inadequate for family owned businesses.
Perhaps, a two-tier system of corporate governance, such as the one used by
Germans or Japanese and other countries in Asia and Europe would be more
appropriate.
The aim of corporate governance in family owned businesses should be to create a
social consensus among the many social networks inherent to these structures.
Secondly, it is meant to ensure continuity and protect the great entrepreneurship
among family owned businesses.
Within family owned businesses is some great entrepreneurship, which must be
allowed to develop.
This type of business is here to stay.
Through the indigenisation and empowerment process, this type of business will
further be embedded in the economy.
With it are strengths and weaknesses, as well as opportunities and threats, which
have not been provided for by current corporate governance frameworks.
The economic power of family owned businesses can be enormous.
This means that their downfall or lack of continuity can be disastrous to the
economy.
Rather than wait for calamity to strike, our corporates, policymakers and researchers
should now consider corporate governance mechanisms appropriate to family owned
businesses in Zimbabwe.
The writer is a consultant and can be contacted at e-mail
[email protected] or +263 (0) 772738811.
Time for ethical leaders to act
Tuesday, 21 June 2011 01:00
Many pundits of organisational transformation embrace the quote of Mahatma
Gandhi which says, "We must be the change we want to see happen in the world."
US President Barrack Obama in his famous citation edifies this statement: "Change
will not come if we wait for some other person or some other time. We are the ones
we've been waiting for. We are the change that we seek."
The need for responsible business conduct and ethical workplace behaviour in the
country continues to grow. Its significance has become more and more important as
scandals continue to hog the limelight in both public and private institutions.
The recent abuse with abandon of depositors' funds at Renaissance Merchant Bank
by its shareholders and senior executives is a case in point.
This leaves many people in the country baffled and wondering how much
wrongdoing needs to be committed before the powers-that-be can take stern
measures against those abusing public trust and violating their fiduciary duties.
The country needs to shift from words about ethics and move to real action about
ethics.
Time has now come for the ethical to come out of their shells and lead processes in
cultivating responsible business conduct in their organisations.
Yes, this is the moment to take off the gloves, call a spade a spade, and fight the
scourge without fear or favour.
Ethical people should know that they have a moral obligation to lead the way in
transforming their organisations and cultivating ethical behaviour that should take our
economy and country forward.
A total onslaught on unethical behaviour wherever it rears its ugly head will reengineer business conduct unmasking dishonesty, deceit, greed and many such
vices endemic in the economy.
Through a scorched-earth line of attack, the ethics effort will devour the bane
destroying it and making sure the new ethics offshoots will find a clear ground to
blossom.
When you have those at the top being at the centre of decimating their organisations
like a pullet eating its own eggs, it becomes imperative to turn to the ethical few
within those organisations and implore them to heroically impose their moral
standing upon their colleagues. "Darkness cannot drive out darkness; only light can
do that," said Martin Luther King Jnr.
Ethical people in boardrooms, among senior management, and in workplace
trenches should know that the time to remain quiet allowing the unethical to lead the
way is over.
Again Martin Luther King Jnr exudes inspiration when he warns: "He who passively
accepts evil is as much involved in it as he who helps to perpetrate it."
Ethical leaders should be inspired to speak out against corruption and all forms of
unethical behaviours, and be the catalysts for change.
They should redeem themselves from the delusion that they are powerless in the
face of shameless acts of the unethical.
The ethical should shade off the spectre of naivety and submission to intimidation
and silencing by the unethical as if they are the ones on the wrong.
The nation demands inspired ethical leadership to lead the way in unravelling
corporate processes flashing out all forms of unethical behaviours present and in
turn instilling a feeling of shame in those bent on plundering their organisations
through greed.
Ethical people should rise above the fear that bars them from reporting misconduct
by colleagues and those in senior positions.
They should overcome timidity and assert themselves as the leading edge for
sustainable organisational change. Fear is an evil responsible people should never
allow controlling their minds and souls.
Nelson Mandela summed it up when he said: "I learned that courage was not the
absence of fear, but the triumph over it. The brave man is not he who does not feel
afraid, but he who conquers that fear."
And according to Andre Gide: "There are very few monsters who warrant the fear we
have of them."
Introducing new ideas and new organisational processes always demands brave and
strong leadership. It requires ethical leadership that is fearless, with the ability to
withstand criticism and demonisation by those against change.
Remember change means fighting against those who have entrenched themselves
in the status quo and don't want to let go of the benefits they have accumulated over
time.
Like a vicious bulldog, they are bound to guard ferociously their feeding trough and
will need those who are equal to the task to subdue them.
And such change is made possible when led by people who know exactly what
needs to be changed. The ethical in organisations should provide the purposeful
leadership required to lead organisations to secure the desired transformation.
Ethical leaders are trusted to have insightful and discerning capabilities that inspire
employees and grow their organisations. Ethical leaders can use the moral trust
bestowed upon them by stakeholders to embed responsible business conduct at all
levels in the organisation that should resonate with the whole economy.
They are the revered ones, the chosen few to effect change through strong, ethics
embedded strategies, in the process rekindling employee commitment towards
organisational success, and the whole nation towards national economic
development.
Organisational change anchored on insightful ethical footing will shake the
foundations of the social and economic systems in the country.
No amount of force will be too strong to withstand this sacrosanct form of change,
and any such resisting force is sure to be wiped out.
An ethics tsunami that takes with it all societal misdemeanours, demolishing even
the most defiant pillars is possible through committed ethical leadership.
The "goliaths" of corporate malfeasance will fall, and corporate vultures including the
most fearsome predators will be vanquished.
They will be driven to the mountains, and with so much jubilation, throwing fists into
the air, the whole nation will rise up to celebrate their demise as a new season of
new ethical systems begins to dictate operations in our firms, our organisations, and
in the economy at large.
These are the new arrangements that will see organisational performance improving,
productivity increasing, and the economy growing for the betterment of all. So be the
first ethical leader inspired to change your organisation.

Bradwell Mhonderwa is the managing consultant of Business Ethics Centre, a
corporate governance and business ethics management firm. Phone 04-293
2948, 0712 420 090, 0772 913 875, or email [email protected]
Differentiating compliance from
ethics
Monday, 06 June 2011 22:18
Getting your company to embrace ethics and compliance issues right is an important
aspect of running any business, small or large, professionally.
When a firm or business organisation is established, compliance with the laws of the
land in relation to issues like the shareholding arrangement, licensing, directorship,
environmental issues, industry rules and regulations, etc, is of paramount
importance.
Failure to comply with all applicable laws needlessly puts the business at risk and
that may include paying heavy fines to regulatory authorities, or facing closure.
At the same time when a firm is established, coming up with a set of values that
direct the behaviour of its employees is an intrinsic business reality which forms the
basis of any firm's ethics decorum, formal or informal.
However, in most organisations, the concepts of compliance and ethics have been
used interchangeably as if the two mean the same thing.
In fact, most organisations think that when they have a compliance function in place,
it means they have their ethics needs automatically covered.
This is an inherent misconception and it is the purpose of this article to show the
difference between these two business fundamentals.
A fully-fledged legal department, and the ethics function is viewed mostly as a
human resources function to fulfil the compliance function in most large
organisations in the country.
In countries and companies that leverage business ethics as a corporate strategic
tool, compliance and the ethics functions are at times combined to form the Ethics
and Compliance Department.
Experience shows that where the ethics function is placed under the legal
department, the tendency is to view ethics as an extension of the legal department.
This tends to compromise the effectiveness of the ethics agenda in the organisation
as employees prejudicially focus on the mere need to comply with the letter and not
the spirit of the company ethics.
Organisations need to recognise first that there is a material distinction between
ethics and compliance. Ethics is an approach to handling business and people
issues, and is built around the overarching values of the firm.
It is about the company's culture and the values that must permeate daily business
conduct at every level in the organisation. Each organisation must come up with
behavioural standards and codify them to provide a practical guide to staff on what
behavioural standards are required of them and make them part of the way it does
business.
On the other hand, compliance is a series of systems and processes that are
designed to ensure conformity to applicable laws and industry rules and regulations.
The first piece of legislation that a company has to abide by at its inception is the
Companies Act that provides a detailed guide on how companies should legally be
run.
This distinction is important because it is possible to operate in legal compliance
while still acting unethically, or in conflict with the firm's values and principles.
Yes, it cannot be denied that ethics and compliance are in most cases co-existing.
However, ethics is intrinsic, it starts with you the person, or organisation, whereas
the law is extrinsic, that is, it is imposed from outside the individual or organisation.
While the law may form the basis of a sound ethics programme, the law on its own is
inherently insufficient to encourage appropriate ethical behaviour in the workplace.
Potential loopholes will always exist when the legal framework is used as a single
tool to control workplace behaviour as it provides employees with the opportunity to
merely comply with the letter as opposed to the spirit of the law. Ethics thus builds
upon the law by reinforcing the spirit aspect of the law, and invoking a spirit of selfregulation, which will then form the basis of a sound ethics programme in the
company.
Building an ethical culture in an organisation is a long-term initiative that must be
linked to company values more than to law.
Yes, employees in organisations are expected to be in "compliance" with the set
standards as stated in the code of conduct and/or ethics. However, this "compliance"
has in most cases been the source of confusion on the difference between
compliance and ethics as others have argued that "complying with set ethics
standards" is itself part of the compliance function.
This scenario, however, also illustrates situations when the two concepts overlap by
exhibiting that compliance and ethics are rooted in everyday workplace operations
and integrated into daily job responsibilities.
In like manner, workplace discrimination laws that prohibit employment based on
race, sex and other personal characteristics supports both the legal and the ethical
posturing of the firm.
Here in Zimbabwe and in most countries in the world, it is obviously unethical to
discriminate people seeking employment on the basis of their race or religion.
Legally, employers are expected to be in compliance with the requirements of the
law such as the Labour Relations Act in our case, which clearly criminalises
workplace discrimination.
Companies should know that unlike the relatively simple task of ensuring regulatory
compliance, creating an ethical culture is a long-term, well sustained initiative that
involves everyone in the firm from management to employees at shop-floor level with
clear board oversight. Creating an ethical culture requires system wide commitment
and a focus on the behaviours that make a difference in daily business practice.
Vital to the plan are committed leaders who can positively influence the conduct of
employees they interact with and mentor, whether in a formal manner or through the
standard they set in their own behaviour, actions and responses to workplace issues.
So, instead of just looking at compliance requirements and confusing them with
ethics, firms should instead segment the two fundamentals, and evaluate the
obvious success indicators that play out in the dynamics of the work environment.
These success indicators will as a matter of fact include looking at how employees
react and conduct themselves when faced with ethical dilemmas, or situations that
require decisions based on the company's value systems.

Bradwell Mhonderwa is the Managing Consultant of Business Ethics Centre, a
corporate governance and business ethics management firm. Phone 04-293
2948, 0712 420 090, 0772 913 875, or email [email protected]
Enact corporate governance law
Monday, 23 May 2011 21:59
AS corporate scandals continue to plague both public and private institutions in the
country, there is a growing acceptance of the need for legislation designed to
manage the corporate governance and business ethics terrain.
The apparent need to increase the financial transparency and accountability of firms
and institutions particularly those that are of national significance, and in the publicly
traded companies cannot be overemphasised.
The recently reported gross abuse of corporate governance processes at
Renaissance Merchant Bank by senior executives is a clear indication of the level of
rot that has befallen our business sector, and shows the need for tougher regulation.
Renaissance Merchant Bank is reported to have had depositors' funds siphoned by
its main shareholders in a way that is "akin to a declaration of dividends by
shareholders from depositors' funds".
Affiliate organisations to the bank such as Afre Corporation and Rainbow Tourism
Group have as a result been suspended from trading on the Zimbabwe Stock
Exchange, and the ordinary shareholders in these firms are counting their losses.
Apparently the after-effects could have been more contagious and catastrophic to
the banking sector and the general economy if it wasn't for the swift action taken by
the central bank and the Ministry of Finance in exposing the malpractices and
securing a financial bailout for the bank.
Global examples of such corporate failures include the fall of the US energy giant
Enron in 2001, through widespread accounting fraud and insider trading, and in
Japan where the alleged securities fraud in 2006 instigated a stock sell-off resulting
in temporary shutdown of the Tokyo Stock Exchange.
The recent world recession that was precipitated by bad corporate governance in the
financial services sectors of the leading economies is another clear example.
These scandals were followed by the enactment of legislation such as the Sarbanes
Oxley Act, 2002 in the US, and in Japan a financial reporting law known informally as
J-SOX, because it was based on the mould of the US Sarbanes Oxley Act.
The aftermath of the world recession saw the implementation of stricter and tougher
regulatory frameworks in the financial services sector of the USA and European
countries.
Corporate integrity is definitely good for business. Greater transparency and
accountability leads to greater efficiency and profitability in the firm.
Flexible and practical frameworks for integrating corporate governance and business
ethics management help organisations use these tools to reduce costs and drive
business performance.
By addressing corporate governance through legislation, the nation will propel
companies to improve their own business performance, expand opportunities for
growth, and contribute to national development.
Organisations that commit to business ethics and good corporate governance
inevitably do better in the market place.
By building into their operations clearly defined and effective avenues for employees
to report theft, fraud and other inappropriate workplace behaviours without fear of
repercussion, corporations can realise real savings at grassroots level.
While petty theft, for example, may seem just that, when multiplied across tens or
hundreds of cases over the course of a year it becomes a huge sum of money.
An effective ethics programme translates into an efficiently run organisation, which in
turn translates into profitability.
When employees observe violations of company policies and procedures and poor
business decisions being made by managers, the business environment in the
country should make it possible to report this behaviour through clearly defined
processes in the organisation which will lead in the punishment of the perpetrators.
In most cases, employees want to report misconduct but fear that management in
their organsations may fail to respond positively to their concerns, or they fear that
they may end up losing their jobs if they speak out or report the rot in the
organisation.
Detection and preventing unethical behaviour not only serves an organisation the
money it may be losing as a result of the misconduct itself, the organisation will
secure even greater savings through a good reputation.
As corporate scandals have demonstrated around the world, nothing weakens
investor confidence like allegations of corporate fraud or insider trading.
Legislation should be put in place in the country to guarantee a confidential reporting
mechanism for all forms of workplace and organisation based misconduct, and to
punish individuals and organisations found wanting.
The world over, it has become apparent that there is an unstoppable and ever
increasing global awareness that a corporate culture of integrity anchored on sound
and prudent national management of the corporate governance and business ethics
environment through well crafted legislation will provide return on investment.
Company executives should be obliged by national legislation to prioritise company
efforts that propagate good corporate governance and business ethics values so as
to drive business performance and promote integrity.
So the future of business ethics programmes around the world is not overtly difficult
to predict.
While corporate scandals continue to drive the need for such programmes, ultimately
it is the economic advantage these programmes provide that will sustain and grow
them in the future.
As a result, dynamic and effective ethics programmes will become the rule rather
than the exception.
The best the Government can do to promote this unavoidable business reality is to
put in place legislative infrastructure and regulatory frameworks that promote good
corporate governance in the whole economy.

Bradwell Mhonderwa is the Managing Consultant of Business Ethics Centre, a
Corporate Governance and Business Ethics Management firm. Phone 04-293
2948, 0712 420 090, 0772 913 875, or email [email protected]
Spirit of corporate governance
Monday, 29 August 2011 02:00
Corporate governance battles rage most in this component. Human minds, hearts,
and emotions must converge for the good of the organisation. Yet egos, greed,
excessive competitiveness, revenge, hate, fear etc also fight to get their way.
Whose decision? Why that decision? What if it does not work and I lose? What is in
it for me? - are examples of the struggles within the soul of governance.
The victor becomes the dominant thought and belief system of governance in the
institution. For instance, if greed is a dominant thought, then corruption will prevail. If
fear is dominant, then amassment and hoarding prevails.
The intensity of this thought and belief systems, translate into a spirit of governance,
if allowed to persist long enough.
In selecting board members and senior executives it is important to be cognizant of
these tendencies. Thus quality and not quantity of boards and executives is really
the key issue in shaping the soul and the spirit of governance in an organisation.
It is equally important for organisations, to define preferred dominant spirit. As
directors and executives are recruited, they should have a certain defined aura about
them, which fits in with organisational values and desired spirit of governance.
"The people that I trusted to run it and then maybe the people they trusted".
These are the words of Rupert Murdoch addressing the UK Parliament, following the
phone-hacking scandal at News Corporation. Driven by greed, these people,
Murdoch trusted caused a 168 year old establishment to shut down instantly.
As names of policemen, private investigators and journalists were tossed about in
this scandal, one could only question the selection criteria, of trusting these
characters to run such an establishment.
Perhaps it is true that Murdoch and his executives were not responsible. It was the
spirit of corruption that had taken over. Greed had been allowed to persist long
enough to be like cancer and it ate away all of News Corporation's 168 years of the
goodwill.
Yet again if the Chief Executive and his executives were not responsible, then it is
conclusive that the dominant thought, belief system and culture of the organisation
were that of irresponsibility.
Crisis of governance always comes about when "self" overshadows "others". If no
one was responsible for the 168 year old establishment, then no one cared, for the
company and for those in and around it.
A good spirit of governance is created values of love, care, truth, compassion,
clemency etc. It allows for nurturing of systems and organisations. a good spirit of
governance thrives in an environment of protection and persistence in doing good.
These values can separate "self" from the needs of the organisations.
These values have an inbuilt ability to create more. Unlike for instance greed that
assumes shortage and lack, the values of love, care, truth, protection and
compassion assume abundance. According to the law of attraction, an atmosphere
that thinks abundance attracts abundance, and vice-versa for lack.
Thus creativeness rather than competitiveness becomes the underlying current in
governance.
Yet, love is not a common corporate language. It is in hospitals, churches and
schools where care is a trait that love is perceived to be more appropriate. More
dominant in corporate corridors are the hard, competitive, strategic thinking, critical
path analysis, SWOT, Gantt and PERT charts etc type of language.
These are necessary masculine values and they have taken over corporate
business, world over. Men dominate businesses and they bring with them male
oriented values. Love and care are perceived to be feminine values of nurturing. An
appropriate balance of these feminine and masculine values is what shapes the spirit
of good governance.
In the confusion of an overdose of male values in organisations, and in some cases,
women trying to adapt to these masculine tendencies, we have "falsified"
organisational governance systems.
"Falsifying type" is a term invented by Carl Jung in 1926. This occurs when one
develops and uses more competencies that are managed by one's non-preferred
functions and fewer managed by one's natural lead function.
Are corporate businesses of today, being governed for their natural functions, or
non-preferred? A common phenomenon in corporate governance is the issue of
remuneration. For instance, institutions are made to function as banks as they
finance executives' lifestyles.
Diversification, sometimes when overdone, brings about "falsification".
The cost could be fatal to the organisation.
I believe that there are crises of governance riding on the back of the current global
crises and that love is the antidote.
People world over are seeking more meaning to life and work. It is as if the whole
world has been operating under falsified governance systems, and Mother Nature is
calling us back to be nurtured. Should we resist?
Although nurturing and love are regarded as feminine traits, it does not mean that
only women can nurture companies. Neither does it mean that all women necessarily
care, love and nurture.
However, I believe that all human beings can learn to be compassionate and caring
to organisations.
A spirit of good governance is therefore shaped first and foremost through
compassion.
Attributes of a responsible
business entity
Tuesday, 16 August 2011 02:00
MANY people have always wondered what really makes some businesses tick whilst
others find the going tough and some close shop on the basis of exogenous factors.
While businesses are unique in terms of their size, complexity, resource base,
product line and management, one critical factor that has tended to define the
success or failure of a business is whether it is able to act responsibly and meet the
reasonable expectations of its stakeholders.
Acting responsibly and meeting stakeholder expectations is premised on the
propagation of an ethical culture in the business.
Every business has stakeholders that include customers, employees, suppliers,
investors, the environment, shareholders and managers.
From the business, customers want quality products, and employees want their
welfare to be taken care of, including having an outlay of good working conditions.
Investors want a return on their investment, the environment needs preservation for
posterity, and shareholders want value for their money.
A responsible enterprise should therefore generate revenue by satisfying customers,
it should attract capital by meeting investor expectations, and it must increase
effectiveness by attracting highly skilled and competent staff.
A responsible business should exhibit transparency in financial matters, and
workplace health and safety issues must be prioritised.
The responsible enterprise should ensure it is compliant with the laws of the land
including industry rules and regulations. Improved business performance,
productivity and increased profits come to those who effectively and efficiently foster
and meet the reasonable expectations of their stakeholders.
While success in business is ultimately measured in terms of profits and losses, the
ethically responsible enterprise knows that taking care of stakeholders' expectations
results in long-term growth and profitability.
Businesses whether small or large, should act responsibly all the time.
It is indisputable that the major goal of an enterprise is to make profit and increase
shareholder value, and when business operations are anchored on sustainability,
more profits and shareholder value is realised in the long term.
Profits made using unethical means are gratifying in the short term, but they clearly
don't guarantee that more profits will be made tomorrow, and worse still, they expose
the firm to sudden and painful loss of business in the long run.
Companies can only sustain profitability in the long term when they adopt ethical
means of making those profits.
Responsible businesses should therefore see the value of going beyond short-term
profiteering to consider the people, and the planet as key elements of sustained
profitability.
The triple bottom line or the three Ps (profit, people and planet) has in recent times
become an unmistakable cornerstone for sustainable business success whether the
business is for-profit, or not.
A responsible business should be inspired to contribute towards national economic
development.
It should take initiatives and inspire change by contributing to efforts that promote
evolution to responsible business conduct in the economy.
This is achievable when firms take the initiative to fund genuine efforts to bring about
behaviour change in the economy, and when they engage in broader corporate
social responsibility programmes that targets not just the community in which they do
business, but the society at large.
Traditionally, people have tended to speak of business in terms of products, jobs,
and profits without talking much about its obligations to the community in which it
does business.
Corporate social responsibility is a company-initiated activity where entities invest
time and resources in improving the welfare of the communities in which they do
business.
It means engaging in the construction of schools, roads and hospitals, providing
clean water, and it may also include caring for the poor and disadvantaged in those
communities. Corporate social responsibility has over the years become a powerful
tool in building brands and securing community goodwill.
A good corporate social responsibility policy can actually give a company a
competitive edge and encourage people to purchase products based on a solid
belief that the company operates with the interests of customers and the community
at heart.
So, it really matters how profits are made, how wealth is distributed, and whether
businesses are operating in a sustainable way. Economic growth and development
and the improvement of the people's living standards in communities are spin-offs
from sustainable business growth.
Former company executives at Lobels (Pvt) Ltd are reported to have formed
numerous fictitious firms which they used to milk Lobels (Pvt) Limited through
fabricated invoicing, and as a result of this, the company is reported to have lost
millions of dollars.
For sometime now, Lobels has teetered on the brink of total collapse putting in
danger the livelihood of a number of people who are dependent on it for
employment.
This scenario is typical of what happens to a business when its leaders choose to be
reckless and irresponsible.
A responsible enterprise strives to place the right people in the right positions, and
understands that it is an integral part of the community in which it does its business.
Company leaders should never concentrate their attention and efforts on dealing
with everyday challenges.
Instead, they should strive to rise above these challenges and focus on the future of
their firms.
A responsible business enterprise holds some enduring purpose that goes beyond
profit to define the enterprise and inspire and guide its employees.
And such a purpose will help employees have a deeper understanding of the intent
of the organisation stirring them to achieve organisational goals.
Above all, a responsible business should implement a formal business ethics
programme.
An effective ethics programme is the cornerstone for building a responsible business
enterprise, which will result in enhanced stakeholder trust and goodwill.
It will result in a responsible business that will enjoy increased productivity,
competitiveness, access to credit, and sustained long-term growth.
l Bradwell Mhonderwa is the Managing Consultant of Business Ethics Centre, a
Corporate Governance and Business Ethics Management firm. Phone 04-293 2948,
0712 420 090, 0772 913 875, or email [email protected]