LAW ASSOCIATION OF ZAMBIA and INTERNATIONAL SENIOR LAWYERS
LAW ASSOCIATION OF ZAMBIA and INTERNATIONAL SENIOR LAWYERS PROJECT Commercial Law Training Programme Presentation on Corporate Governance by Mumba S Kapumpa Corporate Governance Consultant MSK management and governance Consultancy Wednesday 13 th July 2011 Cresta Golfview Hotel, Lusaka 1 laz/islp/msk/July 11
I will discuss…………. . Prelude I Corporate Governance Defined II Pillars of Corporate Governance III Triple Bottom Line IV Role of Board, Directors’ Duties V Role of Chairperson of Board VI CEO/Managing Director VII Distinction Between Board and Management Duties VIII Board Working Procedures, Meetings, Minutes IX Role and Functions of Company Secretary X Conflict of Interest XI Evaluation of Board, Directors and CEO XII Conclusion 2 laz/islp/msk/July 11
BRIEF BIO ON MSK 1971 -1992 -2002 1996 2000 2001 2002 2003 2004 -2007 2004 2005 2007 2008 2009 2010 2011 3 Govt. Exit PS/Treasury Counsel Sec. and CEO, SEC Chair, African Capital Markets Forum Member, Io. D Zambia Board Member, Partnership Forum, ZACA Member, Steering Committee, PACFCG Associate Member, CIArb Partner, Malambo & Co. , Ex. Dir. , Io. D Zambia Trustee, Barclays Staff Pension Fund Member, Corp Govern. Advisory Services Ltd Partner, Mumba S Kapumpa Advocates Vice President, Io. D Zambia Pres. Io. D Zambia, Chair PSDP Corp Gov. W. G Paris, Cape Town, Johannesburg, SADC C. G Trainer APRM Chair Corp. Gov. Ethiopia APRM, CRM, Swaziland Consultations Lesotho, Botswana, Namibia, Zimbabwe, India Consultations Strategic Plans: LASF, NRFA ; ZRL, ZSIC Group Namibia, RSA Corporate Governance workshop facilitation laz/islp/msk/July 11
PRELUDE PRESIDENT BARACK OBAMA in a speech to Ghana’s Parliament Saturday July 11 th 2009 said: “……. we must first recognise a fundamental truth that ……. development depends upon good governance. That is the ingredient which has been missing in far too many places, for far too long. That is the change that can unlock Africa’s potential. And that is a responsibility that can only be met by Africans……” 4 laz/islp/msk/July 11
I. CORPORATE GOVERNANCE DEFINED Governance: n 5 the manner in which power is exercised in the management of economic and social resources for sustainable human development laz/islp/msk/July 11
I. CORPORATE GOVERNANCE DEFINED Corporate Governance: n 6 refers to the manner in which the power of a corporation is exercised in the stewardship of the corporation’s total portfolio of assets and resources with the objective of maintaining and increasing shareholder value with the satisfaction of other stakeholders in the context of its corporate mission. laz/islp/msk/July 11
I. CORPORATE GOVERNANCE DEFINED “the system by which organisation are directed and controlled” Cadbury Report 1992 7 laz/islp/msk/July 11
II. PILLARS OF GOOD GOVERNANCE n n n 8 accountability efficiency and effectiveness integrity and fairness responsibility transparency recognition of stakeholder rights laz/islp/msk/July 11
III. TRIPLE BOTTOM LINE n n n Sustainable Performance = integration of economic, social and environmental performance: People, Planet, Profit Each of the Triple Bottom Line not to be viewed singularly BUT impact across each of the needs to be understood Viability of any particular business initiative must be seen in terms of: n n 9 Costs Impact on stakeholders Environmental consequences (externalities) Social implications resulting from project laz/islp/msk/July 11
IV. ROLE OF BOARD, DIRECTORS’ DUTIES n In King II, III Role of Board is stated thus, to: n n n 10 Determine the company’s purpose and values; Determine the strategy to achieve its purpose …and to implement its values…; Exercise leadership, enterprise, integrity and judgment in directing the company…; Ensure that procedures and practices are in place that protect the company’s assets and reputation Monitor and evaluate the implementation of strategies, policies, management performance criteria and business plans; laz/islp/msk/July 11
IV. ROLE OF BOARD, DIRECTORS’ DUTIES (CONT’D) n n n 11 Ensure that the company complies with all relevant laws, regulations and codes of best business practices Ensure that technology and systems used in the company are adequate…; Identify key risk areas and Key Performance Indicators…. ; Regularly assess its performance and effectiveness…; and Ensure that the company has developed a Succession Plan for its executive directors and senor management laz/islp/msk/July 11
IV. ROLE OF BOARD, DIRECTORS’ DUTIES (CONT’D) The Duty of Care Calls for a Director to: n n n n 12 Act legally, honestly in the interests of the company Be active – question and challenge management Ensure that the Board agenda covers key issues Displays maximum care and prudence that may be expected from a good director in a similar situation and under similar circumstances Ensure company act in compliance with all applicable laws, and Govt policy in appropriate industry Regularly attend meetings Ensure that CEO provides sufficient information to the Board Exercise adequate control over management laz/islp/msk/July 11
IV. ROLE OF BOARD, DIRECTORS’ DUTIES (CONT’D) Duty of Loyalty Directors shall discharge their duties by: n n n 13 Ensuring that their own interests do not prevail over those of the company and company policy Keeping information confidential Avoiding or managing conflicts of interest laz/islp/msk/July 11
V ROLE OF CHAIRPERSON OF BOARD n n 14 Maintain close, but independent working relationship with the CEO Harness the collective skills of the Board to achieve business objectives and maintain the confidence of stakeholders Ensure timeliness and relevance of information to Board Encourage directors to have full participation in board deliberations laz/islp/msk/July 11
V ROLE OF CHAIRPERSON OF BOARD (CONT’D) n n n 15 Heads the Board evaluation process of Board and CEO Demonstrate qualities of leadership and good interpersonal skills Efficiently conduct Board Meetings including setting the agenda Ultimate decision maker Diplomat, Psychologist, Business Person (all in one!) Ensure organisation as sustainable business laz/islp/msk/July 11
VI CEO/MANAGING DIRECTOR Appointment of CEO/MD: Most important Board action Job Mission: Personification of Company Scope of Work: attend Board, no vote Principal Duties: Mgt, Admin, Implement Performance Indicators: K. P. I. Decision-making: NEVER SHY AWAY!! Operationalisation of Company 16 laz/islp/msk/July 11
VII DISTINCTION BETWEEN BOARD AND MANAGEMENT DUTIES Managerial Leadership Management (& CEO) n n 17 Develops/recommends strategic direction Develops/recommends business plans and budgets Develops effective executive board or mgmt. team Carries out corporate activities to achieve corporate strategy and business plans laz/islp/msk/July 11 Board Leadership The Board (& Chairman) n n n Approves strategic direction and makes critical decision Approves business plans and budgets Organises work of the Board, monitors and guides managerial performance
VII DISTINCTION BETWEEN BOARD AND MANAGEMENT DUTIES (CONT’D) Board, Let Management, Manage!! The Board challenge: Nose in, Fingers out Understanding the difference between: n Strategy & Oversight …. vs …… Day-to-day operations n Substance ……vs ……. Form n Performance ……. Vs …… Conformance 18 laz/islp/msk/July 11
VIII BOARD WORKING PROCEDURES n n n 19 Board briefing papers Board Agenda: Board Discussions Meeting Frequency and Length Time Commitment of Busy Directors Role of Company Secretary laz/islp/msk/July 11
VIII. BOARD MEETINGS n n 20 Start, End on Time: No African Time!! Chair to chair NOT stifle Discussions Quorum Cell-Phone-Phobia warning!! laz/islp/msk/July 11
VIII. BOARD MINUTES n n 21 Strictly Record of Decisions, Principal contributions Approval by all Directors Distributed to all Directors BEFORE next Meeting No Personal Observations, Interpretations laz/islp/msk/July 11
IX ROLE AND FUNCTIONS OF CO. SEC. Agenda, Notices Preps and Distribution Key to intra-Board information flow, Board Adviser Proper qualifications: Law, Accounts, Sec. Organises Board/Committee Meetings Facilitates smooth ops, Minutes: Takes and Custody Formal decisions/reporting machinery Gate Keeper of Corporate Governance Annual Report: Corp. Gov. A MUST ! ! LEGAL COMPLIANCE/COMFORMANCE 22 laz/islp/msk/July 11
X. CONFLICT OF INTEREST n An essential part of Good Governance, and indeed an effective procurement process is to ensure that there is adequate process to deal with conflicts of interest n Fiduciary duty of director is to avoid conflict of interest n OECD Guidelines define conflict of interest as: “A conflict of interest involves a conflict between the public duty and private interests of a public official, in which the public official has private-capacity interests which could improperly influence the performance of their official duties and responsibilities” 23 laz/islp/msk/July 11
XI. EVALUATION OF BOARD, DIRECTORS, CEO n Evaluation in the present context means: n n n 24 the ongoing process of reviewing the performance of the Board as a whole, and the ongoing process of reviewing the performance of the individual directors who comprise the Board, including the Chairman, and the CEO laz/islp/msk/July 11
XI. EVALUATION OF BOARD, DIRECTORS, CEO (CONT’D) OECD Guidelines The Objectives of Board and Directors Evaluations n n 25 To provide a vehicle for the Chair to give feedback on an individual director’s performance and to facilitate training, counseling etc where that may be necessary To assist in succession planning laz/islp/msk/July 11
XII. CONCLUSION Good Corporate Governance dictates that the Board of Directors governs the corporation in a way that maximizes shareholder value and in the best interest of society. It is neither in the long-term interest of the enterprise nor of society, to short-change customers, exploit labour, pollute the environment or engage in corrupt practices 26 laz/islp/msk/July 11
THANK YOU FOR YOUR ATTENTION! STAY BLESSED! Mumba S Kapumpa P. O. Box 33066 LUSAKA, ZAMBIA Tel: +260 211 225825 Fax: +260 211 225826 Mobile: +260 966 762035 +260 955 762035 +260 977 881642 Email: mskadvocates@zamtel. zm 27 laz/islp/msk/July 11
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