CORPORATE GOVERNANCE IN PARASTATALS AND STATE ENTERPRISES

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PRESENTATION TO THE CORPORATE GOVERNANCE SUMMIT:
CORPORATE GOVERNANCE IN PARASTATALS AND STATE ENTERPRISES

MINISTRY OF STATE ENTERPRISES AND PARASTATALS

Corporate Governance Summit – ZIMLEF Harare 28/09/2009

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CORPORATE GOVERNANCE IN PARASTATALS AND STATE ENTERPRISES

  1. 1. PRESENTATION TO THE CORPORATE GOVERNANCE SUMMIT: CORPORATE GOVERNANCE IN PARASTATALS AND STATE ENTERPRISES MINISTRY OF STATE ENTERPRISES AND PARASTATALS
  2. 2. STATE ENTERPRISES AND PARASTATALS <ul><li>ANY STATUTORY BODY ESTABLISHED BY AN ACT OF PARLIAMENT </li></ul><ul><li>ANY CORPORATE BODY OR COMPANY IN WHICH THE STATE HAS A CNTROLLING INTEREST </li></ul>
  3. 3. CORPORATE GOVERNANCE <ul><li>A HIGH LEVEL FRAMEWORK WITHIN WHICH ORGANISATIONS INCLUDING STATE ENTERPRISES AND PARASTATALS ARE: </li></ul><ul><ul><li>DIRECTED </li></ul></ul><ul><ul><li>CONTROLLED, AND </li></ul></ul><ul><ul><li>HELD TO ACCOUNT </li></ul></ul>
  4. 4. WHO ARE THE STAKEHOLDERS? <ul><li>PARLIAMENT </li></ul><ul><li>LINE MINISTERS </li></ul><ul><li>BAORD CHAIRPERSONS </li></ul><ul><li>BOARDS </li></ul><ul><li>BOARD COMMITTEES </li></ul><ul><li>C E O </li></ul><ul><li>MANAGEMENT </li></ul><ul><li>EMPLOYEES </li></ul><ul><li>SPEAKER OF PARLIAMENT </li></ul><ul><li>MINISTER OF FINANCE </li></ul><ul><li>MINISTER OF STATE ENTERPRISES AND PARASTATALS </li></ul><ul><li>CONTROLLER AND AUDITOR GENERAL </li></ul><ul><li>CUSTOMERS </li></ul><ul><li>SUPPLIERS </li></ul><ul><li>PUBLIC </li></ul>
  5. 5. CORPORATE GOVERNANCE <ul><li>STANDARDIZED PRINCIPLES OR RULES </li></ul><ul><ul><li>ACCOUNTABILITY, RESPONCIBILITY,TRANSPARENCY, FAIRNESS , ect </li></ul></ul><ul><li>DOCUMENTED PROCESSES AND PROCDURES </li></ul><ul><ul><li>PROCUREMENT PROCESSES AND PROCEDURES </li></ul></ul><ul><ul><li>RESTRUCTURING PROCESSES AND PROCEDURES FOR SEPS </li></ul></ul><ul><ul><li>FINANCIAL MANAGEMENT PROCESSES AND PROCEDURES </li></ul></ul><ul><ul><li>HUMAN RESOUCES MANAGEMENT PROCESSES AND PROCEDURES </li></ul></ul><ul><ul><li>RISK MANAGEMENT PROCESSES AND PROCEDURES </li></ul></ul><ul><ul><li>PRODUCTION PROCESSES AND PROCEDURES </li></ul></ul><ul><ul><li>X PROCESS AND PROCEDURES </li></ul></ul>
  6. 6. CORPORATE GOVERNANCE SEEKS TO <ul><li>ENSURE MAXIMUM DELIVERY OF RESULTS OR OUTCOMES AND IMPACT </li></ul><ul><li>ENSURE EFFICIENT AND EFFECTIVE USE OF RESOURCES </li></ul><ul><li>ENSURE REPEATEBILITY OF PROCESSES AND PROCEDURES TO GUARANTTE QUALITY OUTCOMES </li></ul><ul><li>ENSURE PERIODIC MONITORING FOR COMPLIANCE AND IMPROVEMENT </li></ul><ul><li>MINIMISE RISKS ASSOCIATED WITH THE PROCESSES </li></ul>
  7. 7. THE ACTS <ul><li>ESTABLISHMENT ACTS </li></ul><ul><li>AUDIT AND EXCHAQUER ACT </li></ul><ul><li>PROCUREMENT ACT </li></ul><ul><li>COMPANIES ACT </li></ul><ul><li>LABOUR ACT </li></ul><ul><li>OTHER ACTS RELEVANT AND SPECIFIC TO EACH SEP </li></ul>
  8. 8. WHAT IS PROVIDED FOR IN THE ESTABLISHMENT ACT? <ul><li>SELECTION AND APPOINTMENT OF BOARDS. </li></ul><ul><li>SIZE AND COMPOSITION OF BOARDS. </li></ul><ul><li>THE MANDATE OF THE BOARDS. </li></ul><ul><li>THE ROLES FUNCTIONS AND ACCOUNTABILITY OF THE BOARDS. </li></ul>
  9. 9. WHAT IS PROVIDED FOR IN THE AUDIT AND EXCHEQUER ACT? <ul><li>REPORTING OF AUDITED FINANCIAL STATEMENTS </li></ul><ul><li>REPORTING OF SPECIAL REPORTS </li></ul><ul><li>APPOINTMENT OF INTERNAL AND EXTERNAL AUDITORS </li></ul><ul><li>APROVAL OF CAPITAL BUDGETS </li></ul><ul><li>APROVAL OF REVENUE AND EXPENDITURE BUDGETS </li></ul><ul><li>APROVAL OF SALARIES FOR DESGINATED POSTS </li></ul><ul><li>PRESANTATIONS OF CAPITAL BUDGET TO PARLIAMENT </li></ul><ul><li>APPROVALS ON BORROWINGS </li></ul><ul><li>APPROVALS ON INVESTMENT MODALITIES </li></ul><ul><li>LIMITS ON LOANS </li></ul>
  10. 10. SELECTION AND APPOINTEMENT OF BOARD MEMBERS <ul><li>APPOINTED BY THE PRESIDENT. </li></ul><ul><li>MINISTER REQUESTS FOR NOMINATIONS FROM STAKEHOLDERS. </li></ul><ul><li>MINISTER FORWARD TO THE PRESIDENT, STAKEHOLDER NOMINATION AND HIS RECOMMENDATIONS. </li></ul><ul><li>APPOINTED BY LINE MINISTER WITH THE CONCURRENCE OF THE PRESIDENT </li></ul><ul><li>LINE MINISTRIES TO CONSULT WITH MINISTRY OF STATE ENTERPRISES AND PARASTATALS. </li></ul>
  11. 11. APPOINTMENT OF BOARD POLICY <ul><li>THE APPOINTMENT OF BOARD MEMBERS SHOULD BE CONSISTENT WITH THE FOLLOWING: </li></ul><ul><li>CONTINUITY; </li></ul><ul><li>REGIONAL REPRESENTATION; </li></ul><ul><li>GENDER BALANCE; </li></ul><ul><li>SKILLS DIVERSITY; AND </li></ul><ul><li>POLITICAL NEUTRALITY. </li></ul><ul><li>MINIMISE MULTIPLICITY OF BOARD MEMBERSHIP </li></ul>
  12. 12. FUNCTIONS OF THE BOARD <ul><li>TO DIRECT MOBILIZATION OF PHYSICAL, HUMAN AND FINANCIAL RESOURCES. </li></ul><ul><li>TO DIRECT AND CONTROL USAGE OF PHYSICAL, HUMAN AND FINANCIAL RESOURCES IN LINE WITH THE MANDATE. </li></ul><ul><li>TO DEVELOP, MONITOR AND EVALUATE EFFECTIVENESS OF STRATEGIES AND POLICES TO ACHIEVE OBJECTIVES OF THE MANDATE. </li></ul><ul><li>TO REPORT ON PERFORMANCE OUTCOMES. </li></ul>
  13. 13. ROLE OF THE BOARD <ul><li>THE ROLE OF THE BOARD IS TO ENSURE COMPLIANCE WITH CORPORATE GOVERNANCE AND EFFECTIVE PERFORMANCE AND RISK MANAGEMENT SYSTEMS, AND ALSO TO OBSERVE TRANSPARENCY, ACCOUNTABILITY AND RESPONSIBILITY , WHILST BEING : </li></ul><ul><li>RESPONSIBLE FOR FORMULATING BROAD POLICIES OF THE ORGANIZATION. </li></ul><ul><li>RESPONSIBLE FOR MONITORING AND REVIEWING STRATEGIES AND MAJOR PLANS. </li></ul><ul><li>SHOULD PROVIDE LEADERSHIP AND SUPERVISE MANAGEMENT. </li></ul><ul><li>DEVELOP CORPORATE CULTURE AND CLIMATE. </li></ul><ul><li>MUST ENSURE THAT FULL AND PROPER RECORDS OF THE FINANCIAL AFFAIRS ARE KEPT. </li></ul><ul><li>RESPONSIBLE FOR PRODUCTION OF THE ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS THAT FAIRLY REPRESENTS THE STATE OF AFFAIRS OF THE ORGANIZATION. </li></ul>
  14. 14. ROLE OF THE BOARD <ul><li>RESPONSIBLE FOR APPROVALS OF ANNUAL BUDGETS. </li></ul><ul><li>RESPONSIBLE FOR RISK MANAGEMENT POLICY. </li></ul><ul><li>ENSURE EFFECTIVE INDUCTION AND TRAINING PROGRAMS FOR BOARD MEMBERS. </li></ul><ul><li>ENSURE UNRESTRICTED ACCESS TO RELEVANT AND TIMELY INFORMATION BY BOARD MEMBERS </li></ul>
  15. 15. ROLE OF THE BOARD <ul><li>RESPONSIBLE FOR ADEQUATE INTERNAL CHECKS AND CONTROLS. </li></ul><ul><li>RESPONSIBLE FOR APPOINTMENT AND REMUNERATION OF CEO AND TOP MANAGEMENT. </li></ul><ul><li>RESPONSIBLE FOR PERFORMANCE MANAGEMENT POLICY. </li></ul><ul><li>ENSURE COMPLIANCE WITH LAWS, REGULATIONS AND GOVERNMENT POLICIES. </li></ul>
  16. 16. BOARD PERFOMANCE EVALUATION <ul><li>MONITOR AND EVALUATE THE PERFORMANCE OF THE BOARD CHAIRPERSON. </li></ul><ul><li>MONITOR AND EVALUATE PERFORMANCE OF INDIVIDUAL BOARD MEMBERS. </li></ul><ul><li>MONITOR AND EVALUATE PERFORMANCE OF THE ENTIRE BOARD. </li></ul><ul><li>PERFORMANCE EVALUATION REPORTS TO BE SUBMITTED TO THE LINE MINISTER AT LEAST ONCE A YEAR. </li></ul><ul><li>BOARD TO AGREE WITH SHAREHOLDER ON PERFORMANCE TARGETS AND INDICATORS . </li></ul>
  17. 17. REPORTING STRUCTURE <ul><li>CORPORATE GOVERNANCE SEEKS TO DEFINE ROLE CLARITY AND RELATIONSHIPS BETWEEN VARIOUS KEY STAKEHOLDERS: </li></ul><ul><li>- BETWEEN THE BOARD AND THE LINE MINISTRY; </li></ul><ul><li>- BETWEEN THE CEO AND BOARD MEMBERS AND THE BOARD CHAIRPERSON; </li></ul><ul><li>- BETWEEN THE CEO AND THE LINE MINISTRY’S SECRETARY AND MINISTER; AND </li></ul><ul><li>- BETWEEN THE CEO AND OTHER GOVERNMENT MINISTRIES. </li></ul>
  18. 18. THE ROLE OF THE LINE MINISTRY <ul><li>MINISTER MAY GIVE BOARD DIRECTION ON MATTERS OF POLICY. </li></ul><ul><li>MINISTER TO APPROVE BUDGETS. </li></ul><ul><li>MINISTER TO REPORT TO CABINET PARLIAMENT. </li></ul><ul><li>MINISTER TO CONSULT BOARD BEFORE ISSUING DIRECTIVES. </li></ul><ul><li>DIRECTIONS RECEIVED TO APPEAR IN ANNUAL REPORTS. </li></ul><ul><li>MONITOR AND EVALUATE PERFORMANCE. </li></ul>
  19. 19. ROLE OF THE MINISTRY OF STATE ENTERPRISES AND PARASTATALS <ul><li>FORMULATION AND REVIEW OF POLICIES RELATING TO CORPORATE GOVERNANCE AND PERFORMANCE OF SEPS </li></ul><ul><li>ENSURE COMPLIANCE AND CONTINUOUS IMPROVEMENT </li></ul><ul><li>DEVELOP AND HELP IMPLEMENT REFORM STRATEGIES THAT OPTIMIZE POSITIVE IMPACT OF THE STATE ENTERPRISES AND PARASTATALS . </li></ul><ul><li>ENSURE THAT ALL STATE ENTERPRISES AND PARASTATALS OPERATE AND COMPLY WITH GOOD COOPERATE GOVERNANCE AND REGULATORY ENVIRONMENT. </li></ul>
  20. 20. DECLARATION OF INTEREST <ul><ul><ul><li>A BOARD MEMBER IS BOUND TO DISCLOSE ALL INFORMATION WHICH HAVE MATERIAL EFFECT TO THE ORGANIZATION'S OPERATIONS, FINANCIAL STATUS OR IMAGE. </li></ul></ul></ul><ul><ul><ul><li>A RECORD OF DECLARATION OF INTEREST AT ALL BOARD MEETINGS IS A USEFUL TOOL TO ENSURE COMPLIANCE TO DECLARATION OF INTEREST. </li></ul></ul></ul>
  21. 21. REMUNERATION FOR BOARD MEMBERS <ul><li>APPOINTMENTS TO BOARDS SHOULD NOT BE TAKEN AS SUBSTANTIVE EMPLOYMENT. </li></ul><ul><li>BOARD FEES ARE FIXED BY THE LINE MINISTER WITH THE APPROVAL OF THE MINISTER OF FINANCE. </li></ul><ul><li>BOARD FEES TO BE BASED ON THE PRINCIPLES OF ABILITY TO PAY , SUSTAINABILITY , REASONABLENESS AND COMPARABILITY. </li></ul><ul><li>BOARD REMUNERATION AND BENEFITS SHOULD NOT BE COMPARED TO THOSE APPLICABLE TO THE CEO. </li></ul>
  22. 22. CONTERMPORARY CORPORATE GOVERNANCE CHALLENGES <ul><li>MULTIPLICITY OF STAKEHOLDERS WITH CONFLICTING INTERESTS; </li></ul><ul><li>LACK OF TRANSPARENCY; </li></ul><ul><li>LIMITED ACCOUNTABILITY; </li></ul><ul><li>INDISCIPLINE; AND </li></ul><ul><li>CORRUPT TENDENCIES. </li></ul><ul><li>LACK OF EFFECTIVE COMPLIANCE MONITORING </li></ul><ul><li>INADEQUACY IN PERFORMANCE CONTRACTS </li></ul>
  23. 23. WAY FORWARD <ul><li>IN ORDER TO ENSURE THE ADOPTION AND STRENGTHENING OF EFFECTIVE CORPORATE GOVERNANCE PRINCIPLES BY STATE ENTERPRISES AND PARASTATALS, THE MINISTRY OF STATE ENTERPRISES AND PARASTATALS IS IN THE PROCESS OF DRAFTING A CORPORATE GOVERNANCE FRAMEWORK. </li></ul><ul><li>THE CORPORATE GOVERNANCE FRAMEWORK WILL ADDRESS THE FOLLOWING ISSUES AMONG OTHERS: </li></ul><ul><li>APPOINTMENTS OF BOARD MEMBERS BASED ON A TRANSPARENT CRITERIA AND MERIT. </li></ul><ul><li>INVITATION TO INTERESTED PERSONS FOR INCLUSION IN A DATA BASE OF POTENTIAL BOARD APPOINTEES </li></ul><ul><li>ROLE CLARITY AND REPORTING LINES ,RESPONSIBILITY AND ACCOUNTABILITY FOR KEY STAKE -HOLDERS, INSTITUTIONS AND INDIVIDUALS </li></ul><ul><li>ENSURE THAT GOVERNMENT ACHIEVES ITS VISION FOR ROBUST AND EFFECTIVE SEP BOARDS WHICH FULLY EXERCISE THEIR RESPONSIBILITIES; </li></ul>
  24. 24. WAY FORWARD <ul><li>STREAMLINE BOARD APPOINTMENTS TO SAFEGUARD POSSIBLE CONFLICT OF INTEREST FOR BOARD MEMBERS; </li></ul><ul><li>PROFESSIONAL DETERMINATION OF BOARD MEMBERS’ CONDITIONS OF SERVICES; AND </li></ul><ul><li>BOARDS TO HAVE PERFORMANCE AGREEMENTS WITH SHAREHOLDER AND WITH SENIOR MANAGEMENT </li></ul>
  25. 25. WAY FORWARD <ul><li>THE FRAMEWORK WOULD REFLECT THE GOVERNMENT’S COMMITMENT TO MONITOR THE EFFECTIVENESS OF POLICY AND DECISION MAKING BOTH AT THE BOARD AND MANAGEMENT LEVELS WITH A VIEW TO ENHANCE SHAREHOLDER VALUE IN THE LONG TERM; </li></ul>

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