Declaration of assets by board members 

Declaration of assets by board members 

Source: Declaration of assets by board members | The Herald November 16, 2017

ZimCode (joint Secretariat of ZIMLEF, IoDZ &SAZ)
The Public Entities Corporate Governance (PECG) Bill, henceforth (“the Bill”), is an effort by the government of Zimbabwe to cultivate a culture of compliance in public entities. The Bill makes compliance with the principles of the ZimCode mandatory as well as improving on some, rendering the Bill more progressive. An important aspect that is addressed by both the Bill and ZimCode is the declaration of assets by board members. Even though the ZimCode had highlighted the importance of these declarations compliance has been minimal.

Asset declarations are a means to anchor the issue of ethics and integrity in the company and should be part of codes of conducts or disclosure policies. Asset disclosure enhances the legitimacy of the directors and senior executives in the eyes of the public and stimulates foreign direct investment. It is a known fact that civil servants hold substantial power over the allocation of resources in any country therefore a well-defined asset declaration system is a strong tool to fight public sector corruption and abuse of power.

Principle 85 (c) of the ZimCode highlights that when the board is selecting members the prospective member should disclose their financial standing among other things. However this financial standing is not elaborated which could have given room for partial disclosures. The ZimCode further indicates in Principle 291 (q) that a company’s disclosure policy had to include, “disclosure to the board the main assets of each Board member as of the date of the report;” and principle 291 (r ) “ transactions which have a bearing on conflict or convergence of interests on the part of directors, senior management, shareholders and other stakeholders”.

In the same vein, the Bill in clause 37 indicates that members of boards and of senior staff will have to declare their assets upon their appointment and upon ceasing to be members of the board or of the senior staff, and also at other times if so required. Failure to do so will result in the member ceasing to hold office as such. In this regard the Bill has gone beyond the ZimCode by elaborating who needs to disclose assets, what needs to be disclosed, how often and the consequences for failure.

According to clause 37 of the Bill, the declaration of assets is meant to ensure transparency and the avoidance of conflict of interests. Every board member and senior staff member of a public entity should declare their assets within three months after appointment or re-appointment or within two months after ceasing to be a member of that entity. The members should provide the Office of the President and Cabinet with a written declaration listing in full.

The list to include movable or immovable property that the member owns or leases; any item of movable property, exceeding one hundred thousand dollars ($100 000) or such greater value as may be prescribed; any business in which the member or senior staff member has an interest or which he or she plays any part in running and stating in each case the nature of the interest in the property or business concerned.

If a member of the board of a public entity or senior staff member deliberately fails to list any property or interest in the declaration and provides no adequate explanation for the omission according to clause 37 (2c) “the member or senior staff member shall thereupon cease to be a member of the board or… be disqualified for reappointment, or, in the case of a senior staff member, cease to be employed in that or any other capacity in the entity concerned or . . . be disqualified for re-employment”.

The ability of directors to declare the assets they own and businesses they have interests in gives the assurance that they have nothing to hide. It helps public entities to prevent conflict of interests among employees. When such situations arise it is easier to handle them when the entity has the declaration of assets and interests at hand. These declarations help to dissuade directors from misconduct and protect them from false accusations.

Publishing information on a person’s assets allows stakeholders to hold directors to account. If directors are seen to live beyond their means, an asset declaration can be a starting point for investigations. While some directors complain that this would be an invasion of their privacy, focus should be on the greater good that can result from such declarations. The Bill is firm on asset declaration as compared to the ZimCode which had hoped that people would recognise the benefits of doing so and comply. The ZimCode being a voluntary code could not enforce a mandatory asset declaration policy hence the need for the PECG Bill which will operate on comply or else basis.

For more information on the ZimCode contact: admin@zimcode.net

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