The Office of the President and Cabinet will monitor board members and senior executives at parastatals and State enterprises, and will examine their assets and business interests to ensure good corporate governance.
Permanent secretaries will no longer sit on public boards, while directors who fail to declare assets and/or financial interests will face prosecution.
Further, chief executives who fail to deliver under set performance standards will also face punitive action.
These new rules will be activated if the Public Sector Governance Bill is passed by Parliament.
The Bill is with the Finance and Economic Development Ministry and will be presented to the legislature for scrutiny before 2015 is out.
The Sunday Mail read in the proposed law that senior executives will operate under performance-based contracts that feed into Government’s overarching Results-Based Management System.
The envisaged Public Sector Corporate Governance Delivery Agency will monitor compliance with the National Code on Corporate Governance (ZimCode).
The agency will work directly under the Office of the President and Cabinet, superintending a modern public enterprise corporate governance and remuneration framework.
It will also have powers to launch impromptu audits on any public enterprise, approve board appointments and monitor procurement procedures. The law will legally back ZimCode.
Section 5(1) reads, “Subject to this Act, the functions of the Corporate Governance Agency shall be to: – (b) assess the compliance of public entities with the prescribed National Code on Corporate Governance in Zimbabwe and report to the President through the minister; (c) approve board appointments made by line ministries;
“(d) advise the President on all matters relating to boards; (e) monitor and examine the practices, systems and procurement procedures of public entities; (g) conduct investigations on any public entity with respect to any matter.”
Section 9(2) reads, “Every public entity shall keep a record of the board members’ disclosure of interests for inspection by the Agency at any time. (3) Any person who contravenes subsection (1) and (2) shall be guilty of an offence and liable to a fine not exceeding level six.”
The Bill prescribes two six-year terms for chief executives, with contract renewal based on performance alone. It also compels boards to set salaries, allowances and pension benefits for CEOs and other senior executives, in consultation with their respective line ministries. The Bill provides guidelines on directors’ term limits, board appointments, corporate conflict resolution and settlement.
Economic analyst Mr Witness Chinyama said the proposed regulations would encourage accountability in public entities. “What Government is trying to do is introduce the private sector way of doing business to parastatals to encourage accontability and profitability. In the absence of such a law, we all witnessed what happened sometime last year when Government ordered parastatal bosses to rationalise their salaries. Most of them refused outright.
“However, when we have such a law in place, such cases will become a thing of the past. These kinds of laws promote accountability, investor confidence and the genral health of State-owned enterprises.”
Labour and Economic Development Institute of Zimbabwe director Dr Godfrey Kanyenze added, “That is the right way to go and that has been long overdue. What such a law does is that it inculcates a new paradigm that is divorced from the current one where parastatal executives have a sense of entitlement. “Because there are currently no performance targets, the executives have no incentive to perform and are fully aware that they will receive their salaries and perks come month-end.
“But with such a law in place, there will be no rewards for no results. This will ensure the companies perform and no longer become an albatross around the neck of Treasury.” Globally, corporate governance laws and codes have become major instruments for boosting public and investor confidence and improving management systems. In 2014, a number of State enterprises and parastatals failed to submit turnaround strategies as directed by Cabinet.
In the same year, ZBC executives prejudiced the national broadcaster of nearly US$25 million.
A forensic audit by KPMG Chartered Accountants identified ex-chief executive Mr Happison Muchechetere, general manager (finance) Mr Elliot Kasu, general manager (news and current affairs) Mr Tazzen Mandizvidza, general manager (radio services) Mr Allan Chiweshe, and head of finance Mr Ralph Nyambudzi as having gobbled US$6,7 million of that money. A disciplinary panel chaired by former High Court Judge Justice James Devittie found Mr Muchechetere guilty on several counts of misconduct.
In another case, ex-Air Zimbabwe chief executive Peter Chikumba and company secretary Grace Pfumbidzayi were jailed for prejudicing the airline of millions of dollars.
Both were granted bail last week pending their appeals against conviction and sentence.