A critical assessment of the impact of corporate board composition on firm performance: Case of state-owned enterprises in Zimbabwe

Abstract

The way in which State-Owned enterprises are run is likely to make them suffer agency problems. The double agency problem prevails where a politician with his own agenda has to represent the state’s interests in the State Owned Enterprises. Secondly they suffer “common agency” since they are overseen by several stakeholders including the tax payers who usually are inconsistent with profit maximization. The boards might be appointed in the interest of the Minister (Politician) but overriding the interest of the other stakeholders which is common in Zimbabwe context. The Study sought to scrutinise the relationship between board composition and the performance of State Owned Enterprises in Zimbabwe. In establishing the relationship, a quantitative survey was conducted with 95 board members. The study concluded that a significant and positive relationship existed between board characteristics and State Owned enterprises performance. Finally it was noted that as far as the board contribution to performance of the SOEs, board composition model can be used as a good predictor of SOEs performance. Other factors might be at play in influencing SOEs performance through the board but their impact is not as much. The findings could assist performance of the SOEs as well as corporate governance practitioners in understanding the importance of proper governance practices in State Owned Enterprises.