Assessing the need for a standalone private sector corporate governance framework

Abstract

Zimbabwe has had to contend with corporate scandals and failures detrimental to the economy and most of which have their roots in corporate governance breaches including in the private sector. The study thus sought to assess the need for independent statutory regulation on corporate governance in private entities in Zimbabwe. Its objectives were to ascertain the current legal framework for regulating corporate governance in the private sector in Zimbabwe; to determine whether the current framework for regulating corporate governance in the private sector in Zimbabwe is adequate; to establish the challenges associated with the current framework regulating corporate governance in the private sector in Zimbabwe and; to proffer suggestions for optimizing corporate governance regulation in the private sector in Zimbabwe. The study was a desk study that utilized secondary data. Findings showed that the corporate governance regulation framework in place in the Zimbabwean private sector is multilayered including elements of corporate governance codes (ZimCode and sector specific codes), corporate law (COBE Act [Chapter 24:31] and market regulation (ZSE). The same is also highly optimised in terms of composition. The corporate governance code addresses all important elements though it falls short in terms of continuous optimisation of directors’ suitability as well as provisions for greater shareholder participation which may be necessary. As such measures for enhancing shareholder participation in the running of entities are necessary. On the other hand, the COBE Act makes important provisions including codification of directors’ duties. However, a relatively smaller array of duties is codified in comparison to countries like the UK which are leaders in corporate governance regulation. Certain subjective measures and riders to the provisions may actually render the codification less potent with regards to holding directors accountable. Market regulation through the Zimbabwe Stock Exchange Listing Rules is highly optimised and covers a full spectrum of issues. Greater flexibility for the private sector with regard to the adoption of the ZIMCODE would make a difference by allowing firms to tailor their corporate governance practices to their realities and needs is recommended. It was also recommended that definitive measures are used in the determination of directors’ extent of compliance instead of subjective measures.