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  • PUBLIC ENTITlES CORPORATE GOVERNANCE

    1

    H.B. 5, 2017.]

    DISTRIBUTED BY VERITASe-mail: veritas@mango.zw; website: www.veritaszim.net

    Veritas makes every effort to ensure the provision of reliable information,but cannot take legal responsibility for information supplied.

    Published in the Government Gazette 21st July 2017 [GN 335/2017]

  • PUBLIC ENTITIES CORPORATE GOVERNANCE

    PUBLIC ENTITIES CORPORATE GOVERNANCE BILL,2017

    MEMORANDUM

    This Bill will provide for the corporate governance of public entities, that is to say statutory bodies (parastatals), certain constitutional Commissions, and commercial entities that are owned or controlled by the Government.

    In this context, "corporate governance" means the rules, practices and processes by which an organisation is directed and controlled. Corporate governance essentially involves achieving a fair balance between the interests of the various stakeholders in an organisation, including its shareholders, management, customers, suppliers, financiers and the general community. Corporate governance encompasses most aspects of the organisation's management, from action plans and internal controls to performance measurement and corporate disclosure. It is not directly concerned with the quality of an organisation's services, but it has an indirect effect on them because the more efficient an organisation's management is, the more likely it is that the organisation will deliver good services. Hence this Bill, by improving the internal management structures of parastatals and other public entities, should lead to an improvement in their performance.

    The Bill will apply only to public entities, not to organisations in the private sector. The management of private companies, which are usually small organisations, is the concern of their shareholders. Public companies, which are listed on exchanges such as the Zimbabwe Stock Exchange, are governed by exchange listing rules and by codes of corporate governance laid down by the Securities and Exchange Commission of Zimbabwe. Any changes to the current rules of corporate governance applicable to companies (other than government-owned companies) will be done by amendments to the Companies Act and the Securities and Exchange Act, not through this Bill.

    In summary, the Bill will do the following:

    It will underline the responsibility of line Ministries (those Ministries whose Minister is responsible for any public entity) to more effectively monitor, supervise and oversee the management operations of public entities to ensure strict compliance by them with the provisions of this Bill, without, however, infringing on the autonomy of public entities.

    It outlines the role and functions of the Corporate Governance Unit within the Office of the President and Cabinet (OPC) as a centralised advisory, oversight and support system for line Ministries with regard to the implementation of this Bill.

    It will introduce some consistency in the conditions of service of members /

    of boards of public entities. In particular, it will require members to enter into performance contracts with the Government and will allow their salaries and allowances to be limited.

    Similarly, it will regulate the conditions of service of chief executive officers and other senior staff members of public entities and will allow their remuneration to be limited.

    It will give effect to the National Code on Corporate Governance Zimbabwe (Zimcode) to the extent that it applies to public entities.

    In more detail, the provisions of the Bi 11 are as follows:

    (i)

  • PuBLIC ENTITIES CORPORATE GOVERNANCE

    Part I (Preliminary)

    This Part deals with preliminary matters.

    Clause 1 sets out the Bill's short title and will provide for the Bill to come into operation on a date to be notified by the President in the Gazette.

    Clause 2 defines terms that are used in the Bill. The term "public entity" is defined widely to include organisations of all kinds that are owned or controlled by the Government: constitutional Commissions, parastatals,companies and firms. The word "Minister" is defined to mean the Vice-President or Minister to whom the President may assign the Bill; the term "line Minister" means the Minister invested by the President or an enabling instrument with the responsibility for administering a public entity.

    Clause 3 will exclude government Ministries and departments from the application of the Bill. Subject to that, the Bill will override anything to the contrary in any other Act or legal instrument that establishes or regulates public entities.

    Clause 4 will make it clear that the Bill will not affect the independence of constitutional Commissions, nor the way in which their members can be appointed and dismissed.

    Part II (Corporate Governance Unit)

    This Part recognises the continued existence within the Office of the President and Cabinet of the Corporate Governance Unit, which was established prior to this Bill in accordance with the law relating to the Civil Service. This Part also sets out its functions.

    In terms of clause 5 the Unit will be a semi-autonomous department of the Office of the President and Cabinet and will be headed by a civil servant of Permanent Secretary grade, supported by a Civil Service Commission approved staff structure filled by civil servants.

    The Unit's functions are set out in clause 6 and will include the establishment and maintenance of a database of potential board members; the collection and storage of corporate governance related information for all public entities; the coordination and oversight of board induction programmes to be implemented by all public entities; and general oversight, in collaboration and consultation with line ministries, of compliance with the provisions of this Bill.

    Clause 7 will make the head of the Unit responsible for managing the Unit and its staff.

    The head of the Unit, with the approval of the head of the Ministry responsible for this Bill, will be able to engage experts as consultants (clause 8).

    Clause 9 will give the Minister- i.e. the Minister or Vice-President to whom the President assigns administration of the Bill - power to give policy directives to the head of the Unit.

    Under clause 10 the Unit will have to submit annual reports to the Minister, who will lay them before the National Assembly. The reports will have to mention cases where this Bill has been breached and the breaches have not been rectified.

    Part Ill (Appointment, tenure and conditions of service of boards of public entities)

    Clause I I will regulate appointments members to boards of public entities. Under the clause:

    Members will not be allowed to serve for more than two four-year terms, a total of eight years in all.

    (ii)

  • Pusuc ENTITIES CoRPORATE GovERNANCE

    In the compilation of lists of proposed board members for all public entities to be submitted by the line Minister for approval by the President, line Ministries will be able to benefit from (but not be limited to) the database of potential board members established and maintained by the Unit.

    Persons will have to be appropriately qualified and experienced before they can be appointed to a board, and board members will have to have an appropriate diversity of skills.

    There will have to be equal numbers of men and women on all boards, and Zimbabwe's regions will also have to be equitably represented on them.

    No one will be allowed to serve on more than two boards at a time (though if a person is on the board of a public entity and also on the board of its subsidiary, that will count as membership of only one board).

    Persons in the full-time employment of the State will be eligible for appointment to a board so long as they do not form a majority on the board. Permanent Secretaries will not however be eligible for appointment.

    Vacancies on a board will have to be filled within 90 days.

    Responsible line Ministers will have to ensure that the Unit is notified of all board appointments and that lists showing the names of all board members for all the public entities falling within their portfolios are available for public inspection at their Ministries. In addition, the Unit will ensure that the appointments are notified in the Gazette.

    Under clause 12, the Minister responsible for this Bill will be able to formulate standard sitting allowances, provisions for out-of-pocket expenses and other payments or benefits compatible with service as a non-executive board member.

    Under clause 13, line Ministers will be required to observe the principles of transparency with respect to fixing the remuneration of executive board members set out in the Third Schedule; also, the Minister will be able to formulate model conditions of service for executive board members of public entities, and line Ministers will generally have to follow those model conditions when fixing conditions of service for executive members of boards under their control.

    Clause 14 will empowerthe Minister and the Minister of Finance, in consultation with line Ministers, to fix maximum amounts payable to board members of public entities. No board members will be allowed to receive more than those maximum amounts.

    Clause 15 will permit resignations of board members to be probed by the head of the line Ministry, in order to find out if the resignations were prompted by any defects in the corporate governance of the public entities concerned.

    Clause 16 will give board members of public entities some security of tenure by prohibiting their dismissal for anything other than misconduct, disqualification, failure to comply with their conditi

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