THE government should desist from appointing people to key positions in state-owned enterprises based on political affiliation but should instead consider merit.
If the government and the private sector follow this route, then they can enhance productivity.
This recommendation was made by the Institute of Directors Lesotho (IoD) chief executive officer Lehlohonolo Chefa, during a recent presentation at an internal auditors’ seminar which ran under the title: Setting the corporate tone.
The recommendations are part of the IoD’s recently developed corporate governance code.
Also referred to as the Mohlomi Code owing to its inspiration by the philosophies of the late Chief Mohlomi, the code also lobbies for the chairpersons of the boards of state-owned enterprises to be appointed independently. This will change the norm of the boards being chaired by principal secretaries.
Chief Mohlomi lived from 1720 to 1815 and was King Moshoeshoe’s advisor, a herbalist and was famous for his diplomacy warning against the abuse of power by chiefs. He also was famous for loathing armed conflict between chiefdoms and clans and the abuse of women and children.
The seminar, which was organised by the Institute of Internal Auditors Lesotho (IIAL), also featured the chief executive Standard Lesotho Bank (SLB), Mpho Vumbukani. The seminar sought to promote ethical corporate governance among both private and public entities for improved productivity.
Development of the Mohlomi Code was done through government with the financial assistance of the African Development Bank (AfDB).
Addressing participants, Mr Chefa said that the code was developed to stabilise corporates in environments that facilitate the achievement of their business goals.
He said many local corporates especially those where the government has a stake, tend to appoint managers based on political affiliation instead of merit. He said sometimes people are also appointed based on their experience in certain boards that are not necessarily related to the new appointments.
Mr Chefa said appointees should also be screened for conflict of interest and adding that the chief executive officers of state enterprises should not double up as board secretaries.
“Often, we appoint people based on experience, without bothering to evaluate their fitness for the positions in which they are appointed into,” Mr Chefa said.
“We also need independently appointed chairpersons and do away with having principal secretaries as chairpersons.”
The code also recommended that the boards of enterprises should determine the strategic direction of their respective entities to create sustainable value in an ethical manner. It also said boards should ensure that their members behave in line with “fiduciary duties; and duty of care, skill and diligence”.
The code also recommended that boards should manage conflict of interest while ensuring effective and sustainable transfer of skills in appointments in line with their organisations’ value systems.
The boards should ensure that the remuneration strategy is fair, transparent and reasonable, in line with competencies and risk exposure as well as continuous performance assessment, the code recommended.
For his part, Mr Vumbukani said when corporates collapse, questions are often asked about the whereabouts of their boards and their assurance structures such as the internal audit function.
He said leadership, governance, organisational culture, ethics, integrity and strategy make the right mix in setting about the corporate tone.
“In terms of good corporate governance principles, we have an audit committee which assists the board in discharging its duties relating to safeguarding assets, operating of systems, controlling procedures and the preparation of financial reports and statements.
“The internal audit function reports to the board audit committee independently. This presents a key enabler to internal auditors, to provide assurance to the board, independent of management influence. However, for some unprofessional internal auditors, this is often used to settle corporate political scores.
“As esteemed internal auditors, you are clearly knowledgeable about the internal audit charters that articulate with clarity, your accountability, independence, responsibility, authority and standards in audit practice that you commit to,” Mr Vumbukani said.
On strategy, Mr Vumbukani said progressive organisations embrace the notion of setting a purpose and vision that forms the basis for their existence.
“Most progressive organisations have lately embraced the notion of setting a purpose and vision that forms the basis for their existence. This has to be a higher purpose that benefits humankind beyond the company’s selfish interests.
“Citing the example of the Standard Bank Group, which operates in most Sub-Saharan African countries, we have set our purpose to drive Africa’s growth, given that it is our home. At Standard Lesotho Bank, we say Lesotho is our home, we drive her growth,” Mr Vumbukani said.