Registered at the G.P.O as a Newspaper Issue...

The Chartered Secretary

Ninety-nine CIS Students Graduate

Registered at the G.P.O as a Newspaper Issue 2/2016

O�cial magazine of the Institute of Chartered Secretaries and Administrators in Zimbabwe

Inside this issue

» Exercising their rights can be difficultfor minority shareholders

» Corporate leaders play important role in promoting business ethics

» ICSAZ Affiliate Scheme promotes efficient administration

» Web portal gives members and students easy access to Institute

INSTITUTE OF CHARTERED SECRETARIES AND ADMINISTRATORS IN ZIMBABWE

Friday, 22 July 2016, 11:00 am

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The Chartered Secretary 1

ContentsIssue 2/2016

6

10

8

13


Ninety-nine CIS

Students GraduateRegistered at the G.P.O as a Newspaper

Issue 2/2016


Inside this issue

» Exercising their rights can be difficult

for minority shareholders» Corporate leaders play important

role in promoting business ethics» ICSAZ Affiliate Scheme promotes

efficient administration

» Web portal gives members and

students easy access to Institute

Shareholder RightsExercising their rights can be diffi cult for minority shareholders

8

Student Supplement13

14

15

Graduates challenged to play role in solving worldwide problems

Web portal gives members and students easy access to Institute

Integrative Case Study covers whole ICSAZ syllabus

International10 Responsible Ownership concept spreads to

Asia

Institute NewsNinety-nine CIS students graduate2

ICSAZ President urges graduates to strive to excel in everything they do

5 ICSAZ Affi liate Scheme promotes effi cient administration

3

Corporate leaders play important role in promoting business ethics

7Business Ethics

2 The Chartered Secretary

Institute News

Ninety-nine CIS students graduate

Ninety-nine CIS students graduated in April at the Institute of Chartered Secretaries and Administrators in Zimbabwe graduation ceremony at the

Rainbow Towers in Harare. There were also 88 Institute of Business and

Accounting Studies (IBAS) Diploma students and 35 IBAS Higher Diploma students who graduated at the same ceremony.

The guest speaker at the graduation, Mrs Avilla Dororosa Goba, who is a past president of the Institute, said the graduation ceremony was a time for celebrating victory.

“This is an important day for the graduates and I share your joy in celebrating this significant milestone together with your family and friends,” she said.

She told the graduates that it was an exciting time to enter the ICSAZ profession.

“It is crucial for the nation to have a talent pool of skilled corporate secretaries, administrators, accountants, human resources personnel and business professionals.

“This is where you, equipped with the skills and knowledge, can make a difference and contribute to the economy and society,” she said.

Mrs Goba went on to say that small to medium enterprises (SMEs) are considered to be the backbone of industrial development. They represented, she said, a large, diverse and important sector worldwide.

The SME sector, she pointed out, plays a pivotal role in terms of employment creation and socioeconomic growth in both developing and developed countries.

“Research has shown that SMEs have come into the public policy limelight and have received the attention of the policy makers of both developed and developing countries.

“SMEs have an important role to play in economic development, poverty reduction and employment creation in developing economies. Our government recognises the role played by SMEs in sustaining the economy and improving livelihoods.

“It therefore enacted the Small and Medium Enterprise Act [Chapter 24:12] to promote and develop Micro, Small and Medium Enterprises in Zimbabwe, whether operating in the formal or informal sector of the national economy, for sustainable development,” she said.

Mrs Goba added that in 2002 Zimbabwe was one of the few countries in Africa to set up a Ministry of Small and Medium Enterprises specifically to manage the SMEs sector.

She said later, in 2009, the Ministry was renamed the Ministry of Small and Medium Enterprises and Cooperative Development, after cooperatives were added to its area of responsibility.

“Our country´s economy is being run by SMEs following the closure of many companies and an increase in the unemployment rate.

“The unemployment level in the formal sector in Zimbabwe is increasing, as evidenced by the Zimbabwe Congress of Trade Unions labour body survey which revealed that 75 companies and 9 617 jobs were lost in 2013.

She said Finance Minister Patrick Chinamasa, during his presentation of the 2015 national budget, had revealed that 4 610 companies closed shop between 2011 and 2014, resulting in the loss of 55 443 jobs.

“Furthermore, in 2015 over 10 000 people lost their jobs following the Supreme Court ruling Number 43 of 2015, which found that employers have a common law right to dismiss employees on notice.

“This loss of jobs in the formal sector resulted in most people being absorbed into the SMEs sector,” she added.

She also pointed out that the Finmark Trust’s Finscope Study Zimbabwe 2012 estimated that 5.7 million people work in the SMEs sector in Zimbabwe and 2.8 million people own an estimated 3.5 million businesses.

This meant there would be an even greater demand for the services of professionals like them.

Recently, Small and Medium Enterprises and Cooperative Development Minister Sithembiso Nyoni had said that around 70 percent of SMEs are informal. In other words, she said, most of the SMEs were or are not registered or licensed and some of the businesses were or are relatively young.

“A Chartered Secretary must make sure that the business is formalised. The Chartered Secretary must contribute to the fiscus and avoid unethical dealings,” she said, adding that the importance of integrity in one’s personal and professional life could not be stressed enough.


Institute News

Institute of Chartered Secretaries and Administrators in Zimbabwe President Lovemore Kadenge has called on the 2016 ICSA and

IBAS graduates to strive to excel in everything they do so they can move their profession forward.

Welcoming guests at the graduation ceremony held in April at Rainbow Towers, Mr Kadenge said it is not enough for ICSA graduates to simply get by in life.

“As an ICSA graduate, it is not enough to simply try and get by in life. That does not move the profession forward. You must strive to excel in everything you do. Excel in every task, large or small. The decisions you make starting today will determine what you become.

“You will face many challenges but this is what the real world is all about and the next phase in your life is a great training ground for your future success.

“You must think big, dream based on not what is but on what might be. As a professional you will have amazing networking opportunities by attending Institute functions. Take full advantage of this opportunity as most of us have benefitted significantly from networking in our professional lives.

“Sometimes it is important to reach out. It may be easy to remain in the comfort zone in terms of friendship circles but the best lessons in life are learnt through reaching out. Play your part in sports, cultural or other activities that enable you to expand your network,” he said.

Mr Kadenge went on to express concern about how easy it was for successful professionals to give health and well-being issues insufficient priority.

“It is important that you look after your health through exercise. Eat healthily, as this will help shape your

future. After all, balance is the key to future success.

“We all must have goals and we will have fears about achieving them but it is how we handle those fears that determines whether or not and how quickly we get there. Not every project or task we undertake in life can be successful.

“When it is not successful, learn from the mistakes made and take the necessary remedial measures on the next project,” he added.

Mr Kadenge pointed out that a number of major organisations have failed due to lack of teamwork, despite having some of the finest brains working for them.

“Human creativity has increasingly become a group process. You must improve your skills in working with teams as human friction makes the sparks in the corporate world. We now live in a tough world, low hanging fruit is diminishing and significant success can be achieved if we connect our imaginations.

“The sea of knowledge knows no boundaries. All of us here today are swimmers in the sea, on our own continuous journeys of learning without boundaries, whether at home or at work, whether paid

or unpaid, whether planned or by chance, whether we are graduating or supporting the graduates,” he said.

He reminded the graduates that learning does not stop, especially for professionals. This is why, he said, the Institute organises Continuous Professional Development (CPD) courses for all members and graduates. These are mandatory, he said, as they help them remain relevant in the profession.

Mr Kadenge also called on the graduates to make a promise to the Institute that they will always fight against bad corporate governance practices, including corruption.

“Your promise means you will be part of the leaders in this fight. It is so important to fight this scourge, because if we do not fight it now then there will be no bread and butter to talk about for us in a few years.

“All the national resources will have been spirited away by those with power but a lack of good ethics.

“The President of the country was recently quoted as saying as much as $15 billion was lost in the Marange Diamond Mining process. If this is anything to go by, there won’t be any Zimbabwe to talk about in a few years.

“You will agree with me that all this happened, yet these companies had Boards of Directors, Accountants and Company Secretaries. These people are supposed to be professionals and custodians of good corporate governance.

“The question is, where were the professionals and what action did the professionals take to stop the problem?

“I therefore implore you, as Chartered Secretaries, not to partake in corruption and to fight hard to eliminate this problem. I know it is not an easy task but we all know that the good things are not easy,” he said.

ICSAZ President urges graduates to strive to excel in everything they do

Lovemore Kadenge


The recently introduced Institute of Chartered Secretaries and Administrators in Zimbabwe Affi liate Scheme should help promote and advance effi cient

administration in Zimbabwe’s commercial, industrial and public sectors.

The Affi liate Scheme is designed to provide support for people who carry out company secretarial, risk compliance, accounting, administration and other corporate governance related work who are not chartered secretaries. It should help them perform their roles more effectively.

The Institute has introduced the scheme in response to requests from such professionals to be associated

with the Institute. It is in line with ICSAZ’s mission to promote and advance effi cient administration in the commercial, industrial and public sectors.

The scheme could not be implemented in the past, despite the demand for it, due to constitutional issues. However, the new Chartered Secretaries by-laws that have been gazetted allow for it.

Participation in the scheme will not accord a person ICSAZ membership but affi liates will be allowed to describe themselves as ICSAZ Affi liates.

To qualify to be an affi liate one must be carrying out company secretarial work, accounting or other governance, risk and compliance roles to the satisfaction of the ICSAZ Council.

Those who have been appointed by companies as secretaries pursuant to Section 173A of the Companies Act qualify to become affi liates.

While intended principally to provide a home for those who do not have a professional body to belong to, members of other constituent bodies of the Public Accountants and Auditors Board (PAAB) who are practising as company secretaries or governance and compliance professionals are eligible to become ICSAZ affi liates.

Also eligible are those who studied for the ICSA qualifi cation but did not complete the ICSA programme, as well as lawyers who are working as company secretaries but are not chartered secretaries

The chief benefi t that affi liates will enjoy is being able to be part of a professional community of chartered secretaries for networking and professional development.

Affi liates will enjoy member rates on Continuous Professional Development (CPD) training courses, seminars and conferences, and will receive professional guidance notes and participate in further development through programmes such as the Company Secretary Toolkit.

They will also receive quarterly issues of The Chartered Secretary magazine and have access to member-only technical advice and updates through TechMail, a quarterly newsletter.

Institute News

ICSAZ Affl iate Scheme promotes effi cient administration


TheInstituteofCharteredSecretariesandAdministratorsinZimbabweherebyinvitesnominationsforthe:

CharteredSecretaryoftheYear2015AwardWhoqualifies?

• ACharteredSecretaryandaregisteredmemberoftheInstituteofCharteredSecretariesandAdministratorsinZimbabwe

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• IfyouknowofaCharteredSecretarywhohas,inyouropinion,contributedsignificantlyinanywaytotheidealsoftheprofessionduringtheyear2015,nominatethepersonastheCharteredSecretaryoftheYear;

• Givethereasonforyournominationinlessthan200words;and• Givethenameandcontactdetailsofthepersonnominated.

SendyournominationstotheChiefExecutiveandSecretary,at

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ICSAZ:‘KeytoCorporateSolutions’


Business Ethics

Corporate leaders play important role in promoting business ethics

Values, culture and ethics are the cornerstones of business integrity and good governance

practice. Without business ethics talk about corporate governance remains hollow.

Corporate leaders have an important role to play, when it comes to promoting business ethics. Top management should openly and regularly talk about the importance of business ethics in different kinds of gatherings within the company. This serves to build up and reinforce an ethical culture within it.

When leaders are silent on business ethics, this can be taken by their staff as indicating neutrality or ambivalence towards good ethics.

The quality and style of leadership in a company sets the tone for the entire business and its corporate culture. Many high profi le corporate scandals, such as the Enron and WorldCom scandals and many other international and local scandals, involved unethical behaviour by top management.

The chairman, chief executive, directors and senior manager are collectively regarded as the leaders in this context. The example set at the top will cascade down the company and be followed by staff at different levels.

Leading by example is a concept which should be easily understood by everyone. Leadership through actions and commitment tends to set the tone for translating ethical principles into concrete behaviour.

Business ethics are a set of moral principles, values and standards of conduct for the guidance of business behaviour. They are at the core of good governance. They provide the moral compass for corporate governance.

Headlines that have often hit newspapers vividly describe the consequences of a lack of or death of business ethics.

Corporate fraud by company offi cers, bribery of procurement managers, food scarcity, misuse of customers’ data, insider trading, market manipulation and misleading advertisements are manifestations of defi ciencies in business ethics by companies and individuals.

The board of directors bears the ultimate responsibility for the ethics and standards that make up a company’s culture.

In order not to give employees the impression that business ethics are all about negative things, companies may consider planning a programme of sharing good stories with their staff. These can be helpful in building up an ethical culture within the company.

The board’s involvement in the promotion of business ethics should

also be enhanced. An enlightened board should regularly discuss issues relating to business ethics, including the effectiveness of the code of ethics, the company’s whistleblowing policy, ethics training programmes and the appropriate disciplinary action for malpractice.

A code of ethics is the fi rst step to achieving ethical management. It serves several important functions, which include the following:• a central guide and roadmap

setting out the ground rules for ethical conduct within the company, which provides guidelines for employees’ behaviour and supports management’s day to day decision-making;

• disclosure of values, missions and principles which the company upholds;

• a tool to encourage discussions of ethics among employees and improve their ability to deal with ethical dilemmas that they come across in their daily work.A well drafted and properly

implemented code of ethics can help reduce costs and enhance profi ts by:• reducing fraud, corruption and

other malpractices;• enhancing the trust of stakeholders

such as shareholders, customers, suppliers, creditors and staff;

• reducing confl icts of interest;• enhancing the company’s

reputation.Business ethics, responsibility

and a sustainability agenda are at the heart of corporate governance. Without business ethics it will be diffi cult to convince stakeholders that they are being treated fairly and honestly.This article is based on a presentation by ICSAZ Chief Executive, Dr Farai Musamba, at the 2016 ICSAZ Winter-School.

Dr Farai Musamba

By Dr Farai Musamba


Shareholder Rights

The National Code on Corporate Governance clarifies that shareholders in a general meeting have the power to

make decisions concerning the company and to take any action which they deem appropriate for the protection and development of the company.

Shareholders also have rights under both common and corporate law to participate in corporate governance.

Their power is, in principle, only exercisable through their right to vote for or against major corporate decisions at a general shareholder meeting. Where this right is violated, the shareholders are disenfranchised and therefore powerless.

Good corporate governance practices require active participation of shareholders directly at AGMs or indirectly through independent non-executive directors on the board. However, the major corporate governance problems with participation of shareholders in the governance process emanates from the agency problem of information asymmetry.

Executives own and control information. The review of company annual reports in the ICSAZ Excellence in Corporate Governance Awards revealed that corporate insiders disclose as little information as possible just to meet financial reporting and other requirements.

The result is that shareholders do not receive the complete information they need to exercise their power through the right to vote or ask questions at the AGM. By not disclosing information, the executives retain and manipulate corporate power.

History indicates that Zimbabwean shareholders are generally passive. In the absence of eventful shareholder activism, this notion will stand. The concentration of ownership in the hands of a few individual insiders in most limited liability companies, in some cases through block ownership, is the most likely reason for the dilution of shareholder power which gives rise to the prevailing scenario.

All other shareholders are a minority and thus have no power, especially if they decide to stand against the executives in their individual capacities.

Controlling ShareholdersThe presence of a controlling

shareholder can dramatically change best corporate governance practices. Controlling shareholders have the opportunity to engage in abusive behaviour, a situation which is exacerbated in jurisdictions where transparency is poor and where a weak rule of law fails to give minority investors proper judicial recourse.

The interference by controlling shareholders in the fiduciary

duties and business judgment of their nominee directors (shadow directors) in favour of their

own interests violates the interests of all the other shareholders.

For good corporate governance, all parties affiliated with the controlling shareholder must be identified and disclosed, including those with any direct or indirect ownership interest in the firm.

In practice, it is difficult to deal with controlling shareholders because most good governance practices are mainly designed to resolve conflicts between shareholders and management but not conflicts between controlling shareholders and minority shareholders.

In most cases, boards are typically not independent of controlling shareholders.

Executives’ RemunerationBy contributing capital to a company, shareholders

benefit from a distribution of the company’s profits through dividends or through surplus assets (in the case of ordinary shareholders) if a company is wound up.

In most companies, there are insufficient links between executives’ pay and performance and insufficient alignment of directors’ incentives with the company’s long-term interests. Inappropriate information on remuneration is presented to the shareholders.

The practice in Zimbabwe is that executives’ remuneration is not an AGM agenda item. As a result, shareholders have no oversight of executive remuneration. The issue is left to the remuneration committee of the board to decide.

By Nelson Maseko – ICSAZ Technical Manager

Exercising their rights can be difficult for minority shareholders

Nelson Maseko

to page 9


In the end, shareholders lose out by receiving no dividends, as directors pocket all the profits from the company through excessive pay.

Related Party TransactionsThe mishandling of related party transactions

(RPTs) is one of the pitfalls in corporate governance where shareholder rights, especially those of minority shareholders, are violated.

RPTs can have a negative impact on the value of the company since they can transfer value from the company and its minority shareholders to those who control the company (directors, controlling shareholders and companies affiliated with these).

The presence of large scale business groups maximises the potential for such practices.

Good corporate governance practices can avert the potential for related party transactions disenfranchising minority shareholders.

Any RPT should be exercised in the interests of the firm. Controlling shareholders should pose no competition, directly or indirectly, to the firm. All significant related party transactions must be approved by shareholders.

However, shareholders may not have access to information ahead of the planned RPTs and do not have the tools to oppose abusive RPTs. It is important for independent directors to meet separately as a group without executives and to have access to an appropriate level of information to be able to represent minority shareholders in RPTs.

Independent directors can both support and challenge the decision-making process of the board. Ultimately they can represent minority shareholders’ interests in RPTs. Non-executive directors are therefore believed to be independent representatives of shareholders on the board.

The inescapable problem is the uneven balance of power, as controlling shareholders will be receptive to shareholder proposals only if these proposals are evidently in their own interests.

Companies should ensure equitable shareholder rights through one-share-one-vote. Differentiated voting or dividend rights result in a number of unintended consequences and affect the interests of minority shareholders adversely, rather than stimulating longer-term ownership.

Research in 2013 by Ararat observed that tag-along rights or mandatory offer provisions can be put in place

to allow minority shareholders to participate in corporate actions on the same terms as controlling shareholders.

In addition, super majority requirements (75%) for key resolutions, such as key strategic or corporate actions that affect minority shareholders, should be put in place.

Research has also documented the role of institutional investors in safeguarding the rights of shareholders in corporate governance. Because of their economic muscle, institutional investors can influence good corporate governance practices.

They can encourage regular, systematic contact at senior executive level for the purpose of an exchange of views and information on strategy, performance, board composition and processes, and the quality of management.

In most cases, institutional investors will identify “red flags” that may indicate, for instance, controlling shareholder opportunism and then try to persuade the board to improve its corporate governance practices.

Making these “red flags” known to other shareholders and stakeholders will help put pressure on the board to correct bad practices and change the ways of the inappropriately opportunistic controlling shareholders, thus protecting value for all shareholders and other stakeholders.

Of late, institutional investors are redirecting their investment strategies away from a focus on short-term returns in such a way as to favour stakeholder inclusive practices.

The “free-rider” problem is one of the challenges in shareholder activism. It is common for shareholders to benefit from the engagement efforts of a few who bear ‘the costs’. Shareholders need to realise that part of the wealth they have invested should be protected.

Conclusion

With information in their ‘cabinets’, executives still wield excessive corporate power. In the absence of their vote, shareholders will always be on the receiving end.

Major decisions such as setting executive compensation have remained under the control of the beneficiaries because of information asymmetry, much to the detriment of the owners.

Policy makers and regulators are still faced with a daunting task, since research has shown that none of the existing corporate governance mechanisms for curbing these vices are effective.

Shareholder RightsExercising their rights can be difficult for minority shareholdersfrom page 8


Have you ever wondered what happens to the mandatory provident fund contributions that are

deducted from your monthly salary? Of course we understand that they

go into a provident fund scheme and its underlying investment funds, but what kind of companies are those funds invested in? Do you have a say in that? If those companies are not well managed, would you want to know how that could be changed? Is that even possible?

These were the questions that intrigued me 18 years ago when I was working as a graduate trainee in a global fund management firm. To a certain extent they still do, except now I have a better understanding of what the answers to them could be.

Two decades ago asset managers did not engage with their investee companies, nor did they feel that they had a responsibility to do so. They or their representatives, if they appointed any representatives at all, rarely took active voting decisions. Company directors’ views tended to be: ‘If you don’t like my company, sell the stock.’

This posed a significant problem. In a multi-stage investment chain, there was a complete disconnect between asset owners (collectively known as investors), the asset managers they appointed and their investee companies.

This disconnect arose from the lack of communication between investors and companies. Asset managers lacked a deeper understanding of the corporate culture and strategic outlook that shapes a sustainable company. This contributed to a trading culture that got out of control, damaging the long-term development of capital markets and the economy.

Today, the relationships between investors and companies have moved forward significantly. I am fortunate

to have had the opportunity to work closely with investors, asset managers and companies over the years, advising them on environmental, social and governance (ESG) issues.

Intelligent voting and corporate engagement are becoming mainstream. Even in Asia, where companies have traditionally resisted speaking with investors, we are seeing increased board-level interest in shareholder engagement.It takes two to tango

April Chan, former Company Secretary of CLP Holdings, points out that the success of the dialogue between investors and companies depends greatly on the willingness of both parties to engage with each other.

“It takes two to tango,” she said at a recent Hong Kong Institute of Chartered Secretaries shareholder engagement forum.

“To do the dance well, we need regular communications so that companies and shareholders understand each other’s expectations.”

On the investor side, since 2010 when the UK launched its Stewardship Code, we have seen the concepts of ‘stewardship’ and ‘responsible ownership’ gain ground around the world. We have seen an increased willingness by shareholders to exercise their ownership rights and this means more than simply

voting in shareholder meetings. The UK Financial Reporting

Council, which revised the UK’s Stewardship Code in September 2012, points out that, in addition to voting, responsible ownership activities may include monitoring and engaging with companies on matters such as strategy, performance, risk, capital structure, remuneration, corporate culture and corporate governance.

Moreover, responsible ownership is no longer the domain of the West. This is reflected in the growing number of Asian codes and guidance on best practice in this area. The Japanese Principles for Responsible Institutional Investors and the Malaysian Code for Institutional Investors, both launched in 2014, aim to support the long-term success of companies so that the ultimate capital providers also benefit.

Hong Kong is poised to join this trend with the imminent introduction of the Securities and Futures Commission’s (SFC) Principles of Responsible Ownership.

Admittedly, in practice the level of engagement in the dialogue between investors and companies varies immensely.

Among investors, the philosophy of responsible investment has only just begun to enter the mainstream. Companies that actively engage with investors often find that those making voting decisions do so under time pressure.

However, many investors do ask for more information when they need to make a decision. Investors should understand that companies will only put an item on the meeting agenda when it has a material impact on the company and that it is the responsibility of shareholders to vote dutifully and carefully.

On the company side, there remains a degree of suspicion of

InternationalResponsible Ownership concept spreads to AsiaBy Christine Chow, Associate Director, Hermes EOS, Hermes Investment Management

Christine Chow

to page 11


InternationalResponsible Ownership concept spreads to Asiafrom page 10

to page 12

investor requests for dialogue. This is sometimes seen as ‘interference’. Some feel that they are under constant surveillance by those who do not understand their business, while others feel unprepared when investors ask to meet board directors, especially independent non-executive directors.

Established global companies can ask internal staff to prepare briefing packs for independent directors and provide these directors with training on how to interact with investors. However smaller listed companies have fewer resources and less expertise to do the same. In the extreme, companies may feel this dialogue is completely unnecessary. Professional managers and industry specialists are employed to manage the business on behalf of shareholders – why don’t they trust us?

The truth of the matter is that we have long left behind an era when business was conducted with a good, solid handshake – with simplicity. We now operate in an environment where transparency, accountability and fairness are required to support the social licence to operate.

This means developing a new status quo towards supporting a comprehensive governance system with robust checks and balances, clear reporting standards and key performance indicators. When checks and balances are deployed appropriately and thoughtfully, without over-burdening a business, they enhance a company’s ability to excel and expand.

The view from Hong KongAs mentioned above, Hong Kong

is poised to introduce its own code setting out the basic principles for responsible ownership (the SFC’s Principles of Responsible Ownership), but what do executives and board members of companies

listed in Hong Kong expect from responsible shareowners?

I recently visited a number of company executives in Hong Kong to discuss responsible ownership and shareholder engagement. Some of the key issues to emerge from these discussions are highlighted below.

Some executives I spoke to were excited about the shareholder engagement trend because, as one respondent put it, ‘We have the support of our investors to explore better ways to add value to the business’. Other executives were frustrated by a lack of engagement from the investor side.

One respondent said that his biggest challenge is getting investors to read the circulated information and set aside sufficient time to make voting decisions.

“Many investors will vote against management without even engaging with us ahead of time to discuss the matter.” he said.

This frustration is felt on both sides of the dialogue. On numerous occasions I have contacted an investor relations manager for further information ahead of an annual general meeting and received no response. It is surprising but some listed companies do not even display contact information for the investor relations department on their websites.

Even if they do, there may be no reply. I acknowledge that some investors may not carry out intelligent voting and tend to follow third-party advice at all times but a company could plan to engage with shareholders ahead of time to ensure that sufficient communication takes place prior to shareholder meetings.

Minority rightsThe executives I spoke to were

working in diverse sectors of the economy and for companies with different shareholding structures ranging from state, founder or family-

controlled companies to those with an institutional shareholding structure.

These shareholding structures often influence the approach taken to shareholder engagement. One respondent made the point that for state-controlled companies ‘shareholder engagement’ has historically been seen as a question of reporting to their largest shareholder – the state – on their business activities.

“As engagement becomes mainstream,” he said, “we are familiarising ourselves with the Western style of communication and seeking ways to protect minority shareholder rights in a state-controlled setting. There are practical challenges but I think open and fair communication with all shareholders is the first step.

“Under the current reforms, shareholders and the board will become more international over time. As a result, our leadership’s commitment to protecting minority shareholder rights and their ability to do so, becomes vitally important to the survival of our business.”Independent directors

Independent directors can often play an important role in shareholder engagement. One respondent pointed out that in China the appointment of senior executives in state-owned enterprises is still likely to be determined by the state.

One way to improve the dynamics and effectiveness of the board is therefore to create lead independent director roles. The tasks of a lead independent director is to communicate with minority shareholders, consolidate the views of other board directors, and manage the various committees and government investigations – if there are any – as a non-executive but informed party.

More detailed succession plans for, and better disclosure of, succession and director candidates meanwhile will improve transparency.


InternationalResponsible Ownership concept spreads to Asiafrom page 11

“Culturally we must learn to respect minority shareholders as part of the audit and monitoring process because we are responsible for other people’s capital,” the respondent said.

Another respondent pointed out that appointing a lead independent director to work with investors is not common practice in Hong Kong at the moment but that this practice would be beneficial – particularly for companies with an executive chair.

“The appointment of an independent non-executive lead director would provide a way to obtain the views of investors. After all, this is why we go on roadshows – to speak to investors and to understand their views. It would be great to create a mechanism that enables us to do this more easily and effectively,’ he said.

The constructive challengeWhere investors are prepared to

engage with companies, they can provide a constructive challenge to the status quo. Having one leg in the investment industry and another in academia allows me to come up with the following comparison: companies should expect from responsible investors committed to stewardship what we should expect from a good teacher.

A good teacher appreciates the efforts made by the best students, but to avoid complacency and a self-congratulating attitude, he or she continues to challenge them in a constructive manner and pushes them to perform and excel beyond their imagination. A good teacher also listens and respects individuality.

Moreover, a good teacher cares for the students who are not top performers and tries to find ways that will help them realise their potential.

Sometimes, underperformance can be caused by the complicated family situation of the student, which can

be compared to a company operating in a highly regulated industry and a high-risk and complex environment.

Underperformance can also be caused by having resources in the wrong places. For example, a student can focus too much on getting the work done without thinking through the lessons he or she should learn.

This is akin to a company trying to fill in various industry questionnaires for rating and awards purposes. The lessons learned from completing questionnaires, such as discovering the areas in which the company could improve and how to prioritise resources is a far better way to support improvement and business excellence.

I would like to highlight a couple of examples of what can happen when the constructive challenge provided by engaged investors is ignored.

The BP caseBetween 2000 and 2008, as

responsible ownership gained momentum in the United Kingdom, oil major BP steadily increased engagement activities with its shareholders. These investors voiced their concerns over the company’s environmental performance and health and safety standards. Unfortunately, the company did not respond sufficiently to what proved to be prescient concerns of investors.

The subsequent 2010 Deepwater Horizon oil spill in the Gulf of Mexico led to BP incurring fines of US$20bn. Following this crisis, BP significantly increased its dialogue with investors and launched a much deeper investigation into health and safety practices at the company.

While some may say that this is an isolated case, it can also be argued that this case demonstrates that proper engagement with responsible owners gives companies insights

into future risks and outcomes.

The Volkswagen case

In September 2015, the US Environmental Protection Agency discovered that Volkswagen had installed defeat devices that caused the nitrogen oxide output of its vehicles to meet US standards during regulatory testing, but breached the standards in real life driving. Hermes EOS has been engaging with Volkswagen since 2006.

On multiple occasions, we raised concerns about the corporate governance standards of the company – including the composition and effectiveness of its board and the lack of efficient and independent oversight.

Our Global Equities investment team uses an ESG-risk rating system that measures a company’s holistic performance and had observed the decline of Volkswagen’s governance rating.

This example also serves as a warning that investors must monitor and, if appropriate, engage with single or multiple party-controlled companies – in this case, the Porsche or Piëch families and the State of Lower Saxony – to verify that the board is taking into account the interests of all shareholders for the long-term success of the company.

Family, personal and corporate interests must align for this type of business leadership to work. Investors should also maintain a dialogue with other controlling shareholders to ensure that ongoing strategic and governance concerns are discussed and addressed in a timely manner.

This article first appeared in the April 2016 edition of CSj (http://csj.hkics.org.hk), the journal of the Hong Kong Institute of Chartered Secretaries, published by Ninehills Media Ltd.


Student Supplement

Institute of Chartered Secretaries and Administrators in Zimbabwe past president Avilla Dororosa Goba has challenged the 2016

CIS and IBAS graduates to play a role in solving many of the problems being experienced worldwide.

“We have learnt of cases of mismanagement, corruption and fraud and these continue to recur. Global warming, depletion of natural resources and pollution are real threats to human existence and sustainability will be a key consideration for organisations,” she said.

Mrs Goba, who was addressing the graduates and guests as the guest speaker at the ICSAZ graduation ceremony in April at Rainbow Towers, pointed out that many large companies in Zimbabwe had closed shop in the past few years.

She called on the new graduates to consider how, as Chartered Secretaries, financing and accounting professionals, human resources professionals or administrators, they could be part of the solution to some of the problems that confronted them.

“As you enter the working world armed with your professional qualification, how will you choose to make a difference?

“Perhaps some of you will be starting your own businesses and be social entrepreneurs. As you start a business as an SME or as you work for an SME, how will you make a difference?” she asked.

She said she had recently read a newspaper report about a graduate who sells airtime and bottled water at a certain road intersection in Harare’s central business district clad in a suit.

“His professional presentation has attracted a lot of attention from onlookers and passers-by to the extent that he has built a huge customer base.

“Some flock to him out of empathy, some out of curiosity but, at the end of the day, he emerges a winner,” she said, adding that without doubt it was important to make a living.

Mrs Goba assured the graduates that the CIS and IBAS professional qualifications would open doors for all of them in the area they wished to specialise in.

“The opportunities to make a difference are endless,” she added.

“Each one of you will develop and progress through life at your own unique pace. Each one of you will dream different dreams and each will win and lose at your own pace,” she said.

She urged all the graduates to look inside themselves and find the indomitable spirit that resides there.

“Find it and set it free within you. That spirit is not a vessel to

be filled but a fire to light. Light that fire,” she said.

She predicted that there would be an even greater demand for talented and skilled professionals as well as an even larger arena for accountancy and finance graduates to make an impact in the world of business.

She urged them to never stop learning after graduating, as they are living in a world of constant change.

She also emphasised that the professional knowledge that the graduates have acquired cannot be taken away from them.

“The world today is characterised by rapid advancements in technology, increasing globalisation and the transition into a knowledge-based economy. What this means for today’s business is that one must continually learn new skills.

“In such an environment, we cannot expect the knowledge we received in school to last us a lifetime. Therefore the professional qualification is just but a first step towards the right direction. It should be a portal that will expand horizons and bring more opportunities in this economy,” she said.

She mentioned that as a past president of ICSAZ and a human resources professional, she knew first-hand the importance of obtaining a professional qualification and continuing to attain professional education for one’s career development.

She said some of the graduates would become business owners and employers. Their qualifications, moral values and integrity must be the compass that will provide the direction for their paths, she said.

Graduates challenged to play role in solving worldwide problems

Mrs Avilla Goba


The Institute has a web portal that enables its students to access the Institute’s facilities over the internet, making it unnecessary for them to travel to the Institute for information

and various transactions. Facilities provided by the web portal are:• Examinations registrations• Downloading of examination confi rmation letters• Checking of examination results• Downloading credit lists• Purchase of Institute paraphernalia• Downloading of free past examination papers• Downloading of payment history

The web portal has been integrated with the online banking system so that students can deposit money at the bank that is automatically transferred to the student account in the ICSAZ system. Some transactions go directly to the student account. With transactions that do not go directly into the system, students or members will need to indicate where the money is to be allocated to.

The transactions that go directly to the student account are : Re-registration Fees Re-admission Fees Winter School Fees Graduation Fees Initial Student Registration Fees Penalties

The indirect transactions are:1. Examinations For these, students will need to deposit money at

the bank using the transaction code and description for examinations as provided on the deposit slip. After making the payment, students will need to log on to the web portal to select the subject and session to register for.

2. Stores Sales Stores sales include sales of booklets, study packs

and gowns. The students pay at the bank and then log on to the

web portal to select a particular item on the web portal.

3. Other These are sundry items that are neither listed on the

deposit slip nor on the Stores Sales, such as Credit List, Transcript, Lost Identity Card etc.

Online salesThe Online Sales system allows the purchase or ordering of the following materials online:

• Study Packs• Past Examination Booklets• Transcripts• Graduation Regalia• Ties• Other Institute paraphernalia

The items ordered will, at the moment, be delivered to Zimbabwean addresses by three courier services, namely:

1. Courier Connect2. DHL3. SwiftDelivery to international destinations is still being arranged. Information on this will be available from the offi ce.

The way the process works is as follows:Once an item has been purchased, the student may choose a delivery option from the ones mentioned above. The couriers above have different charges for transporting the purchased materials. Members and students also have the option to buy the materials on line and choose to collect the material from the Institute.For a student to be able to purchase materials online, the student account must have a credit balance that is equal to or more than the total cost of the items purchased including courier charges for those who opt to have the material delivered by a courier service.

Web portal gives members and students easy access to Institute

Student Supplement


The Integrative Case Study covers the full ICSAZ syllabus. It aims to evaluate the candidates’ knowledge, skills and professional competencies developed in parts A to D of the Institute’s

curriculum. The paper is the final Test of Competence for the ICSAZ

examinations. It is therefore designed to test multiple skills and knowledge elements.

Upon completion of the Final Test of Competence, one should be positioned to represent the Institute at the highest level in the corporate world. The major examination process used in the paper is a case study based on pre-seen material given to the candidates 30 days before the examination day.

The case study syllabusThe case study is not a new syllabus, but rather a scenario

based on a fictitious organisation to test application of knowledge and skills learnt from parts A to D of the syllabus.

The ICSAZ syllabus covers business communication, governance, financial accounting, information technology, principles of economics, management accounting, financial management, tax management, general and strategic management and company law and secretarial practices among other subjects. The learning outcomes are set at above postgraduate competency levels. It follows that the case study is a holistic paper seeking to cover any parts of the syllabus.

The paper is three hours long. It consists of 5 compulsory questions.

Learning outcomesThe Integrative Case Study’s primary expected learning outcomes are twofold, namely:i) Knowledge of • financial models and financial decision making

techniques; • role of the Chartered Secretary in ensuring good

governance and in fulfilment of provisions of the Companies Act and common law;

• elements and processes involved in the development and implementation of organisational strategy.

ii) Ability to • critically evaluate financial, legal and regulatory

information; • assess the structure, quality and performance

of the organisation and provide practical advice; • critically evaluate complex and conflicting data

and formulate advice in the context of governance

Examination SkillsThe primary preparation for the Integrative case study is the review and context learning derived from the pre-seen

material. The candidate goes through the pre-seen material four weeks in advance. The case study discusses business scenarios and themes based on the parts A to D ICSAZ subjects and attempts to balance all the major competencies expected of a Chartered Secretary in business.

The candidates are expected to demonstrate sound application skills, good knowledge and appreciation of the integrated nature of the subjects when it comes to application. The case study enables the candidates to focus their knowledge and anticipate areas of possible examination questions. Anticipation is developed from the case story and issues discussed in the pre-seen material.

Skills in answering questionsThe examination questions are designed to enable the candidates to demonstrate the expected learning outcomes. As a result the questions generally are modelled to test the following knowledge, competencies, skills and comprehension:a. Remembering – Retrieving relevant knowledge from

the entire set of 17 subjects. The candidates are expected to recognise and recall relevant concepts, principles and subject matter content in line with the case study scenarios.

b. Understanding – Determining the meaning of instructional messages, including oral, written, and graphic communication. The candidates are expected to interpret, exemplify, classify, infer, compare and explain data and information.

c. Applying – Carrying out or using a procedure in a given situation to solve a problem, render professional advice and make a sound business decision. This is demonstrated in executing and implementing the case scenario in a practicable manner.

d. Analysing – Breaking material into its constituent parts and detecting how the parts relate to one another and to an overall structure or purpose, such as informing strategic decisions, or choosing among options. The ability to differentiate, organise and attribute data to given scenarios is crucial in this regard.

e. Evaluating – Making judgments based on criteria and standards to arrive at sound decisions. The candidates are expected to check and critique data in line with the themes in the question and the direction of the question.

f. Creation – Putting elements together to form a novel, coherent whole or make an original product. This is demonstrated in the candidates’ ability to generate, plan and produce relevant, ethical practical solutions to business issues.

Students are therefore to demonstrate an understanding of these terms in answering the questions.

Integrative Case Study covers whole ICSAZ syllabus

to page 16

Student Supplement


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Chartered SecretariesSouthern AfricaPO Box 3146Houghton2041South AfricaTel: (011) 551 4000Fax: (011) 551 4028www.chartsec.co.za

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Governance NewZealand Inc.

PRESIDENT:Lovemore Kadenge

VICE PRESIDENTS:Charles NhemachenaGeorge Mahembe

ADVERTISING: M. JojoICSAZEmail: [email protected]: 086 4412596-9

Richard SummersParadza Paradza (Dr) Loice Kunyongana (Ms)Ferida Matambo (Mrs)Letitia Nyama (Mrs)Taona MunzvandiWonder Chenjerai

Email: [email protected]: http://www.icsaz.co.zw

BRANCH CHAIRMENHarare: Lovemore MangenaBulawayo: Sithembile Ncube (Mrs)Midlands: Godfrey NyikaMutare: Shepherd ChinakaMasvingo: Joseph Bemani (Dr)

CHIEF EXECUTIVE AND SECRETARY:Farai Musamba (Dr)

Study techniques

Candidates are advised to analyse the case study, pull out themes (issues) and look for examples on which to base their arguments in the exams. Such examples include financial data, statistics, role and responsibilities of identified persons in the case study, legal opinion, strategies, products, dates, decisions etc.

All responses to questions are primarily based on the context of the case study before opening to general business knowledge, leading practices and market contemporary information on issues discussed.

A good example would be product development in the Zimbabwe market for a financial institution. Candidates could use the contemporary liquidity challenges in the country to argue their advice and strategic decisions.

Besides the analysis of the case, good practice also requires application of the case to industry requirements to demonstrate practical solutions. For instance, the May 2016 case study was on the financial services industry. The candidates could demonstrate very good arguments based on sector knowledge. This separates a moderate answer from a very good one.

Candidates should be prepared to compute ratios and trends. It is not good enough to argue without demonstrating trends and changes shown by the numbers.

Some aspects of the case study scenario refer to aspects of the law such as the Companies Act or Income Tax law.

The candidates should demonstrate an appreciation of the principles of the law as it applies in Zimbabwe. Unless the question asks for it, there is no point in the candidate dismissing the principles of the law as generally understood.

One area to watch is ‘practical application’. This should be judged by relevance of the arguments given by the candidates, legal application of the facts, compliance with good governance principles, international standard requirements in the case of financial reporting and known case law. Candidates should remain neutral and professional in their arguments and avoid emotions aroused by political or personal preferences of the candidate.

In the event that candidates fail to identify the knowledge being tested, candidates should at least lean on the basic case study story to provide their thoughts instead of missing the case study scenario completely.

ConclusionThe Integrative Case study, as the final qualifying examination, is set at a sufficiently high level to allow the Institute to produce professionals with knowledge and ability to represent the core of the Institute in any organisation.

Candidates should thus be guided by experienced professionals to learn how to apply knowledge and how to handle the examinations by providing relevant practical arguments in the three hours set for the paper.

Student Supplement

798760/1

Integrative Case Study covers whole ICSAZ syllabusfrom page 15

INSTITUTE OF CHARTERED SECRETARIES AND ADMINISTRATORS IN ZIMBABWE

Friday, 22 July 2016, 11:00 am

CHAPMAN GOLF CLUB

$200 per team, Individual $50

Hole No. 1, 10 and 18 $150 *** Tee box / Green $100

Cocktail – Auction – Prize giving

Sponsorship of activities is welcome

REGISTER NOW—TO MAKE A DIFFERENCE!!

Enquiries to: ICSAZ

P O Box CY 172, Causeway, Harare Tel: 04-700553-5, 702241;

Fax: 04-700624 Email: [email protected]

Website: www.icsaz.co.zw

2016 Annual Charity Golf

Tournament

BETTER BALL ALLIANCEBETTER BALL ALLIANCE


Ninety-nine CIS Students Graduate

Registered at the G.P.O as a Newspaper Issue 2/2016


Inside this issue

» Exercising their rights can be difficultfor minority shareholders

» Corporate leaders play important role in promoting business ethics

» ICSAZ Affiliate Scheme promotes efficient administration

» Web portal gives members and students easy access to Institute

Registered at the G.P.O as a Newspaper Issue...

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