eBusiness Weekly
Taking Stock Kudzanai Sharara
Economist Milton Friedman once said “there is one and only one social responsibility of a business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.
In other words, Friedman was suggesting that how a company behaves matters and maximising profits does not justify all means.
The Zimbabwean market has had plenty of experience of poor corporate governance in recent years. The highest profile was the lack of good corporate governance that allowed the NSSA rot to perpetuate.
Millions are said to have been looted at NSSA through corporate malpractices, but there are a number of other examples.
Hippo Valley, for instance, is being haunted by sins from its parent company Tongaat Hullet. The parent company requested the suspension of its listing on the Johannesburg Stock Exchange amid an investigation.
This decision by the board comes following a delay in the publication of the company’s financial results. Shareholders were advised on May 31, 2019 that the financial results for March 31, 2018 cannot be relied upon and will be restated. This has had implications for the reliance of the interim results for the period ended September 30, 2018 and the full 12 months ended March 31, 2019.
Corporate governance issues are also haunting Old Mutual Limited. This is after concerns had arisen over “fired” CEO Peter Moyo’s involvement in approving NMT Capital ordinary dividend payments (in his capacity as a director of NMT Capital) at a time when various amounts were due and payable by NMT Capital to Old Mutual, in breach of the terms of NMT Capital’s preference share subscription agreement with Old Mutual. According to Old Mutual’s board, in a letter to shareholders, these ordinary dividend payments benefited Moyo personally in the amount of approximately R30,6 million, and he did not at any relevant stage raise the matter with the Board sub-committee entrusted with oversight over his relationship with NMT.
Another ZSE listed company CFI is currently under suspension from trading on the ZSE as it has continuously failed to abide by ZSE regulations. CFI’s suspension was indefinitely prolonged after it failed to comply with listing requirements. One of the issues which led to the suspension is that CFI has not appointed independent non-executive directors who are not affiliated or have an association with any of the company’s shareholders.
In each instance, investors have suffered as these companies’ share prices have come under pressure in the case of Old Mutual and suspension in the case of Hippo Valley and CFI, which deprives investors an opportunity to trade the company’s shares.
