PRESENTATION TO THE CORPORATE GOVERNANCE SUMMIT:

CORPORATE GOVERNANCE IN PARASTATALS AND STATE ENTERPRISES

MINISTRY OF STATE ENTERPRISES AND PARASTATALS

STATE ENTERPRISES AND PARASTATALS

• ANY STATUTORY BODY ESTABLISHED BY AN ACT OF PARLIAMENT

• ANY CORPORATE BODY OR COMPANY IN WHICH THE STATE HAS A CNTROLLING INTEREST

CORPORATE GOVERNANCE• A HIGH LEVEL FRAMEWORK WITHIN WHICH ORGANISATIONS

INCLUDING STATE ENTERPRISES AND PARASTATALS ARE:– DIRECTED– CONTROLLED, AND– HELD TO ACCOUNT

WHO ARE THE STAKEHOLDERS?

PARLIAMENTLINE MINISTERSBAORD CHAIRPERSONSBOARDSBOARD COMMITTEESC E OMANAGEMENTEMPLOYEES

SPEAKER OF PARLIAMENTMINISTER OF FINANCEMINISTER OF STATE ENTERPRISES AND

PARASTATALSCONTROLLER AND AUDITOR GENERALCUSTOMERSSUPPLIERSPUBLIC

CORPORATE GOVERNANCE

• STANDARDIZED PRINCIPLES OR RULES– ACCOUNTABILITY, RESPONCIBILITY,TRANSPARENCY, FAIRNESS , ect

• DOCUMENTED PROCESSES AND PROCDURES– PROCUREMENT PROCESSES AND PROCEDURES– RESTRUCTURING PROCESSES AND PROCEDURES FOR SEPS– FINANCIAL MANAGEMENT PROCESSES AND PROCEDURES– HUMAN RESOUCES MANAGEMENT PROCESSES AND PROCEDURES– RISK MANAGEMENT PROCESSES AND PROCEDURES– PRODUCTION PROCESSES AND PROCEDURES

–X PROCESS AND PROCEDURES

CORPORATE GOVERNANCESEEKS TO

• ENSURE MAXIMUM DELIVERY OF RESULTS OR OUTCOMES AND IMPACT

• ENSURE EFFICIENT AND EFFECTIVE USE OF RESOURCES• ENSURE REPEATEBILITY OF PROCESSES AND

PROCEDURES TO GUARANTTE QUALITY OUTCOMES• ENSURE PERIODIC MONITORING FOR COMPLIANCE AND

IMPROVEMENT• MINIMISE RISKS ASSOCIATED WITH THE PROCESSES

THE ACTS

• ESTABLISHMENT ACTS• AUDIT AND EXCHAQUER ACT• PROCUREMENT ACT • COMPANIES ACT• LABOUR ACT• OTHER ACTS RELEVANT AND SPECIFIC TO

EACH SEP

WHAT IS PROVIDED FOR IN THE ESTABLISHMENT ACT?

• SELECTION AND APPOINTMENT OF BOARDS.

• SIZE AND COMPOSITION OF BOARDS.

• THE MANDATE OF THE BOARDS.

• THE ROLES FUNCTIONS AND ACCOUNTABILITY OF THE BOARDS.

WHAT IS PROVIDED FOR IN THE AUDIT AND EXCHEQUER ACT?

• REPORTING OF AUDITED FINANCIAL STATEMENTS• REPORTING OF SPECIAL REPORTS• APPOINTMENT OF INTERNAL AND EXTERNAL AUDITORS• APROVAL OF CAPITAL BUDGETS• APROVAL OF REVENUE AND EXPENDITURE BUDGETS• APROVAL OF SALARIES FOR DESGINATED POSTS• PRESANTATIONS OF CAPITAL BUDGET TO PARLIAMENT• APPROVALS ON BORROWINGS• APPROVALS ON INVESTMENT MODALITIES• LIMITS ON LOANS

SELECTION AND APPOINTEMENT OF BOARD MEMBERS

• APPOINTED BY THE PRESIDENT.• MINISTER REQUESTS FOR NOMINATIONS FROM STAKEHOLDERS.• MINISTER FORWARD TO THE PRESIDENT, STAKEHOLDER

NOMINATION AND HIS RECOMMENDATIONS.• APPOINTED BY LINE MINISTER WITH THE CONCURRENCE OF THE

PRESIDENT• LINE MINISTRIES TO CONSULT WITH MINISTRY OF STATE

ENTERPRISES AND PARASTATALS.

APPOINTMENT OF BOARD POLICY

• THE APPOINTMENT OF BOARD MEMBERS SHOULD BE CONSISTENT WITH THE FOLLOWING:

- CONTINUITY;- REGIONAL REPRESENTATION;- GENDER BALANCE;- SKILLS DIVERSITY; AND- POLITICAL NEUTRALITY.- MINIMISE MULTIPLICITY OF BOARD MEMBERSHIP

FUNCTIONS OF THE BOARD

• TO DIRECT MOBILIZATION OF PHYSICAL, HUMAN AND FINANCIAL RESOURCES.

• TO DIRECT AND CONTROL USAGE OF PHYSICAL, HUMAN AND FINANCIAL RESOURCES IN LINE WITH THE MANDATE.

• TO DEVELOP, MONITOR AND EVALUATE EFFECTIVENESS OF STRATEGIES AND POLICES TO ACHIEVE OBJECTIVES OF THE MANDATE.

• TO REPORT ON PERFORMANCE OUTCOMES.

ROLE OF THE BOARD

THE ROLE OF THE BOARD IS TO ENSURE COMPLIANCE WITH CORPORATE GOVERNANCE AND EFFECTIVE PERFORMANCE AND RISK MANAGEMENT SYSTEMS, AND ALSO TO OBSERVE TRANSPARENCY, ACCOUNTABILITY AND RESPONSIBILITY , WHILST BEING :

• RESPONSIBLE FOR FORMULATING BROAD POLICIES OF THE ORGANIZATION.

• RESPONSIBLE FOR MONITORING AND REVIEWING STRATEGIES AND MAJOR PLANS.

• SHOULD PROVIDE LEADERSHIP AND SUPERVISE MANAGEMENT.

• DEVELOP CORPORATE CULTURE AND CLIMATE.

• MUST ENSURE THAT FULL AND PROPER RECORDS OF THE FINANCIAL AFFAIRS ARE KEPT.

• RESPONSIBLE FOR PRODUCTION OF THE ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS THAT FAIRLY REPRESENTS THE STATE OF AFFAIRS OF THE ORGANIZATION.

ROLE OF THE BOARD• RESPONSIBLE FOR APPROVALS OF ANNUAL BUDGETS.

• RESPONSIBLE FOR RISK MANAGEMENT POLICY.

• ENSURE EFFECTIVE INDUCTION AND TRAINING PROGRAMS FOR BOARD MEMBERS.

• ENSURE UNRESTRICTED ACCESS TO RELEVANT AND TIMELY INFORMATION BY BOARD MEMBERS

ROLE OF THE BOARD• RESPONSIBLE FOR ADEQUATE INTERNAL CHECKS AND

CONTROLS.

• RESPONSIBLE FOR APPOINTMENT AND REMUNERATION OF CEO AND TOP MANAGEMENT.

• RESPONSIBLE FOR PERFORMANCE MANAGEMENT POLICY.

• ENSURE COMPLIANCE WITH LAWS, REGULATIONS AND GOVERNMENT POLICIES.

BOARD PERFOMANCE EVALUATION

• MONITOR AND EVALUATE THE PERFORMANCE OF THE BOARD CHAIRPERSON.

• MONITOR AND EVALUATE PERFORMANCE OF INDIVIDUAL BOARD MEMBERS.

• MONITOR AND EVALUATE PERFORMANCE OF THE ENTIRE BOARD.

• PERFORMANCE EVALUATION REPORTS TO BE SUBMITTED TO THE LINE MINISTER AT LEAST ONCE A YEAR.

• BOARD TO AGREE WITH SHAREHOLDER ON PERFORMANCE TARGETS AND INDICATORS .

REPORTING STRUCTURE• CORPORATE GOVERNANCE SEEKS TO DEFINE ROLE CLARITY

AND RELATIONSHIPS BETWEEN VARIOUS KEY STAKEHOLDERS:

- BETWEEN THE BOARD AND THE LINE MINISTRY;- BETWEEN THE CEO AND BOARD MEMBERS AND THE BOARD

CHAIRPERSON;- BETWEEN THE CEO AND THE LINE MINISTRY’S SECRETARY

AND MINISTER; AND- BETWEEN THE CEO AND OTHER GOVERNMENT MINISTRIES.

THE ROLE OF THE LINE MINISTRY

• MINISTER MAY GIVE BOARD DIRECTION ON MATTERS OF POLICY.

• MINISTER TO APPROVE BUDGETS.• MINISTER TO REPORT TO CABINET PARLIAMENT.• MINISTER TO CONSULT BOARD BEFORE ISSUING DIRECTIVES.• DIRECTIONS RECEIVED TO APPEAR IN ANNUAL REPORTS.• MONITOR AND EVALUATE PERFORMANCE.

ROLE OF THE MINISTRY OF STATE ENTERPRISES AND PARASTATALS

• FORMULATION AND REVIEW OF POLICIES RELATING TO CORPORATE GOVERNANCE AND PERFORMANCE OF SEPS

• ENSURE COMPLIANCE AND CONTINUOUS IMPROVEMENT• DEVELOP AND HELP IMPLEMENT REFORM STRATEGIES

THAT OPTIMIZE POSITIVE IMPACT OF THE STATE ENTERPRISES AND PARASTATALS .

• ENSURE THAT ALL STATE ENTERPRISES AND PARASTATALS OPERATE AND COMPLY WITH GOOD COOPERATE GOVERNANCE AND REGULATORY ENVIRONMENT.

DECLARATION OF INTEREST

• A BOARD MEMBER IS BOUND TO DISCLOSE ALL INFORMATION WHICH HAVE MATERIAL EFFECT TO THE ORGANIZATION'S OPERATIONS, FINANCIAL STATUS OR IMAGE.

• A RECORD OF DECLARATION OF INTEREST AT ALL BOARD MEETINGS IS A USEFUL TOOL TO ENSURE COMPLIANCE TO DECLARATION OF INTEREST.

REMUNERATION FOR BOARD MEMBERS

• APPOINTMENTS TO BOARDS SHOULD NOT BE TAKEN AS SUBSTANTIVE EMPLOYMENT.

• BOARD FEES ARE FIXED BY THE LINE MINISTER WITH THE APPROVAL OF THE MINISTER OF FINANCE.

• BOARD FEES TO BE BASED ON THE PRINCIPLES OF ABILITY TO PAY , SUSTAINABILITY , REASONABLENESS AND COMPARABILITY.

• BOARD REMUNERATION AND BENEFITS SHOULD NOT BE COMPARED TO THOSE APPLICABLE TO THE CEO.

CONTERMPORARY CORPORATE GOVERNANCE CHALLENGES

• MULTIPLICITY OF STAKEHOLDERS WITH CONFLICTING INTERESTS;

• LACK OF TRANSPARENCY;• LIMITED ACCOUNTABILITY;• INDISCIPLINE; AND • CORRUPT TENDENCIES.• LACK OF EFFECTIVE COMPLIANCE MONITORING• INADEQUACY IN PERFORMANCE CONTRACTS

WAY FORWARD • IN ORDER TO ENSURE THE ADOPTION AND STRENGTHENING OF EFFECTIVE

CORPORATE GOVERNANCE PRINCIPLES BY STATE ENTERPRISES AND PARASTATALS, THE MINISTRY OF STATE ENTERPRISES AND PARASTATALS IS IN THE PROCESS OF DRAFTING A CORPORATE GOVERNANCE FRAMEWORK.

• THE CORPORATE GOVERNANCE FRAMEWORK WILL ADDRESS THE FOLLOWING ISSUES AMONG OTHERS:

- APPOINTMENTS OF BOARD MEMBERS BASED ON A TRANSPARENT CRITERIA AND MERIT.

- INVITATION TO INTERESTED PERSONS FOR INCLUSION IN A DATA BASE OF POTENTIAL BOARD APPOINTEES

- ROLE CLARITY AND REPORTING LINES ,RESPONSIBILITY AND ACCOUNTABILITY FOR KEY STAKE -HOLDERS, INSTITUTIONS AND INDIVIDUALS

- ENSURE THAT GOVERNMENT ACHIEVES ITS VISION FOR ROBUST AND EFFECTIVE SEP BOARDS WHICH FULLY EXERCISE THEIR RESPONSIBILITIES;

WAY FORWARD- STREAMLINE BOARD APPOINTMENTS TO

SAFEGUARD POSSIBLE CONFLICT OF INTEREST FOR BOARD MEMBERS;

- PROFESSIONAL DETERMINATION OF BOARD MEMBERS’ CONDITIONS OF SERVICES; AND

- BOARDS TO HAVE PERFORMANCE AGREEMENTS WITH SHAREHOLDER AND WITH SENIOR MANAGEMENT

WAY FORWARD

• THE FRAMEWORK WOULD REFLECT THE GOVERNMENT’S COMMITMENT TO MONITOR THE EFFECTIVENESS OF POLICY AND DECISION MAKING BOTH AT THE BOARD AND MANAGEMENT LEVELS WITH A VIEW TO ENHANCE SHAREHOLDER VALUE IN THE LONG TERM;