The speedy shift from the traditional outlook of organizational life to the new corporate culture has encouraged corporate governance to take shape in some of the share companies and public organizations in Ethiopia. The structures of the organizations allow shareholders to influence a company by exercising their voting rights. Thus, the days are going out for the traditional outlook of shareholders who had been only interested in the return on their investment, leaving the crucial operations to their managers.
It is gratifying to observe nowadays in the governing structures of the share companies and some public organizations checks and balances through clear division of responsibility between the board and the management as a reflection of the steady democratic growth of these institutions on the root of the new economic order. The fact of the matter that gave rise to corporate governance which is a system by which corporate entities are directed and controlled lies exactly here. In the traditional organizational cultures, particularly, in the governance of public corporations, the post of directorship was enjoyed more for the remuneration it afforded rather than the assumption of responsibility.
The sharp difference between the old thinking and the new mind-set is to be seen in the ability of the new directors appointed on the boards to blow the whistle on any discrepancies that may be suspected on abnormality of management including illegal or unethical actions. Board directors, more often than not, are expected to be men and women of high professional standing and integrity to fulfill the requirements of good corporate governance and to discharge their fiduciary responsibilities towards the company’s shareholders, customers, and in general to all stakeholders including the primary organs of government to which they are expected to report under the Ethiopian Commercial Code and the memorandum and articles of association of their respective institutions.
One thing that needs to be discerned is that the roles played by the boards in all share companies are not the same; in practice there is a wide difference. The difference may be due to the ownership patterns and in the nature of the statutes of the public and private sector companies. The novelty of it all, however, is in the nascent beginnings of such corporate governance to the tune of our democratic choice. Another beauty of corporate governance lies in the demarcation of responsibilities and leadership between the boards and the executive managements.
While the boards are required to direct, the chief executives designated as executive directors, managing directors, general managers or presidents, are responsible for all aspects of strategic managements, from the formation to their execution. However, they refer operational matters of great significance like strategic objectives appraisals, new product developments, marketing strategy and publicity, senior management appointments, staff benefits and other related issues to the boards for evaluations and directions. Because the boards are considered vital links between the environments and the organizations, operational decision makings are left to the chief executive officers.
In some cases, the difference in responsibilities between the boards and the managements compel the boards and the chief executives to function sometimes separately, i.e. without the chief executives as board members. In the opinion of some authors this arrangement would build up transparency and freedom of office of the chief executives, particularly, in situations where there will be aggressive or bureaucratic boards; the converse is also true. Others argue as long as important questions are decided either by vote or consensus the freedom of the chief executives will be unhampered. In any way, the functioning of boards depends critically on their relationships with the chief executives. If the preference is one of working separately, the boards may create the institutions of professional company secretaries or strengthen the present-day board secretaries by conferring on them broader authorities. These secretaries, beyond keeping board minutes and preparing agendas, can study important documents well in advance of board meetings and present the cases to the boards whenever it is necessary. Nonetheless, it is pleasing to note that the concept of corporate governance, as a whole, is fast growing in practice in Ethiopia under the atmosphere of present day corporate culture.
|
|