Improper boards of directors blamed

. . . as Lesotho moves to overhaul corporate culture

NEO SENOKO

MASERU – Lesotho has suffered tremendously for the past years as a result of poor standards of corporate governance, particularly with regard to poor administration of boards of directors, in both private and state-owned enterprises (SOE)s.

Big corporates such as the Lesotho Airways, Lesotho Bank and Agric Bank have all vanished due to poor governance, according to the chairman of the Lesotho Institute of Directors (IoD) board, Robert Likhang.

Those that survive to this day such as the Lesotho Electricity Company (LEC) and many others are still operational but struggling to make progress.

The long time struggles in the business circles could be over soon, with the formation of the corporate governance code in Lesotho.

Dubbed the “Mohlomi Code”, the new guidelines are set to be launched in August this year. Currently the draft of the document is under review with several stakeholders given the opportunity to scrutinise it before the official launch.

Expectations are that the code will go a long way towards transforming the manner in which corporations and organisations operate in Lesotho.

It is expected to be applicable across the board, from SOEs, private companies, public companies, academic institutions as well as non-governmental organisations.

Lesotho was among very few countries without their own corporate governance code.

Many countries have long established that the best way of improving the corporate governance culture was to develop their own codes.

Botswana, Malawi, Namibia, South Africa, Zambia and Zimbabwe are some of the SADC countries that already have corporate governance codes.

Looking at the draft which was presented by the Institute of Directors (IoD) on Tuesday, the overall consensus is that boards of directors are responsible for the struggles or the successes of big companies in the country.

The guidelines are therefore more central towards the performance and appointment of the board as well as the caliber of people who should occupy such critical offices.

“Many companies in Lesotho and abroad have died because of poor administration and lack of knowledge from boards of directors. So, through this code we are hoping to provide direction on how things should be done going forward.”

“Every country that seeks to improve its economy, particularly through foreign investments, upholds issues of good corporate governance to level the playing field and manages risks for investors to come in,” Likhang said on Tuesday during a two-day workshop on corporate governance.

The Mohlomi code, which has six chapters, will operate under the philosophy that a responsible leader pursues peaceful and productive alliances, accommodates stakeholders and uses new instruments of power to create inter-generational value.

This, Likhang said, covers all the principles contained in the Mohlomi code.

In opening a new page on the administrative front in the country, the new code requires that the role of the board be to shepherd and determine the strategic direction of the organisation with their view to creating sustainable value in an ethical manner.

The board, according to the code, should have the capacity lead the organisation and further adhere to the industry and governance best practice. The new code also rates highly issues of competency and management of conflict of interests.

“We are saying any organization thrives or dies based on its leadership. So, board leadership is very critical as well as the board conduct and behaviour. Issues of audit compliance and many others are also included in the code,” Likhang added.

The Chief Executive Officer (CEO) of the Institute of Directors (IoD), Lehlohonolo Chefa, emphasised at the same event that it is time to put an end to undesirable behaviour where some companies fail to abide by the laws, citing that in their recent finding in Lesotho only two out of 29 companies currently have proper boards of directors.

The CEO mainly took a swipe at SOEs’ tendency to deviate from the law.

“This is a challenge and we are hoping that with this code, board members will be able to stay firm on their decisions without any political influence from government through different ministries,” Chefa said, explaining further that the code will improve the country’s status on the ease of doing business indices.

The drafting of the Mohlomi code was financed by the government of Lesotho through financial assistance from the Africa Development Bank (AfDB) to the tune of M900,000.00.

The code was drafted by a task force made from representatives of professional bodies, regulators, business associations, non-governmental organisations and independent experts.