Uganda’s first Corporate Governance Awards to uplift embattled economy

“Does good governance translate into overall performance of a company?” Indeed, it does. Profit is to good governance while tides are to swimming trucks. When the former is high, absence of the latter tends to go unnoticed. For many years, Ugandan companies have struggled with maintaining clear and comprehensive business procedures and policies in their working environment. This issue has seen the fall of many promising institutions, loss of top jobs and an increase in fraudulent activities in these firms. Most of the companies in Uganda lack a clear strategic direction and some of the boards have been in service too long. A precise example is that of Uganda Telecom where the board and management had stayed too long. You saw what consequently happened to them.

Some companies are said to have policies and procedures in place only for compliance. There is no implementation on ground. At one of the Microfinance Deposit taking Institutions (MDIs), top management was rumoured to have been taking interest free loans from the bank, stagnating its growth. No wonder there has been a massive restructuring in that firm.

Another case in point is the national broadcaster; Uganda Broadcasting Corporation (UBC) where the board and management had been in power for too long. The industry players in the oligopoly market kept sweeping the national broadcaster away with its below average quality programs. First, it was WBS (that also got shattered), NTV Uganda and now NBS TV. To be sincere, UBC is exponentially on the verge. Almost every new television tends to pool more viewers in a month than the national broadcaster yet its coverage is countrywide, even in the remotest regions. This is another depiction of poor corporate governance in the country. However, this is a pool of public sector entities.

It was no different for the private sector. In 2016, news of the impending and subsequent closure of the famous Crane Bank, one of the biggest indigenous commercial bank in Uganda then, took the country by storm. The bank had for many years boasted of having the widest coverage, fastest growing customer base, year on year success in audit reports and to put icing on the cake, it won a swarm of top bank and business awards. What the bank was never assessed on was; “did Crane Bank have corporate governance policies in place?” This turned out to be detrimental. The bank was closed for misappropriation of funds and a number of fraudulent activities, yet it is the Board’s role to ensure oversight and ongoing concern of the business. Where was the Board at this particular point in time? The auditors of the bank were put under the spotlight. The most prominent of them was Ernst and Young, which is accused of hiding critical information from other external auditors. This is not the only company that has fallen due to poor implementation and an absent or lacking corporate governance strategy. However, why corporate governance?

Corporate governance is the way a corporation, firm or company policies itself. Best practices of corporate governance entail instating the organisation’s customs, policies and laws to its employees from the highest to the lowest levels. Even the cleaner of your company should be aligned with the company’s strategy – assuming this is the lowest level in the chain of governance.

Corporate governance intends to increase accountability in a firm and to avoid massive disasters before they occur. Had Crane Bank been given the opportunity to be assessed and audited for best practices in corporate governance, they would still be a standing bank. Best practices in corporate governance should equip an organisation with a department similar to internal affairs unit of police; fishing out and eliminating problems with extreme prejudice.

Grant Thornton in conjunction with the Institute of Corporate Governance of Uganda organized the first Corporate Governance awards to reward institutions that portray outstanding corporate governance, adhered to its best practices and implemented their policies neatly. With these, companies are able to benchmark their practices against the best practices of corporate governance. It encompasses companies’ performance and the board’s performance; appointment and assessment of the board of directors; board membership, committees and responsibilities; how the board works with the executive; code of conduct in the companies and, last but not least, risk management, corporate social responsibility and other obligatory internal controls.

The ICGU Corporate Governance (CG) Awards recognize organizations with outstanding achievements in the governance, risk and compliance fields in Uganda. The ICGU CG Awards play an important role in encouraging improvements in the quality of CG, while reflecting changing attitudes and expectations among shareholders, investors and other stakeholders. ICGU leadership understands the best way to help corporate entities, government and the economy at large is to recognize entities that practice and demonstrate corporate governance best practices.

At the start of 2018, posters and blogs circulated around as the rumours about the impending corporate governance awards spread profusely. Although not so commonly practised in the country, it drove a lot of attention. Almost every firm wanted to find out where it was in their state of governance. A portal, was later deployed calling for nominees to register on condition that they met certain criteria like being tax compliant and possessing a board of directors. In addition, companies were to present material that was bounded between January 2015 and December 2017.

Companies were categorised in different clusters, that is; large private sector enterprises, with turnover of more than Ugx. 100 billion; Small and Medium Sized Enterprises, with turnover of less than Ugx. 100 billion; public sector enterprises including Ministries, Departments and Agencies of the government; Non-Government Organisations, Insurance Companies; Banks and Micro Deposit Institutions (MDIs)

On 15th February 2018, companies begun submitting their documents. A review of nomination feedback forms against the minimum criteria was performed. All nominations that met the stated criteria were shortlisted for further validation by the Institute of Corporate Governance of Uganda. More than 200 companies failed to meet the eligibility criteria, citing issues of missing documents, a sign of lapse in their policies and procedures. Already, the award was exposing those companies without all the right policies and procedures, a clear picture of the state of corporate governance of Uganda. No wonder they have been closing rampantly. After a thorough registration process, the portal was closed on 16th April 2018.

A multitude of field visits were conducted by professional auditors and governance experts from Summit Consulting, to each of the nominated companies. This was to inspect whether these companies were implementing what they had previously submitted on paper and were adhering to King IV Corporate Governance Principles. Whistleblowing implementation, risk registers, board meeting minutes approving relevant procedures, CSR impact, business continuity, to mention but a few.

Although most of the companies had these policies and procedures in place, a handful of them had not implemented. There were firms whose employees had no idea of their company strategy. Other company policies were yet to be approved by the board. There were firms whose documents were not at their Ugandan office but at their headquarters overseas. The list of discrepancies in their policies and procedures is stretched. However, all this data was collected and prepared for qualitative analytics.

Formal requests for further information were then made as the Awards Judges Board scored all the short-listed entries against the judging criteria. From these, the judges selected the top five companies per category, based on the highest average score of the different judges. All the companies that made the list were shortly notified and videos of the Executive Directors were taken. These videos were added to the portfolio for the judges to score the top five.

The process was transparent, free and fair as principles of a successful corporate governance process were employed. The judges that were selected were from various trades and industries and gave a clear line of sight of Uganda’s Corporate Governance locus.

On 17th May 2018, the winner in each category will be announced. The company with the best well documented policies, procedures and implementation will be crowned the overall winner in the ICGU Corporate Governance (CG) Awards 2018 on the same night.