The new code is part of sweeping changes introduced by amendments to the Financial Reporting Act, which came into effect on April 1.
According to the amendments, the corporate governance code will apply to Public Interest Entities (PIEs), which include major firms listed on the Botswana Stock Exchange (BSE), those licensed by the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) or the Bank of Botswana (BoB), parastatals and others deemed significant in terms of their presence in the country.
The new amendments also reduce the thresholds for classification as a PIE from having more than 200 workers to 150 and total assets of P200 million to P150 million.
The BAOA last week sent out a notice to its stakeholders informing them that the new amendments had taken effect.
Clause 19 of the Act’s regulations requires that the BAOA: “...establish a code of corporate governance to be used by a PIE and monitor and enforce compliance with the code of corporate governance.”
The new changes come as corporate governance has become a major thorn in the BAOA’s side, with several high-profile corporate governance scandals shaking the country, costing investors and ordinary Batswana millions of pula and sullying the country’s well-curated image.
A corporate governance review of 15 PIEs by the BAOA in 2020 found out that all but one failed. The firms included three BSE-listed companies, five state-owned entities, two supervised by the NBFIRA and one supervised by the BoB.
According to the BAOA’s findings, seven of the entities had no statement of compliance to a corporate governance code such as King III, while 10 had no effective monitoring of ethics. Eight failed the question of electing a board chair who is an independent non-executive director and ensuring the CEO of the company is not also the board chair.
Eleven of the 15 entities had no documented succession plans for the role of the board chair, CEO and senior executives, while nine had no disclosure of the assessment of the independence of the independent non-executive directors.
In nine entities, shareholders had not approved the companies’ remuneration policy before implementation, while in 10 entities, the policies and disclosures of remuneration of directors and senior executives were not according to recommended best practice.
Of the 15 reviewed firms, state-owned entities had the most corporate governance failures, a finding that raises troubling questions about public finance management and accountability, particularly in a period where the budget is facing mounting deficits.
BAOA CEO, Duncan Majinda previously disclosed that the main signs of problem entities with regards to corporate governance failures include having an acting CEO or no CEO for prolonged periods, entities without boards or full boards over time, and persistently delayed finalisation of financials.
