The Sunday Mail
Vision 2030
Allen Choruma
To enhance good corporate governance standards and organisational performance in both public and private sectors in Zimbabwe in pursuit of Vision 2030, there is growing debate on whether or not the tenure of chief executive officers (CEOs) should be limited.
Debate on limiting CEO tenure often rages in corporate offices, corridors and other spaces where employees gather, but never finds its way into the citadel of power, the boardroom.
Discussions or mere suggestions that a CEO’s term of office should be limited is a subject that most corporate boardrooms dare not touch, especially in organisations where there are long-serving CEOs.
Readers of this column who responded to last week’s article had a very clear and concise message on this hotly contested issue: a CEO’s term of office should be limited.
Notwithstanding the current push, there isn’t any conclusive empirical evidence linking limited CEO tenure to enhanced good corporate governance and organisational performance.
Quite a handful of CEOs in leading companies, parastatals, State enterprises, public institutions (universities and colleges), local authorities, heads of influential Government departments, and so on, have been at the helm for periods ranging well above 10 years and still show no sign that they are leaving office any time soon. Many readers agreed in toto with the reasons that I gave supporting the need to limit a CEO’s tenure.
To recap, the reasons are as follows:
l Long-serving CEOs become entrenched and autocratic
l Need to inject new blood and fresh ideas
l It provides opportunity for younger talent
l Long-serving CEOs become complacent and less value-adding.
l Allows for innovation if others are allowed to come in with new ideas
l Brings in diversity needed to rejuvenate an organisation.
l Long-serving CEOs end up controlling the board, compromising its independence and effectiveness
l Long-serving CEOs end up using the company to enhance own status for personal advantage.
l It improves corporate governance (for example, accountability/transparency).
But, two critical points stuck out the most with readers: that many long-serving CEOs end up controlling the board, compromising its independence and effectiveness (rather than the other way around); and that some CEOs end up using an organisation’s resources to enhance their own status for personal advantage.
There have been many stories of long-serving CEOs who have become so powerful as to be instrumental in the selection of board members and determining their remuneration and welfare.
Some corporate boards are said to be captured by long-serving CEOs to an extent of losing their independence, effectiveness and power in discharging their fiduciary duties and oversight functions over management.
Long-serving CEOs allegedly dominate boardroom discussions to an extent that open and candid discussions are often eroded to the detriment of enhancing good corporate governance in an organisation.
Incidences of long-serving CEOs using their influence, power and organisational resources for personal gain cannot be ignored.
Some prominent long-serving CEOs in Zimbabwe (past and present) are alleged to have used their longevity in office to acquire massive shares in companies they lead through exercising stock (share) options they crafted, influenced or manipulated for personal gain.
Succession planning and performance management are tools that should be used in corporate governance to ensure that CEOs step down at some point to pave way for others to take over.
Shareholder activism should be developed in Zimbabwe to allow shareholders to raise contentious issues such as CEO term limits and put them to vote at annual general meetings to enhance good governance and organisational performance.
Perhaps, it is time Government and regulatory and professional bodies such as Securities and Exchange Commission of Zimbabwe (SECZ) and Zimbabwe Stock Exchange (ZSE), Institute of Directors (IOD) look at CEOs tenure of office and come up with sustainable interventionist measures to address concerns being raised by stakeholders.
Allen Choruma can be contacted on e-mail: [email protected]
