Corporate Governance For Investment Clubs in Zambia

 

Corporate governance is concerned with ways in which all parties interested in the well-being of the firm (the stakeholders) attempt to ensure that managers and other insiders take measures or adopt mechanisms that safeguard the interests of the stakeholders.

The investment clubs have three boards namely; supervisory board, board of directors, and the management boards.

1.      The supervisory board comprises of three members who are not in leadership.

2.      The management board has should have between 3-9 members.

3.      Board of directors should have between 3-9 members too.

The core function of corporate governance is the responsibility of the board of directors.

€       Board of Directors

Every investment club is required by law to have a board of directors. Its legal function is to govern the affairs of the investment club. Board of directors is the agent of the owner and their principal task is to monitor management’s performance.

€       Board Activities: Roles and Responsibilities

Board of directors has varied roles and responsibilities. They are entrusted with the following:

·        represent and create shareholders value;

·        align the interest of management with those of shareholders, define the companies mission and goals, protecting the interest of other stakeholders (customers, creditors, suppliers);

·        appoint senior executives to manage the investment club in accordance with the established strategies, plans , policies and procedures;

·        develop and approve executive compensation, pension, post-retirement benefits plan;

·        review financial reports, including audited annual financial statements and other important financial disclosures;

·        review management reports on the effectiveness of internal control over financial reporting ;

·        ensure the investment club’s compliance with applicable laws, rules and regulations ;

·        approve the investment club’s major operating , investing and financial activities;

·        evaluate the performance of the board , its committees (e.g. audit, compensation) and the members of each committee;

·        hold the board, its members and its directors accountable for the fulfillment of the assigned fiduciary duties and oversight functions ;

·        approve dividends , financing , capital changes and other extra-ordinary corporative matters.

·        oversee the sustainability of the investment club in creating long term shareholder value and protecting interest of other stakeholders.

€       Board committees

Board committees normally function independently from each other, they are provided with sufficient resources and authority and are evaluated by the board of directors. Board committees are a subset of the board and perform specific functions that assist the board in discharging its advisory and oversight responsibilities. The common committees are:

·        compensation and appointment committee,

·        audit committee, which must be composed of independent directors with no personal, financial or family ties to management.

·        investment committee.

·        shareholder relation committee .

·        governance committee .

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