Ugandan companies continue to struggle in areas of Governance

“This report clearly shows Ugandan
companies continue to struggle in areas
of Governance but are taking positive
steps towards improving their structures.”

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There are so many organizations that have put Boards in place but are doing things, which do not necessarily add value to the business. Knowing the Prince IV corporate governance best practices is one thing. Putting such practices into action is another thing altogether.

No one wants organisations with window dressing Boards. Very many things go wrong with incompetent Boards. In politics, you will ask; “Is our parliament a ‘biting’ parliament?” Can Parliamentarians put their feet on the floor and say no to the executive? If they can, then that Parliament is ok, because then it is said to independent of any influence.

Uganda had its first Ever-Corporate Governance Awards on May 17th 2018, which marked another milestone in the evolution of Uganda’s corporate structure. Over 201 organisations participated in the nominations by submitting information via an online form but only 45 companies made it to the finals. This means only about 22.39% of top private and government institutions had enough information to complete the assessment form, which had key corporate governance requirements including, codes of governance and other best practices corporate governance criteria. This report is based on the analysis of 45 companies only, this is a worrying statistic.

However, it is a positive move from a business perspective. The corporate governance debate is shifting from emphasis on compliance to processes and procedures to the effect on the business of applying them. From an emphasis on compliance to emphasis on stakeholder value delivery, good corporate governance looks at not just how businesses are run, but to what processes are they run and the resulting impact on the business. Good governance drives organizational resilience, productivity, stakeholder value and economic development.

Uganda’s businesses continue to struggle with a limited number of compliant Boards. No wonder the Uganda Securities Exchange has just about 17 companies. This means Uganda’s Stockmarket takes about two ears to list a new company. Mostly because of poor compliance to corporate governance practices as most businesses think the cost of good governance is higher than the benefits.

It’s only after a long period, for example, when founders die or exit, that corporate sustainability becomes threatened and the sudden realization of good governance comes to mind. Most of these companies lack the right policies and procedures.

This report clearly shows Ugandan companies continue to struggle in areas of Governance but are taking positive steps towards improving their structures. Some companies impressed in this analysis complying with almost every requirement although only about 10% of those that met the criteria had implemented these policies and procedures.

While banks are generally compliant in many areas of Corporate Governance, their sisters the insurance firms that offer 60% of what the financial institutions’ offer is struggling with these figures. Even poorly structured SMEs are doing better in many areas.

The objective of the report is to create awareness of the state of corporate governance in Uganda to inform policy and regulatory framework. There is a need for automation of the corporate governance processes like strategy execution and risk management. I thank the Institute of Corporate Governance of Uganda for organizing the 2018 inaugural Corporate Governance Awards and Grant Thornton for sponsoring fully, the Awards, specifically for entrusting Summit Consulting with managing the Awards process for quality management.

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It is against this background that we have published this report.

Copyright Mustapha B Mugisa, All rights reserved