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194 Njanike, K.; Mutengezanwa, M.; Gombarume, F.B. This was the case before the collapse of the Barbican Bank when Dr Mtuli Ncube was the major share holder and chief executive officer. The chief executive officer dominated in the board meetings which resulted in the body of directors being a rubber stamping board. In the United Kingdom in 1991, the Bank of Credit and Commerce International (BCCI) collapsed due to fraud by top executives costing depositors and investors large sums of money amounting to 6 billion pounds nearly half the banks assets. In the 1970s in the US, during a period which more than 400 firms engaged in corrupt activities a commission called Tread Way or Committee of Sponsoring Organizations of the Tread Way Commission (COSO) was formed to deal specifically with financial reporting fraud. The first report was published in 1985. Magaisa (2004) suggests that larger boards are less effective and easier for a chief executive officer to control because as boards become too large, it becomes difficult to coordinate and process problems. This was the case with the body of directors of Trust Bank who said they were unaware of the scenario were a significant amount of the banks loans were non performing and were granted without formal agreement facilities. In his research Pheysey (1993) found a negative correlation between board and profitability of a firm. Despite RBZ (2004) critique on multiple appointments Cook, who retired as chairman and chief executive officer of Deloitte and Touché in 1999 and sits on boards of five American companies, commented that there is considerable value being on multiple boards and the experience across boards can be of real value to governance (Cook, 2002). As with all other areas of financial institutions activities, body of directors has a critical role to play in overseeing internal control functions of the bank. The Basel Committee on Banking Supervision (1999) stipulates that the board should develop effective internal controls and adopt the necessary policies and procedures for conducing such. The internal should be approved and be reviewed periodically by the board. In other instances top management wilfully violated internal controls as they tried to be creative and innovative in order to enhance shareholder interests of profit maximizing and in their desire to please the body of directors and be rewarded for good performance. In other occasions managers will not agree with internal controls and view them as stringent measures aimed to frustrating their endeavors. In some case of banks such as Trust Bank of Zimbabwe, it was noted that though there were adequate internal control measures these were however principality reactive and non-proactive as these measures did not raise alarm to the board to take corrective action before the damage had been severe. Also in most instances, decoctions from such policies and procedures were not independently investigated and addressed by relevant parties. In the case of Barbican Bank the body of directors tried to “sweep the mess under the carpet” pretending that everything was well until the RBZ surveillance time exposed the precarious situation in which the bank was operating under before it went on into liquidation. According to the Reserve Bank of Zimbabwe majority of financial institutions have internal controls and if these internal controls were religiously adhered to good corporate governance would be the order of
Internal Controls in Ensuring Good Corporate Governance in … 195 the day in these financial institutions. However a number of factors discussed below have been militating against the soundly implementation of effective internal controls. Borerwe (2004) saw economic confusion in the last decade in Zimbabwe, insatiable appetite for riches, corruption and double standards by senior management who preach good corporate governance during the day and do not walk their talk by awarding themselves heft packages which when it comes to the attention of workers would see management as insensitive and thus they will work towards evading internal controls so that they themselves will get rich. There should be board oversight responsible for ensuring the following in financial institutions: - Ensuring that senior management has not only developed but they have also implemented a properly structured internal control system. - Periodic discussion with senior management concerning the effectiveness of the internal control system is held. - Ensuring timely reviews of evaluations of internal controls are performed by internal and external auditors. - Periodic checks to ensure that management has promptly acted on recommendations and concerns expressed by auditors and regulatory authorities on internal control weakness. For the internal controls to be effective they do not only need to be precise and well presented for everyone to know, but there also needs to be appointed compliance officers whose mandate is to oversee compliance issues. They should be equipped with necessary skills and expertise, the level of which should be commensurate with the complexity of the institutions activities. Cook (2002) suggested that the board and senior management of Banks are responsible for promoting high ethical and integrity standards and for establishing a culture within that organization that emphasizes and demonstrates to all levels of personnel the importance of internal controls. All personnel at a bank need to understand their role in the internal controls systems and be fully engaged in the system. 8. CONCLUSION The results obtained from the research clearly support the assertion that the effectiveness internal control systems contributed to a greater extent to good corporate governance in financial institutions in Zimbabwe. Therefore effective internal controls contribute to better performance by financial institutions. The success of the system depends on positive internal control culture. Banks should have in place a comprehensive internal control management process to identify, measure, monitor and control internal control system effectiveness and compliance. There is also need for financial institutions to cultivate a culture of ethically doing business from the top management which should see this culture cascading down to he most junior worker or employee in the organization so as to promote adherence to internal controls of the organization which are essentially management tools on measuring compliance to an organizations way of doing business in a competitive environment.
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Concerns on Labour Power Selection
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