The KML saga exposes hooligans in our corporate governance

Link to the Herald article: 

It is common cause that the right to appoint directors is vested in shareholders. What is evident is that at the core of the KML saga is a challenge by some directors as agents of a company that in terms of the Companies Act ought to be controlled by shareholders as principals. The authority under the Act is vested as it is universally in shareholders who can decide on whom they want to represent the company as directors.

Although corporate law is founded on the tyranny of the majority and not their benevolence, the KML saga has exposed a new and dangerous phenomenon that agents can temporarily deprive principals of their sovereign right to decide who should and should not be on the board.

It is significant that Mr. Jokonya, who is an accomplished businessman in his own right, is reported to have said that if anyone was to step down from the board, it was Acting Chairman, Mr. Muchadeyi Masunda, for alleged "flagrant disregard" of corporate governance principles.

I have no doubt that Mr. Jokonya is acutely aware that Mr. Masunda can only remain a director of KML if he enjoys the support of the majority of the shareholders. What is evident is that Mr. Moxon controls the majority of the shares and, therefore, at law he has the right to make choices on behalf of the company.

Mr. Jokonya is reported to have said: "What kind of a director is he (Masunda) when he decides to withdraw a court case meant to recover shareholders’ funds externalised. Those issues must be rectified not the removal of Jokonya from the KML board, shareholders must act responsibly."

If one accepts that Mr. Moxon controls the majority of the shares in KML, then how would one respond to a statement from a director who may have concerns about the company’s conduct?

Such a director can always choose to resign than fight in futility. Unlike politics, if a person controls, for example, 50 plus one votes, then no amount of politicking can change the inevitable outcome. The voice of a company (a company is a juristic person) at a general meeting can only be measured by the votes commanded not the number of government officials who can come to your rescue in an argument over the affairs of the company.

The only real power shareholders have is the power to remove directors or refuse to confirm their appointment at a general meeting. Knowing what we now know, can Mr. Jokonya argue that he enjoys the support of the majority of KML’s shareholders to justify his position on company matters?

Mr. Jokonya states as fact that shareholders’ funds were externalised, when it should be obvious to him that, for example, assets of KML do not belong to shareholders only but stakeholders of the company including employees and creditors whose interests and future are equally important. KML is a principal in its own right and is capable of asserting its own rights through properly appointed directors.

Ordinarily any director who appreciates corporate governance would resign when he knows as we do that he/she no longer enjoys the support of the people vested with the constitutional power to make decisions on behalf of the company. Why would any rational director want to remain on the board of a company when the people who command the majority of the votes have spoken otherwise?

It is shocking that Mr Jokonya would arrive at the conclusion that he will not step down from the KML boards until three major purported irregularities in the group have been addressed.

Mr Jokonya is reported to have cited the sale of Cape Grace to Mentor Holdings and breakdown of corporate governance within the group and the externalisation as reasons he would not agree to step-down from the board.

He is also reported to have also cited the transfer of 26 percent of the Cape Grace building to a trustee, Mr Steven Levenberg, who happens to be the managing director for Mentor Holdings, for his refusal to exit KML.

Mr. Jokonya then makes the case that: "As a director I am concerned about the US$22.5 million that was externalised, which must be brought back. There also is the issue of the intended sale of the Cape Grace Hotel. That agreement must be rescinded. Further, the 26 percent of Cape Grace transferred to a trustee must be reversed."

To the extent that his continued role on the board may be questionable, why would a director of a company whose affairs are under investigations be the one making a determination on criminality? If the company is guilty as alleged, then this ought to be the role of the courts to adjudicate on the matter.

The Constitution of Zimbabwe is clear on the need for an independent tribunal to adjudicate on such matters.

The assets in question are situated in South Africa and yet one would conclude that Zimbabwe has jurisdiction over the affairs of such companies. Even if it is accepted that KML is the shareholder of companies domiciled in South Africa, any allegation that says the assets of a South African company belong to a company situated in Zimbabwe by virtue of the original investment is fatally flawed.

The funds in question were invested prior to the KML merger and such funds were a product of a deal approved by Zimbabwean authorities. It is remarkable that a non contractual arrangement would be construed to produce outcomes that are now being dressed for political and commercial expediency as if they were contractual in nature with criminal implications. If the allegations were coming from a layman then one would understand what time it is in Zimbabwe.

When the same allegations were levelled against me, I naively thought that this was the action of a few "wise but financially illiterate men" but the KML saga has exposed how deep seated financial and corporate governance is in Zimbabwe. We are after all, the majority of us, first generation corporate leaders and, therefore, some of the ignorance can be excused to a point.

It was also reported in the said article that I was present at a meeting allegedly held in South Africa between Messrs Moxon and Chanakira. This is not accurate.

I did not meet Mr. Chanakira let alone his attorneys.

I understand that Mr. Dube of DMH Attorneys represents Mr. Chanakira. It is common cause that DMH also represents the government of Zimbabwe in the various litigations between my companies and the government challenging not only my specification but the specification and subsequent placement of my companies under the control of an administrator without the involvement of the courts.

Yes I did meet Mr. Moxon who was also anxious to better understand how the state can be efficiently brought to private use by powerful people.

As victims of corporate violence, it is important that notes are compared so that lessons are drawn on what kind of response will help lift Zimbabwe and, indeed, Africa up. Africa’s future is only as good as we make it.

However, a corporate civilisation of the kind that Mr. Jokonya appears to be advocating must be rejected.

If Mr. Jokonya was in Mr. Moxon’s shoes how would he act? Would he accept this kind of extortion capitalism as the order of the day? Would he countenance anyone refusing to step down from a board in which the majority are closed outside the house?

If Zimbabwe makes it a habit that when people vested with the power to speak have spoken, the people who want to cling to power can manipulate the situation to advantage then the future is as uncertain as today is.

What really would controlling a majority of shares in a company mean if one cannot speak freely in the company that one is supposed to be in control of?