An analysis of Corporate Governance: A Uganda Clays Typical Scenario

This year’s Uganda Clays AGM (Annual General Meeting) was rocked by an outrage of shareholders with their deep concerns being the directors’ failure to apply corporate governance principles in the running of the infamous brick maker. Well, though the debate was centered on poor corporate governance, the question is whether there is indeed a lack of corporate governance or the shareholders claims were simply unfounded and inclined to punish the directors for the company’s continued loss making year on year.  

What is corporate governance?  

Corporate Governance is the system through which companies are directed and controlled by senior officials (directors) on behalf of the shareholders and other relevant stakeholders. The burden of good corporate governance without any doubt therefore falls on directors. Good corporate governance will entail;

• The institution of an effective board of directors.

• A balance of directors involved in actively running the company and those who do not have a day-to-day operational responsibility.

• An Annual re-election of directors subject to continued satisfactory perforance.

• The institution of a formal, transparent policy on executive remuneration.

• The achievement of a satisfactory dialogue between management and shareholders .

These and many more corporate governance principles are generally referred to as ‘best practices’ hence implying their applicability globally.

Uganda clays typical scenario

Uganda Clays may seem to have adopted corporate governance principles but a closer look should tell that the adoption is actually on a patchwork basis. The annual report does not for instance include a statement of compliance or non – compliance to corporate governance principles. The statement is a vital one given the fact that it gives a detail of significant aspects to the user’s understanding of financial statements. They include; directors’ remuneration, composition of the board (executive and non - executive), a list of directors and their corresponding age, skills and competences, directors’ attendance of board meetings, the roles of the different sub committees of the board and many more. So what good corporate governance practices can be handpicked from our dear brick maker?  

At the helm of the 61 years old brick maker is Mr. Charles Rubaijaniza, a man who has been on the role of the chief executive officer since 1^st of January 2011. His appointment to the post was following a competitive interview process and we could therefore assume good corporate governance regarding his appointment. On the other hand, the chairman of the board is Prof. Eng. John Senfuma (an independent non – executive director), hence implying a clear division of responsibilities between running of the board and the company’s business. 

The board of directors comprises of a majority non – executive directors most of whom were reappointed during the 2010 AGM. As such reappointments should be based on individual directors’ performance and their contribution to the board, we can again assume good corporate governance. 

My take

Uganda Clays has been trading on the Uganda Securities Exchange (USE) since the year 2000. To the best of my knowledge, compliance to corporate governance principles should be a pre – requisite to such a listing. The big question is, ‘should we therefore pass the back of inadequate governance principles at Uganda Clays to USE?’ Well, to some extent, in my view, ‘YES’. In addition, I believe the onus to good corporate governance at Clays lies on the shoulders of Prof. Eng. John Senfuma. It’s his role in ensuring effectiveness of the board in all its aspects.

Good corporate governance will not only safeguard our wealth as shareholders but also rust off the mechanics necessary for profitability.