The Continental Sunrise Breakfast show has on Friday analysed important contents around shareholders and the role of Non and Executive Directors at a company.
By: Ratlou Mabula
In a corporate literacy conversation with Chipo Pswarayi, who is an Attorney, the discussion was summarised briefly on the role of a shareholder in a company.
Pswarayi said that profits belong to a company while shareholders are not contractually entitled to the profits generated.
“A share is a unit that gives shareholders ownership interest of the profit of the company, to materialise it into value.
A company must do assessment of its ability to pay out any surplus to shareholders as dividends.”
She emphasised the importance of understanding the distinguished responsibilities of Non Executive and Executive Directors.
“Directors have the fiduciary responsibility to the company and are required by the company’s act to do what’s in the best interest of the company.
Executive Director is employed by the company, they are a director while employed.
A Non Executive Director doesn’t work for the company. They only come and serve the company on the board that is non executive.”
She added that a non executive director should not be conflicted and their only interest should be to drive the business to succeed.
Chipo’s take is that a company needs both directors, who come with an on the ground experience and an insight of what is happening outside the ground.
In addition she says Non Executive Director cannot be employed in the company.
On the question of qualifications accompanying those whose responsibility is to make important decisions, she said:
“There is that element of need for one to be qualified to make decisions and the law has made it obligatory, that direcotors must have skills, knowledge and experience.
Since a company can’t make decisions for itself it must have a reliable director.
On that note, directors must be personally held liable for bad decisions, which can be seen as reckless trading.”
Chipo has highlighted the lack of knowledge and inability to differentiate between a shareholder and director as a general problem across races.
“The ignorance on the law and how a company should work can result in directors and shareholders missing their area of responsibilities by stepping into areas they shouldn’t be.
Directors must exercise their fiduciary responsibility to understand the duty to act in the best interest of the company, to understand the company’s policies and laws that govern the company as well as its clear strategy.
That include making decisions on whether to buy or sell assets and making big or small transactions.”; she said.
Chipo believes that the ability to separate and split the different levels and responsibilities at a company shouldn’t be seen as an attempt to steal the limelight from anyone, but the team work that will take the company to greater heights.
On that note she says none of the executives should think their limelight is taken away from them and the success story should follow the limelight.