Shikaputo Phd Thesis 2013
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University of Dundee DOCTOR OF PHILOSOPHY Stakeholder perspectives on corporate governance and accountability for development in Zambia Shikaputo, Mutambalale Chanda Grevas Award date: 2013 Link to publication General rights Copyright and moral rights for the publications made accessible in the public portal are retained by the authors and/or other copyright owners and it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights. • Users may download and print one copy of any publication from the public portal for the purpose of private study or research. • You may not further distribute the material or use it for any profit-making activity or commercial gain • You may freely distribute the URL identifying the publication in the public portal Take down policy If you believe that this document breaches copyright please contact us providing details, and we will remove access to the work immediately and investigate your claim. Download date: 05. Oct. 2021 DOCTOR OF PHILOSOPHY Stakeholder perspectives on corporate governance and accountability for development in Zambia Mutambalale Chanda Grevas Shikaputo 2013 University of Dundee Conditions for Use and Duplication Copyright of this work belongs to the author unless otherwise identified in the body of the thesis. It is permitted to use and duplicate this work only for personal and non-commercial research, study or criticism/review. You must obtain prior written consent from the author for any other use. Any quotation from this thesis must be acknowledged using the normal academic conventions. It is not permitted to supply the whole or part of this thesis to any other person or to post the same on any website or other online location without the prior written consent of the author. Contact the Discovery team ([email protected]) with any queries about the use or acknowledgement of this work. Stakeholder Perspectives on Corporate Governance and Accountability for Development in Zambia M. Chanda G. Shikaputo A Thesis Submitted to the University of Dundee in Fulfilment of the Requirements for Award of the Degree of Doctor of Philosophy School of Business Division of Accounting and Finance University of Dundee SCOTLAND 2013 Dedication I dedicate this thesis to my late parents, Paulino and Blandina. I have no doubt in my mind that without their support, their inspiration and their value for education, I could not have made it this far. ii Table of Contents Page Appendices x Acronyms xi List of Figures xiv List of Tables xv Acknowledgements xvi Declaration xvii Certificate xvii Abstract xviii Chapter 1 Introduction 1.1 Introduction 2 1.2 The Concept of ‘Good’ Governance 3 1.3 Corporate Governance 7 1.4 Research Focus 9 1.5 Research Objectives 11 1.6 Motivation and Significance of the Current Research 12 1.7 Structure of the Thesis 14 Chapter 2 National Background: Zambia 2.1 Introduction 17 2.2 The History and People of Zambia 20 2.2.1 Migratory Origins 20 2.2.2 David Livingstone and the British 21 2.3 The Political Environment 22 2.3.1 Before Independence 22 2.3.2 After Independence 24 2.4 The Economic Environment 28 2.4.1 Political Economy 28 2.4.2 Nationalisation and Reforms 29 2.4.3 Crisis and IMF Intervention 31 2.4.4 Privatisation and Debt-relief in the Post-Kaunda era 34 2.5 The Legal Environment 36 iii 2.5.1 History and Colonial Influence 36 2.5.2 Branches of the Law 37 2.5.3 The Zambian Court System 38 2.5.4 Post Colonial Trends 39 2.6 The Regulatory Environment 40 2.6.1 Risk and Investment 40 2.6.2 Corporate Governance and Regulation in Modern Day Zambia 41 2.7 Education 42 2.7.1 Historical Context 42 2.7.2 The Modern Zambian System 43 2.8 Corporate Governance in Zambia 45 2.8.1 Governance and Development 45 2.8.2 Governance Failures 45 2.8.3 Governance Initiatives and Current Regulation 47 2.9 Conclusion 48 Chapter 3 Literature Review: Global Aspects of Corporate Governance 3.1 Introduction 51 3.2 Corporate Governance Revival 52 3.3 Corporate Governance Defined 53 3.3.1 The Cadbury Committee’s Definition of Corporate Governance 55 3.3.2 Shleifer and Vishny’s Definition of Corporate Governance 56 3.3.3 OECD’s Definition of Corporate Governance 57 3.3.4 Solomon’s Definition of Corporate Governance 58 3.3.5 Nganga et al.’s Definition of Corporate Governance 58 3.4 Developments in the Theory of Corporate Governance 60 3.4.1 Overview 60 3.4.2 Agency Theory 60 3.4.3 Stakeholder Theory 61 3.4.4 Transaction Cost Economics 63 3.4.5 Stewardship Theory 64 3.4.6 Theories - A Corporate Governance Implication 65 3.5 Corporate Governance in Developed Countries 66 3.5.1 Momentum for Corporate Governance Change 68 3.5.2 Properly Run Firms as Drivers of Wealth 69 3.6 Corporate Governance in Developing Countries 71 3.6.1 Drivers of Corporate Governance in Developing Countries 73 3.6.2 Corporate Governance in Developing Countries - Outside Africa 74 3.6.2.1 Eastern Europe 74 3.6.2.2 The Asian financial crisis 75 3.6.2.3 Latin America 76 3.7 Corporate Governance in Africa 77 3.7.1 Africa’s Demand for Corporate Governance 78 3.7.2 Corporate Governance Drivers in Africa 79 3.7.2.1 Corporate Failures in Africa 80 iv 3.7.2.2 Globalisation and the Scramble for Investors 81 3.7.2.3 Privatisation 82 3.7.3 Corporate Governance Initiatives in Africa 82 3.7.3.1 New Partnership for African Development (NEPAD) 83 3.7.3.2 The King Report 83 3.7.3.3 OECD Principles of Corporate Governance 84 3.7.3.4 Commonwealth Association for Corporate Governance 85 3.7.4 Nature of Corporate Governance Practices in Africa 86 3.7.4.1 Corporate Governance Models - the African Perception 87 3.8 Corporate Governance Challenges in Africa 89 3.8.1 Africa’s Peculiarities – Weak Institutional Arrangements 89 3.8.2 Political Instability 91 3.8.3 Shareholder Activism 92 3.8.4 Privatisation 93 3.8.4.1 Privatisation and Corporate Governance 94 3.8.5 Corruption 95 3.8.5.1 Corruption and Corporate Governance 96 3.8.6 Globalisation 97 3.9 Corporate Governance and Development 98 3.9.1 Aid, Governance and Development 101 3.9.2 Zambia’s Experience 102 3.10 Conclusion 103 Chapter 4 Literature Review: Corporate Governance in Zambia 4.1 Introduction 106 4.2 An Overview of Corporate Governance in Zambia 107 4.2.1 The First Phase of Economic Governance, 1960 – 1969 108 4.2.2 The Second Phase of Economic Governance, 1970 – 1990 109 4.2.2.1 The Drive for Change 109 4.2.2.2 Economic Indigenisation Programmes 109 4.2.2.3 Economic Performance and the Failure of State-Owned Enterprises 110 4.2.2.4 Corporate Governance Implications 111 4.2.3 The Current Phase of Economic Governance (from 1990) 113 4.3 Corporate Governance Developments in Zambia 114 4.3.1 Corporate Failures – Zambian Experience 114 4.3.2 Reasons Cited for Failures 115 4.3.3 Changes in Political Governance in 1991 117 4.3.4 Privatisation 117 4.3.5 Privatisation and corporate governance 118 4.3.6 Anglo-American Corporation’s Pull out of the Mines 120 4.3.6.1 Corporate Governance Implications 121 4.3.7 Chinese Investment in Zambia and Corporate Governance 122 4.3.7.1 Implications for Corporate Governance 124 4.3.8 Corruption in Zambia 128 4.3.8.1 Zambia’s Corruption Perception Index (CPI) Ranking 129 4.3.8.2 Corporate Governance as a Means of Fighting Corruption 130 4.4 Corporate Governance Initiatives in Zambia 131 v 4.4.1 The Institute Of Directors of Zambia (IODZ) 131 4.4.2 IODZ’s Corporate Governance Code for SMEs in Zambia 132 4.4.3 The Lusaka Stock Exchange (LuSE) 133 4.4.4 The LuSE Corporate Governance Code 134 4.5 External Corporate Governance Initiatives and Influences 136 4.5.1 The International Finance Corporation (IFC) 136 4.5.2 The Commonwealth Association for Corporate Governance (CACG) 136 4.5.3 The New Partnership for Africa’s Development (NEPAD) 137 4.5.4 African Peer Review Mechanism (APRM) 137 4.5.5 APRM Country Self-Assessment Report on Corporate Governance 138 4.5.6 The World Bank and the International Monetary Fund (IMF) 141 4.5.7 The Global Corporate Governance Forum (GCGF) 141 4.5.8 Economic Commission for Africa - Southern Africa (ECA – SA) 142 4.5.9 The King Report 142 4.5.10 The Cadbury Report 142 4.6 Development Aid and Corporate Governance in Zambia 143 4.6.1 Development Aid Failure in Zambia 143 4.6.2 Aid Conditionality a Means of Improving Governance 144 4.7 The Corporate Governance Regulatory Framework in Zambia 145 4.7.1 Background 145 4.7.2 Zambia’s Extent Legal and Regulatory Structures 146 4.7.3 Financial Sector Regulation in Zambia 148 4.7.4 Bank of Zambia (BOZ) Corporate Governance Guidelines 148 4.8 Conclusion 149 Chapter 5 Accountability Theoretical Framework 5.1 Introduction 152 5.2 The Concept of Accountability 154 5.2.1 Defining Accountability 155 5.2.2 Types of Accountability 159 5.2.3 Accountability to Whom and for What? 160 5.2.4 Stakeholder Accountability and Stewart’s Ladder of Accountability 161 5.3 Corporate Governance and Accountability 165 5.3.1 Accountability as an Element of Good Governance 168 5.4 Accountability, Corporate Governance and Development 169 5.4.1 Key Thematic Issues 170 5.4.2 Corporations as Principal Generators of Economic Wealth 170 5.5 Why Corporate Governance Matters to Development 172 5.5.1 Corporate Governance as a Precondition for Attracting Capital 173 5.5.2 Accountability - Implications for C.