Name: Khumoyame Gaobolelelwe

ID number: 200601316

Course: BBA 290

Subject: Mgt 405

EVALUATION OF CORPORATE GOVERNANCE PRACTICES OF BOTSWANA SAVINGS BANK

INTRODUCTION
This report serves to do an analysis on the Botswana Savings Bank (BSB).
The Botswana savings bank was established in 1992. The vision of BSB is
to be the bank of choice in the industry. Its mission is to provide
customers with innovative but affordable banking and other financial
services. Its mandate is to play an essential role in mobilizing savings and
providing banking services throughout the country. BSB has consolidated
this service through s bilateral agreement between the bank as provided
for by section 3 of the BSB act of 1992 and the Botswana Postal Services
where the service is primarily delivered.

BSB is wholly owned by the government of Botswana and is run under the
supervision of Bank of Botswana.BSB is a financial service that mobilizes
domestic savings by accepting customer deposits, grants loans on
commercial terms as they see necessary from the citizens of Botswana.
The bank is also authorized to act as an agent for the administration of
funds other than the funds of the bank, on behalf of individuals,
organizations, government or other administrations. The bank also offers
National Savings Certificates (NSC), recurring deposits, savings accounts
and loans. The main target of the bank is low income citizens and those in
rural areas as services are provided through Botswana post.

DISCUSSION
The BSB has a board that consists of eight members and a chairperson. Of
these members, 3 are appointed by the minister of finance and
development from public service and one of these three shall be appointed
chairperson. Four members are appointed by the minister of finance and
development from the private sector, being persons who in the opinion of
the minister have the necessary knowledge and experience to contributor
successfully to the development of the bank. Director General of the
Botswana Postal Services and the Managing Director of the bank are ex
officio members of the board.

The board basically consists of one executive director, two ex officio

members and six non executive members. Members of the board excluding
the ex officio members can only be appointed for a term not exceeding
4years arranged such that no more than two members’ memberships may
expire in the same year, but they are eligible for re-appointment. Board
members other than the ex officio members may retire from the board in
writing to the minister who at his discretion may cancel the membership
of said member. The board meets four times a year or more as decided at
the beginning of the BSB financial year.

The board meets four times a year or more as decided by the board at the
beginning of the financial year. Extraordinary meetings may be convened
at any time at the request of a board member in writing. Attendance fees,
if there are to be any, are determined by the minister of finance and
development. At board meetings there shall be a quorum of at least five
members, one of which must be from the private sector. The board can, at
any time invite professionals whose skills they feel are useful to meetings
so they can provide their expertise. All matters arising at the meetings
shall be determined in the manner of voting where majority rules apply.
When an instance occurs where there is a tie in the vote the chairman
holds a second vote which shall be the tie breaker.

Being that the board is set in place in order for the smooth running of the
organization, there are rules and regulations set in place for the members
of the board. There are quite a number of very specific reasons a member
may be disqualified from the board. If a member of the board becomes a
member of the national assembly their membership with the board ceases
immediately. If a member of the board becomes an employee of the bank
or any other financial institution or having been appointed to the board by
virtue of a public office and they lose it they will lose their membership
to the board.
Being declared insolvent or bankrupt or suspending payment of your debts
or compounds with creditors leads to a termination of board membership.
If a member is convicted of any offence involving dishonesty, their
membership is revoked as this questions their integrity and therefore that
member cannot be allowed to continue sitting on the board. Their
continued sitting on the board would raise questions as to whether the
board is as transparent as it should be. Being a holder of professional
qualifications, having them suspended by any authority other than at your
request will lead to a disqualification from the board. Missing three
consecutive board meetings without sufficient reason also leads to having
board membership revoked.

The board is responsible for the efficient operation and administration of

the bank. They have the power to dismiss any member of the management
team subject to the minister of finance and development’s approval. The
board has the power to determine general policy of the bank in relation to
its banking business and to determine the rates of interest, banking fees
and loan conditions of the bank, this done in consultation with the senior
management of the bank. The board has the deciding power of all budget
forecasts and has to approve the annual accounts and the annual report of
the bank. The organization and structure of the bank is also determined by
the board. The board also governs the distribution of the net profits at the
end of the financial year.

The roles of the board chairperson and the CEO (managing director of the
bank) are not combined. It is important to have these posts held by two
different people because it allows for transparency. It also allows for
impartiality in decision making as having one person hold both positions
results in them being partial to a certain train of thought or a certain way
of doing things. With only one person holding both positions one can
never be sure of how much one decision they make influences the other
decisions they make. Also, one cannot be assured that the person’s
prejudices won’t impact the running of the organization. Whereas with
two people holding the positions, they bring two different perspectives
and opinions and there is always a platform for discussion if they’re faced
with a tough decision to make.

The appointment of board members of this company is fairly transparent

but I feel more could be done. Appointment of board members is done by
the minister of finance and development. He chooses three people from
the public sector, four people from the private sector and the executive
director of Botswana post and the managing director of the bank are
automatically on the board as ex officio members. I feel that this act
makes too much allowance for the minister’s discretion. So the board is
basically handpicked by one person.

What should be done is that a panel or a consultancy firm should be

appointed to look at all possible choices and then the decision shall be
made by the board based on the results from this panel. This prevents
favoritism from one person as the decision will be discussed among a
group of people and their personal prejudices won’t influence the final
decision.

The company discloses the qualifications of their members, with every

new appointment there is a press release that states the new members’
qualifications, what boards they’ve been on and work experience to date.

In my opinion the board is directly accountable to the shareholders. In

this instance the only shareholder is the government and the board is
accountable to the minister of finance and development who is
accountable to the government. So in this sense the board is accountable
since they have to account for their actions to the minister who in turn
reports to the government.

The company has a very strict policy on full disclosure for the board
members and failure to do so leads to termination of board membership. I
feel that this is a very important clause and I’m glad they included it.
This is a financial institution and they tend to be prone to malpractice as
the tenders they give out are huge. So this prohibits members from trying
to manipulate the board in order to take advantage of these. In terms of
corporate social responsibility, I feel that their mandate is geared towards
doing what’s best for the society. Their main objective is not profit as
they are back by the government, what they do is provide affordable
banking for people in lower income brackets. They do however still fulfill
their corporate social responsibility, in 1996 they built a house for a
destitute and they also donate money to organizations that help the less
privileged. I feel that this is a very good thing as they tend to work with
organizations that work with the community at grass roots level.

Compliance practices with the Botswana savings bank I feel are rather by
the book. The bank of Botswana oversees their operations and therefore
they are subject to external auditing and they have to account for their
actions. The board does not interfere with the running of the bank,
discipline of staff and staff appointments are the sole responsibility of the
managing director. The board only gets involved when the offender id the
senior management. I feel this is a very good way to handle things as this
allows the managing director to do his job without any meddling from
board members which makes him more efficient.

Non-regulatory requirements are followed in order to ensure the smooth

running of the company. There are systems set in place within the
organization to ensure that procedures run well. They have a system they
use for the tellers to ensure that money is accounted for correctly in the
system and as its transactions are done in post offices across the country,
the forms are filled in and checked very thoroughly by the post office
tellers. This allows for information that is brought in to be uniform and
makes it easier for accounting purposes.

When it comes to social reporting, I feel that BSB does a commendable

job. The always keep the public abreast with their plans through press
releases. Since the bank doesn’t really do any manufacturing work they
don’t have to account for any impact that they may have on the
environment. They do, however, have clean up campaigns in areas they
feel they could lend a helping hand. They also do, as afore mentioned,
donate to charities and these charitable donations are also reported on in
the form of press releases in the paper.

The Botswana savings bank board composition, I feel, meets best practice
corporate governance standards. This is my stand because as a financial
institution it is under more scrutiny than, having both the government of
Botswana independently monitoring it. It has to report to both these
parties and as such has to keep its practices immaculate. The board
consists of members of the public sector and the private sector. This
allows for both public interest and the interest of the private sector to be
addressed. The board also consists of the executive director of Botswana
post and the managing director of the bank, who are interested parties and
can represent the bank and the post offices which are the primary
providers of the service. There are also strict rules in place to ensure the
smooth running of the bank. This hinders malpractice and allows for
integrity and transparency within the board.

According to the bank of Botswana directory of financial institutions, as

at December 31st 2009 had total assets worth P479,569,000. I feel that this
shows that they are continually growing bigger and bigger. This shows
that the Botswana savings bank is a big corporation and can operate
efficiently in its efforts to meet its mandate.
CONCLUSION
In conclusion, having analyzed the data, I feel that the Botswana savings
bank has good corporate governance practices. It has a system in place
which specifies which actions would be considered contrary to their
corporate governance ideals. The BSB Act contains specific offences and
how they are punishable. The bank has a lot of checks and balances in the
form of the government and the bank of Botswana. This results in the bank
being very transparent. The bank also gives regular reports to the public
which keeps them appraised of it progress. There are systems in place to
allow for citizens to query bank practices and there are avenues open to
them if they feel they’ve been wronged. The act contains guidelines on
how to go about solving such matters.

I do however feel that their method of appointing board member could be

revised. Although the final composition of the board is fair, having
representatives from all interested parties, having one person choose the
board members negates that effect. This method does not guarantee
absolute impartiality as the person who picks the board is also human and
prone to subjectivity.

All in all I feel that there are more positives than negatives on the
corporate governance structure of the bank. So I conclude that the
Botswana Savings Bank has a good corporate governance structure and
that they meet best practice corporate governance standards.
SOURCES
www.law .gov Chapter 56:03

www.bsb.bw
REFERENCES
www.bsb.bw

http://www.bankofbotswana.bw/assets/uploaded/2010-directory-of-financial-institutions-
alphabetical.pdf

http://en.wikipedia.org/wiki/Botswana_Savings_Bank

www.craftsilicon.com/Uploads/Case%20Study%20BSB.pdf