THE UNIVERSITY OF DAR ES SALAAM

RESEARCH PROPOSAL FOR MASTERS DISSERTATION

1. Name, Registration Number of Candidate, Academic Qualification of

Candidate

Name of Candidate: Rachel Abyud Sanga

Registration Number: 2018-06-00069

Qualification: Bachelor of Accountancy, CPA (T)

2. Name of Supervisor: Dr. Lemayon Melyoki

3. Department and School

Department: Finance Department

School: University of Dar es Salaam Business School

4. Proposed Degree: MBA in Finance

5. Title: Compliance with Corporate Governance Best Practices: A survey of listed

companies in Tanzania

CHAPTER ONE

INTRODUCTION AND BACKGROUND OF THE STUDY

1.1 Introduction

This introductory chapter presents the background of the study, statement of the

problem, objectives of the study and significance of the study.

1.2 Background of the study

The adoption of best practice codes has been one of the most significant influential

trends in corporate governance in the last 20 years (Cuomo, Christine & Alessandro,

2016). Corporate Governance is expanding and changing constantly due to a desire for

transparency, accountability, fairness, disclosure responsibilities and increased investor

confidence in the financial markets (Andrew, 2013). Across the globe, the economic

crisis has amplified the significance of good corporate governance and increased

regulation as complementary to the over-liberated freedom of modern capitalism

(Claessens & Yurtoglu, 2013). According to World Bank (2002) as cited in Afolabi

(2013), the collapse of high- profile firms such as Enron, WorldCom, Tyco and Xerox

are believed that poor corporate governance contributed to their collapse, hence have

generated renewed interest in determining the best practices of corporate governance.

Moreover, in 1997 the East Asian financial crisis occurred as a result of the lack of poor
corporate governance mechanisms which highlighted the weaknesses of economic

institutions (Vaughn & Ryan, 2016). The situation in Sub-Saharan Africa is no

different; corporate governance has received some attention in recent times, due to poor

performance of corporations in the region[ Ref?].

Corporate Governance is a relatively new term, which became popular in 1980s,

however the principles of Corporate Governance were already in practice by which the

companies were being managed and controlled (George & Karibo, 2014). This term is

used to describe a phenomenon, which has been practiced since the creation of

corporate entities (Ronald, 2016). The theoretical application of the subject Corporate

Governance is new however; the practice of the principles of Corporate Governance is

as old as trade (Claessens & Yurtoglu, 2013). The need of Corporate Governance

principles was there even when in 1932, Berle and Means highlighted the agency issues

(Ronald, 2016). Whenever a principal has to rely on agents for the handling of his

business, governance issues arise, and these issues have long been recognized in order

to run and regulate modern enterprises (Claessens & Yurtoglu, 2013).

The principal-agent problems formed the background for a number of initiatives, at both

the national and international levels, aimed at improving corporate governance

practices. International organizations have devoted increasing attention to corporate

governance as a subject of global concern (Melyoki 2005).

Similarly, listed companies have increasingly become subject to internal and external

pressure to comply with ethical and social standards (Mzenzi, Mori & Kurt, 2019).

Corporate governance is something investors of large companies look forward to in the

sense that it helps in cleaning up the governance environment, exposes insider

relationship and injects the value of transparency and accountability in both private and

public transactions (Levis, 2016). In any corporate organization, it is its corporate

governance system that defines the owner of the firm and dictates the rules by which all

financial returns are to be distributed among employees, managers and other

stakeholders (Levis, 2016).

However, the poor quality of local system of corporate governance lies at the heart of

one of the greatest challenges facing most countries in developing world (Bhasin,

2010). The problem of weak legal and regulatory systems is generally viewed as a

problem of developing countries (Lin, 2015). It comprises the incompetence of the

board of directors; lack of independent directors as well as presence of corporate

cultures that does not promote enquiries of various issues (Lin, 2015). Clarke and Clegg

(2018) added that the application of varying accounting and auditing standards is

another challenge to corporate governance.

1.3 Statement of the problem

The balance of pursuing market opportunities while maintaining accountability and

integrity has proved a defining challenge for business enterprise since the arrival of the

joint- stock company in the early years of industrialism (Levis, 2016). Indeed, the recent
world economic and financial crisis, has made several governments across the global

adopt or adapt governance reforms that are specifically aimed at improving their

corporate governance systems (Maher & Anderson, 2020). Despite this, Mitton (2018)

argues that the major setback facing government policies in this regard is how to

develop a good corporate governance framework that would protect benefits of

stakeholders and spearhead development of capital markets. The challenges stretch to

global applicability versus compliance with local jurisdiction; conflicting rules in a

trans-border environment; consistency in internal rules and regulations; and challenges

related to internal control and documentations (Mitton, 2018).

Researches on the issue of Corporate Governance are more than a few. Previous studies

have struggled to pinpoint important things regarding the whole basket of Corporate

Governance. Most of reviewed studies have strived to show the effectiveness of

Corporate Governance Best Practices, their shortfalls and possible remedies towards

compliance of Corporate Governance in Tanzania. Reviewed studies have confined on a

single area but on different focus. For example, the study by Hendrike and Veerman

(2014) focused on the issue of corporate governance in financial management, while

that of Aghion and Tirole (2017), focused on corporate governance procedures for

board and directors’ selection.

In the Tanzanian context, there have been attempts to address the challenge of corporate

governance. Specifically, the Capital Markets and Securities Authority (CMSA) and the

Steering Committee on Corporate Governance in Tanzania introduced in 2002, separate

but related sets of principles for effective corporate governance which companies are

being encouraged to adopt and implement (Assad, 2011). Equally, according to Mzenzi,

Mori and Kurt (2019), there are a number of studies, which have been conducted in

Tanzania to examine the corporate governance structures, practices and governance

failure in different sectors as well as corporate social responsibility. These include the

study by Melyoki (2005) focusing on determinants of effective corporate governance in

the country, and Assad (2011) focusing fraud related issues that potentially suggest

ineffective corporate governance practices among victim organizations (Assad, 2011).

Altogether had similar focus but they failed to achieve the clearest intervention about

the state of compliance with Corporate Governance best practices in Tanzania. This

observation wants to show the knowledge gap that still exists regarding the information

about the subject at hand. Previous studies did not show the effectiveness of Corporate

gGovernance bBest pPractices, their shortfalls and possible remedies towards

compliance of cCorporate cGovernance in Tanzania. However, as long as knowledge

gap still exits, this study envisaged filling it by focusing on assessing the state of

Compliance with Corporate Governance Best Practices of listed companies in Tanzania.

1.4 Objectives of the study

1.4.1 Main objective of the study

The main objective of the study is to examine the state of compliance with corporate

governance Principles or best practices for listed companies in Tanzania instituted by

the regulatory authorities.

 1.4.1 Specific objectives of the study

[i.] To determinie the extent of compliance by companies listed at DSE with corporate

governance best practices instituted by the capitals markets regulatory

authorities in Tanzania. ,

[ii.] To identify factors motivating companies listed at DSE to comply with with

corporate governance best practices instituted by the capitals markets regulatory

authorities

i.[iii.] To identify factors constraining companies listed at DSE from complying with

corporate governance best practices instituted by the capitals markets regulatory

authorities.

1.6 Significance of the study

Findings of this study will come up with reliable and consistent information that will

help to explain the extent of compliance with corporate governance best practices in

Tanzania. Stakeholders of the listed firms will understand as to what extent their firms

comply with the corporate governance best practices; motivation as to why firms

comply; factors for non-compliance as well as suggestive measures to ensure

compliance.

The significance of the study to the government lies to the fact that the findings that will

be provided by the study can be used as basis to improve conditions relating to policy
that promotes adaptability as well as setting friendly framework that enhance

compliance with corporate governance best practices.

To researchers, the study will add information that will contribute to the knowledge gap
of the matters pertaining to compliance with corporate governance best practices.
Additionally, the study will also reveal the areas for other researchers to focus.

1.7 Limitation of the study

This study will assess the extent of compliance of the corporate governance best

practices for the listed firms. For that case, it will only cover 28 1 companies listed on

Dar Es Salaam Stock Exchange (DSE). It is for that case, other firms that are not listed

on DSE will not be of consideration.

1
This information can be accessed through https://www.dse.co.tz/listed-companies
 CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction

This chapter is set to give the definition of key terms, area of study, major debates and

competing explanations of the problem under study, empirical studies and research gap

on the matters pertaining to Compliance with Corporate Governance Best Practices in

Tanzania.

2.2 Definition of key terms

2.2.1 Corporate Governance

The definitions of corporate governance used by some authorities focus on governance

structures, processes, and practices (Tricker, 2015). The Committee of the Financial

Aspects of Corporate Governance (1992) defined corporate governance as the system

by which companies are directed and controlled. It further explained that board of

directors are responsible for the governance of companies while the shareholder’s role

in governance is to appoint the directors and auditors, and to satisfy themselves that the

appropriate governance structure is in place (Tricker, 2015). Additionally, Hilmer

(1993) emphasized the strategic responsibility of the board, suggesting that the board’s

key role is to ensure that the corporate management is continuously and effectively

striving for above average performance, taking account of risk, which is not to deny the

board’s additional role with respect to shareholder protection.

This study will adopt the definition of Tricker (2015) who defined corporate governance

as the way power is exercised over corporate entities. This definition covers the

activities of the board and its relationships with the shareholders or members, and with

those managing the enterprise, as well as with the external auditors, regulators, and

other legitimate stakeholders.

All corporate entities, including profit-oriented companies, both public and private,

joint ventures, co-operatives, and partnerships, and not-for-profit organizations such as

voluntary and community organizations, charities, and academic institutions, as well as

governmental corporate entities and quangos2 have to be governed (Tricker, 2015). All

need a governing body. In the case of a company, this is its board of directors. Other

corporate entities may call their body a council, a court, a committee, a board of

governors or, in the case of some Oxford colleges just the governing body.

2.2.2 Listed Firms/Companies

Listed Firms/Companies are firms/companies whose shares are traded on an official

stock exchange. They must adhere to the listing requirements of that exchange, which

may include how many shares are listed and a minimum earnings level (Skinner, 2017).

Legal and institutional framework for listed companies involves the company registry

for the incorporation of companies in Tanzania (including public companies that might

later be listed), the Capital Markets Regulatory Authority (involved in case the intended

company to be registered as some open ended investments company) and other

2
An acronym meaning quasi-autonomous non-governmental organization
regulations applicable to specific industry (line of business). That is, for a company

registered at the company registry to qualify as a listed company it has to be a public

company as defined under the Tanzania Capital Markets and Securities Act. Therefore,

for Tanzanian set-up, companies are listed in the stock market by the Dar es Salaam

Stock Exchange (DSE).

DSE, on the other hand, is a stock market located in Dar es Salaam, Tanzania. It was

incorporated in September 1996 as a company limited by guarantee without a share

capital and became operational in April 1998. The DSE is a non-profit making body

created to facilitate the Government implementation of the reforms and in the future to

encourage wider share ownership of privatized and all the companies in Tanzania. The

DSE membership consists of Licensed Dealing Members (LDMs) and Associate

Members. LDMs are allowed access to the trading floor.

2.3 Theoretical Literature

There are many theories of corporate governance which addressed the challenges of

governance of firms and companies from time to time. However, this study will adopt

The Agency Theory, Stewardship Theory as well as Resource Dependency Theory

(RDT). The choice of the theories is reasonable since they describe the relationship

between various stakeholders of the business while carrying out the activities of the

business.
2.3.1 The Agency Theory

Agency theory, or principal-agent theory as some writers refer to it, looks at corporate

governance practices and behavior through the lens of agency dilemma (Tricker, 2015).

In essence, the theory perceives the governance relationship as a contract between

shareholder (the principal) and director (the agent). As early proponents of agency

theory, Jensen and Meckling (1976), explained:

‘Agency theory involves a contract under which one or more persons (the

shareholders(s)) engage other person persons (the directors) to perform some

service on their behalf which includes delegating some decision-making

authority to the agent. If both parties to the relationship are utility maximizers

there is good reason to believe the agent will not always act in the best interests

of the principal’.

Following that, Tricker (2015) added that anecdotal evidence of such behavior is not

hard to find. There are myriad cases in which directors treat listed public company as

though it were their own property, exploiting their position, receiving unsanctioned

benefits, and taking remuneration unrelated to their performance to their shareholders’

detriment.

Agency theory focuses at the level of shareholders and board as entities. Board-level

processes, political activities, and interpersonal relations between directors are outside

their scan3. Consequently, researchers do not need access to the boardroom or to

3
Some authorities refer to this as being treated as a ‘black box’, but that can confuse since the black box
on an aircraft contains all the vital data.
individual directors. Apparently, most agency theoretical research uses data about

governance practices and company performance that are readily available in the public

domain, for example directors’ reports and audited company accounts. Agency theory

offers a statistically rigorous insight into corporate governance processes. Because of its

simplicity and the availability of both reliable data and statistical tests, agency theory

has provided powerful approach to corporate governance theory building.

Therefore, it is for that case, that, according to Fama and Jensen (1983) as it was cited

on Tricker (2015), most scholarly research into corporate governance has used agency

theory which has been developed within the discipline of financial economics.

Moreover, looking at corporate governance through agency lens, researchers have

explored links between corporate governance processes and outcomes. In other words,

they have looked for casual links between government systems and their effects.

On the contrary, some critics of agency theory emphasizes its relatively narrow

theoretical scope. To study the intricacies of corporate governance in terms of contracts

between principals and agents is argued to be naïve (Tricker, 2015). Other critic relied

on the focus on purely quantitative metrics, such as board structure or corporate

compensation packages, or on the building of a governance index through a ‘box-

ticking approach’ where compliance with governance criteria mechanically feeds into

formance (Tricker, 2015). Such critics believe that board behavior does not consist of

set of contractual intrigue.

In summary, critics of agency theory argue that it has been erected on a single,

questionable abstraction that governance involves contracts between two parties, and is

based on a dubious conjectural morality that people maximize their personal utility.

Nevertheless, agency theory is still an interesting frontier of corporate governance as it

bridges the disciplines and applications of theoretical of economics to the legal context

of the corporation.

2.3.2 Stewardship Theory

Stewardship theory as introduced by Donaldson and Davis (1989) as a normative

alternative to the agency theory. The theory looks at governance through different lends

from agency theory, reflecting the original legal view of corporation (Tricker, 2015).

The joint-stock company with limited liability for its shareholding investors was simple

and eminently successful development of the mid-19 th Century (Shleifer & Vishny,

2017). The limited-liability company has provided capital, encouraged business growth,

secured employment, provided innovation in industry and commerce, and created

untold wealth over 150 years (Clarke, 2017). Tricker (2015) added that the

underpinning disciplines in stewardship theory are legal and organizational studies. By

reflecting the legal model, stewardship theory provides precise boundaries for the

company, clearly identifying its assets and liabilities, its shareholders and its directors

(Clarke, 2017). The theory emphasizes the responsibility of boards to maximize

shareholder value sustainably in the long term. This model proved robust and adaptable.
Indeed, its great flexibility has led to the huge proliferation, diversity, and complexity of

cooperate types and structures (Tricker, 2015).

However, In the family-controlled firms, the ownership and management are the same,

as the family members themselves are the managers, or they exert enormous control

over the strategic decisions of the firms. Hence, the agency theory may not hold well in

family-controlled firms (Ang, Cole, & Lin, 2016). The family members are committed

to the business. In addition, they are altruistic towards each other because of kinship

obligations that are part of the axiomatically binding normative moral order in most

cultures (Shleifer & Vishny, 2017). The existence of high levels of commitment is

frequently regarded as one of the strong advantages of family firms compared to non-

family firms (Thomsen, 2018). Hence, ideally, the stewardship theory should hold well

in family-owned firms. However, in practice, family-owned firms also have serious

corporate governance problems.

Critics of stewardship theory point out that the de facto situation in modern corporations

is quite different from the 19th century model (Aoki, 2016). It is argued that the concept

of a set of shareholders owning a single company and appointing its directors is naïve in

modern circumstances, except for smaller companies.

2.3.3 Resource Dependency Theory

Resource Dependency Theory (RDT) takes a strategic view of corporate governance as

it sees the governing board of a corporate entity as the linchpin between the company

and the resources it needs to achieve its objectives (Tricker, 2015). These resources

could include, for example, links to relevant markets including potential customers and

competitors, access to capital and other sources of finance, provision of know-how and

technology, and relationship with business, political, and other societal networks and

elites.

In RDT, directors are viewed as boundary-spinning nodes of networks able to connect

the business to its strategic environment. Studies in this perspective focus on the

independence of companies in a market and can serve to reduce uncertainty in corporate

decisions. The theory finds its roots in organization theories, for example Pfeiffer

(1972).

The theory of social networks recognizes that those involved in corporate governance

processes are often linked through networks. Individuals at the nodes may have things

in common including, perhaps, social standing, class, income, education, institutional or

corporate links and so on lifestyle theory.

2.4 Empirical Literature

Research interest in the concept of corporate governance has grown considerably over

the past decade), particularly because of recent economic crises (Calderon and Villabon,

2017). In additional to that, there are different schools of thought on corporate

governance such as corporate finance perspective such as that of Tirole (2016) as well

as that of Williamson (2018).

Safari, Mirshekary & Wise investigated compliance with corporate governance

principles in Australia. They further investigated the association between the level of

compliance of Australian listed companies with Australian corporate governance

principles, in aggregate, and the level of discretionary accruals using the modified Jones

model. It is hypothesized that higher levels of compliance would be associated with

lower levels of discretionary accruals. Data from a random sample of 214 Australian

listed companies for the years 2009 and 2010 were used to test the hypothesis. The

results demonstrate a significant negative relationship indicating that companies with

higher levels of compliance engage in lower levels of earnings management via

discretionary accruals.

Moreover, Bravo-Urquiza & Morena-Ureba (2021) analyzed whether the compliance

with corporate governance codes helps to mitigate the financial distress of firms. They

examined three different levels of compliance: overall compliance, the compliance with

the recommendations regarding the board of directors and the compliance with the

recommendations on board subcommittees. Their study revealed that only the

fulfillment with the recommendations about the board of directors leads to a reduction
in the likelihood of financial distress. These findings extend the academic debate

concerning the role of governance codes and their impact on firm outcomes, and have

practical implications for both professionals and firms. Moreover, our findings

emphasize the need to distinguish between the different types of recommendations to

investigate the effects of these codes.

Cleyn (2014) investigated whether and to which extent Belgian publicly listed SMEs

comply with the Belgian Code on Corporate Governance after its first year of

introduction, which has been constituted in the framework of the European Action Plan

on Corporate Governance. In a sample of 78 Belgian listed SMEs, the compliance with

the Code is analyzed. After its first year of introduction, companies comply with on

average 70% of the Code’s provisions. The most problematic topics in terms of

disclosure of information seem to relate to (individual) remuneration, private

information and content of shareholders’ meetings.

On African settings, Dzingai & Fakoya (2017) examined the effect of corporate

governance structures on firm financial performance. The secondary data of selected

Johannesburg Stock Exchange (JSE), Socially Responsible Investment (SRI) Index-

listed mining firms’ sustainability reports, and integrated annual financial statements are

used. Using panel data analysis of the random effects model, the study determined the

relationship between board independence and board size and the return on equity (ROE)

for the period 2010-2015. Results indicate a weak negative correlation between ROE

and board size, and a weak, but positive, correlation between ROE and board
independence. Additionally, there is a positive, but weak, correlation between ROE and

sales growth, but a negative and weak relationship between ROE and firm size. The

study suggests that effective corporate governance through a small effective board and

monitoring by an independent board result in increased firm financial performance. We

recommend that South African companies see compliance with the recommendations of

the King IV Code on Corporate Governance not as a liability, but an ethical investment

that may likely yield financial benefit in the long-term.

Isakul & Chizea (2017) examined corporate governance disclosure in Nigerian and

South African Banks using the unweighted disclosure index technique. This research

provides a cross-sectional examination of corporate governance disclosure practices in

the annual reports of listed banks in Nigeria and South Africa. The results suggest that

Nigerian and South African banks have a high level of corporate governance disclosure.

However, Nigeria and South African banks have low levels of voluntary corporate

governance disclosure. Furthermore, in reporting of voluntary corporate governance

disclosure, Nigerian banks appear to be collating information with no link to the overall

business strategy of the organization while the South African banks have a more robust

approach to voluntary corporate governance disclosure as they apply international

guidelines such as the Global Reporting Initiative to their disclosure.

2.5 Conceptual Framework

Motivating Factors

Compliance with Corporate

Governance Best Practices

 Implementation of
established Best
Practices listed in
Guideline

Constraining Factors

Figure 2.1: Conceptual Framework

Figure 2.1 describes the relationship between variables of the study. It shows how the

study assumes the influencing-influenced relationship between independent and

dependent variables of the study. The conceptual framework connotes that compliance

with corporate governance best practices and implementation of established best

practices listed in the guideline depends on numerous motivating factors for its

occurrence and constraining factors for its hindrance.

2.6 Principles/Best practices of corporate governance in Tanzania

The Capital Markets and Securities Authority has developed these guidelines for good

corporate governance practices by public listed companies in Tanzania in response to

the growing importance of governance issues both in emerging and developing

economies and for promoting domestic and regional capital markets growth. It is also in

recognition of the role of good governance in corporate performance, capital formation

and maximization of shareholders’ value as well as protection of investors’ rights.

2.6.1 Board of Directors

2.6.1.1 The Role and Responsibilities of the Board of Directors

The board of directors should assume a primary responsibility of fostering long-term

business of the corporation consistent with their fiduciary responsibility to the

shareholders. Board members should accord sufficient time to their functions and act on

a fully-informed basis, while treating all shareholders fairly in the discharge of the

following responsibilities (among others):

i. Define the company’s mission, its strategy, goals, risk policy, plans and

objectives including approval of its annual budgets;

 ii. Oversee the corporate management and operations, management accounts,

major capital expenditures, acquisitions and divestitures and review corporate

performance and strategies at least on a quarterly basis;

iii. Identify the corporate business opportunities as well as principal risks in its

operating environment including the implementation of appropriate measures to

manage such risks or anticipated changes impacting on the corporate business;

iv. Development of appropriate staffing and remuneration policy including the

appointment of chief executive and the senior staff, particularly the finance

director, operations director and the company secretary as may be applicable;

v. Review on a regular basis the adequacy and integrity of the company’s internal

control, accounting and financial reporting and management information

systems including compliance with applicable laws, regulations, rules and

guidelines;

vi. Establish and implement a system that provides necessary information to the

shareholders including shareholder communication policy for the company;

vii. Monitor the effectiveness of the corporate governance practices under which it

operates and propose revisions as may be required;

viii. Take into consideration the interests of the company’s stakeholders in its

decision-making process.

2.6.1.2 A Balanced Board Constitution for an Effective Board

 i. The board of directors of every listed company should reflect a balance between

independent, non-executive directors and executive directors.

ii. The independent and non-executive directors should form at least one-third of

the membership of the board.

iii. The structure of the board should also comprise a number of directors, which

fairly reflects the company’s shareholding structure. The board composition

should not be biased towards representation by a substantial shareholder but

should reflect the company’s broad shareholding structure. The composition of

the board should also provide a mechanism for representation of the minority

shareholders without undermining the collective responsibility of the directors.

iv. In circumstances where there is no majority shareholder but there is still a single

substantial shareholder the board should exercise judgement in determining the

board representation of such shareholder and those of the other shareholders

which reflects the shareholding structure of the company.

v. The board should disclose in its annual report whether independent and non-

executive directors constitute one-third of the board and if it satisfies the

representation of the minority shareholders.

vi. The size of the board should not be too large to undermine an interactive

discussion during board meetings or too small such that the inclusion of a wider

expertise and skills to improve the effectiveness of the board is compromised.

vii. The Board should monitor and manage potential conflicts of interests at

management, board and shareholder levels.

2.6.1.3 Appointment and Qualifications of Directors

i. The board of every listed company should appoint a nominating committee

composed of majority non-executive directors with the responsibility of

proposing new nominees for the board and for assessing the performance and

effectiveness of directors to perform their role in the company.

ii. The nominating committee should consider only persons of caliber, credibility

and who have necessary skills and expertise to exercise independent judgement

on issues that are necessary to promote the company’s objectives and

performance in its area of business.

iii. The nominating committee should also consider candidates for directorship

proposed by the chief executive and shareholders.

iv. The board, through the nominating committee, should on an annual basis review

its required mix, skills and expertise of which the executive directors as well as

independent or non-executive directors should bring to the board and make

disclosure of the same in the annual report.

 v. The board should also implement a process of assessing the effectiveness of the

board as a whole, committees of the board, as well as of each individual director

and such task should be assigned to the nominating committee.

vi. Newly appointed directors should be provided with necessary orientation in the

area of the company’s business in order to enhance their effectiveness in the

board.

vii. The nominating committee should recommend to the board candidates for

directorship to be filled by the shareholders as the responsibility of nominating

rests on the full board, after considering the recommendations of the nominating

committee.

viii. The process of the appointment of directors should be sensitive to gender

representation.

ix. No person should hold more than three directorships in any public listed

company at any one time in order to ensure effective participation in the board.

2.6.1.4 Remuneration of the Directors

i. The board of directors of every listed company should appoint a remuneration

committee or assign a mandate to a nominating committee consisting mainly of

independent and non-executive directors to recommend to the board the

remuneration of the executive directors and the structure of their compensation

package.
 ii. The determination of the remuneration for the non-executive directors should be

a matter for the whole board.

iii. The remuneration of the executive directors should include an element that is

linked to corporate performance including a share option scheme so as to ensure

the maximization of the shareholders’ value.

iv. The consolidated total remuneration of the directors should be disclosed to the

shareholders in the annual report specifying the following categories:

a) Total remuneration for executive directors;

b) Total fees for non-executive directors.

2.6.2 Position of Chairman and Chief Executive

The guideline requires that;

i. Every public listed company should, as a matter of best practice, separate the

role of the chairman and chief executive in order to ensure a balance of power

and authority and provide for checks and balances.

ii. Where the role of the chairman and the chief executive is combined, there

should be a clear rationale and justification which must-

a) be for a limited period;

b) be approved by the shareholders;

 c) include measures that have been implemented to ensure that no one individual

has unfettered powers of decision in the company; and

d) include plan for separation of the role where such combined role is deemed

necessary during the restructuring or change process.

iii. Chairmanship of a public listed company should be held by an independent or

non-executive director.

iv. No person should hold more than two chairmanships in any public listed

company at any one time in order to ensure effective participation of the

company’s affairs.

v. Every listed company should also have a clear succession plan for its chairman

and chief executive in order to avoid unplanned and sudden departure, which

could undermine the company and shareholders’ interest.

vi. The chief executive should be responsible for implementing the board corporate

decisions and there should be a clear flow of information between management

and the board in order to facilitate both quantitative and qualitative evaluation

and appraisal of the company’s performance.

vii. The chairman of the board should undertake a primary responsibility for

organizing information necessary for the board to deal with and for providing

necessary information to the directors on a timely basis.

viii. The chief executive is obliged to provide such necessary quality information to

the board in the discharge of the board’s business.

2.6.3 Rights of Shareholders

The essence of good corporate governance practices is to promote and protect

shareholder’s rights. Thus;

i. Every public listed company board should ensure equitable treatment of

shareholders including the minority shareholders.

ii. All shareholders should receive relevant information on the company’s

performance through distribution of regular annual reports and accounts, half-

yearly results and quarterly results as a matter of best practice.

iii. The shareholders should receive a secure method of transfer and registration of

ownership as well as a certificate or statement evidencing such ownership in the

case of a central depository environment.

iv. Every shareholder shall have a right to participate and vote at the general

shareholders meeting including the election of directors.

v. Every shareholder shall be entitled to ask questions, seek clarification on the

company’s performance as reflected in the annual reports and accounts or in any

matter that may be relevant to the company’s performance or promotion of

shareholders’ interests and to receive explanation by the directors and/or

management.
 vi. Every shareholder shall be entitled to distributed profit in form of dividends and

other rights for bonus, shares, script, or rights issue, as applicable and in the

proportion of its shareholding in the company’s share capital.

vii. The board should maintain an effective communication policy that enables both

management and the board to communicate effectively with its shareholders,

stakeholders and the public in general.

viii. The annual report and accounts to the shareholders must include highlights of

the operation of the company and financial performance.

ix. All shareholders should be encouraged to participate in the annual general

meetings and to exercise their votes.

x. Institutional investors are particularly encouraged to make direct contact with

the company’s senior management and board members to discuss performance

and corporate governance matters as well as vote during the annual general

meetings of the company.

xi. Companies, as a matter of best practice, are encouraged to organize regular

investor briefings when the half-yearly and annual results are declared or as may

be necessary to explain their performance and promote interaction with

investors.

xii. Every listed company should encourage the establishment and use of the

company’s website by shareholders to ease communication and interaction

among shareholders and the company.

xiii. Every listed company should encourage and facilitate the establishment of a

Shareholders’ Association to promote dialogue between the company and the

shareholders. The Association should play an important role in promoting good

corporate governance and actively encourage all shareholders to participate in

the annual general meeting of the company or assign necessary voting proxy.

xiv. Shareholders while exercising their right of participation and voting during

annual general meetings of their company should not act in a disrespective

manner as such action may undermine the company’s interest.

2.6.4 Conduct of General Meetings

The board of a public listed company should ensure that shareholders’ rights of full

participation at general meetings are protected by:

i. Giving shareholders sufficient information on voting rules and procedures,

ii. Giving shareholders the opportunity to question management,

iii. Giving shareholders the opportunity to place items on the agenda at general

meetings,

iv. Giving shareholders the opportunity to vote in absentia, and,

v. Giving shareholders the opportunity to consider the costs and benefits of their

votes.
2.6.5 Accountability and the role of Audit Committee

As a matter of best practice, the constitution of audit committees represents an

important step towards promoting good corporate governance. The following shall

represent the recommended best practice relating to the role and constitution of audit

committees by public listed companies:

2.6.5.1 The Audit Committees

The board shall establish an audit committee of at least three independent and non-

executive directors who shall report to the board, with written terms of reference, which

deal clearly with its authority and duties. The chairman of the audit committee should

be an independent or non-executive director. The board should disclose in its annual

report whether it has an audit committee and the mandate of such committee.

2.6.5.2 Attributes of Audit Committee Members

Important attributes of committee members should include: -

i. Broad business knowledge relevant to the company’s business;

ii. Keen awareness of the interests of the investing public;

iii. Familiarity with basic accounting principles; and

iv. Objectivity in carrying out their mandate and no conflict of interest.

2.6.5.3 Duties of Audit Committee

Audit Committees should have adequate resources and authority to discharge their

responsibilities. The members of the audit committee shall:

i. Be informed, vigilant and effective overseers of the financial reporting process

and the company’s internal controls.

ii. Review and make recommendations on management programs established to

monitor compliance with the code of conduct.

iii. Consider the appointment of the external auditor, the audit fee and any questions

of resignation or dismissal of the external auditor.

iv. Discuss with the external auditor before the audit commences, the nature and

scope of the audit, and ensure co-ordination where more than one audit firm is

involved.

v. Review management’s evaluation of factors related to the independence of the

company’s external auditor. Both the audit committee and management should

assist the external auditor in preserving its independence.

vi. Review the quarterly, half-yearly and year-end financial statements of the

company, focusing particularly on:

a) Any changes in accounting policies and practices;

b) Significant adjustments arising from the audit;

c) The going concern assumption; and

d) Compliance with Tanzania Financial Accounting Standards and other legal

requirements.
vii. Discuss problems and reservations arising from the interim and final audits, and

any matter the external auditor may wish to discuss (in the absence of

management where necessary).

viii. Review the external auditor’s letter(s) to the management and management’s

response.

ix. Consider any related party transactions that may arise within the company or

group.

x. Consider the major findings of internal investigations and management’s

response.

xi. Have explicit authority to investigate any matter within its terms of reference,

the resources that it needs to do so and full access to information.

xii. Obtain external professional advice and to invite outsiders with relevant

experience to attend, if necessary; and

xiii. Consider other topics as defined by the Board including regular review of the

capacity of the internal audit function.

2.6.5.4 Audit Committee and Internal Audit functions

The board should establish an internal audit function and the audit committee’s function

in relation to internal audit functions should include:

i. Review of the adequacy, scope, functions and resources of the internal audit

function, and ensure that it has the necessary authority to carry out its work;
 ii. Review the internal audit program and results of the internal audit process and

where necessary ensure that appropriate action is taken on the recommendations

of the internal audit function;

iii. Review any appraisal or assessment of the performance of members of the

internal audit function;

iv. Approve any appointment or termination of senior staff members of the internal

audit function;

v. Ensure that the internal audit function is independent of the activities of the

company and is performed with impartiality, proficiency and due professional

care;

vi. Determine the effectiveness of the internal audit functions; and

vii. Be informed of resignation of internal audit staff members and provide the

resigning staff members an opportunity to submit reasons for resigning.

2.6.5.5 Participation in the Meetings of Audit Committees

The finance director, the head of internal audit (where such a function exists) and a

representative of the external auditors shall normally attend meetings of the audit

committee while other board members may attend meetings upon the invitation by the

audit committee.

i. At least once a year the committee shall meet with the external auditors without

the presence of executive board members.

 ii. The audit committee should meet regularly, with due notice of issues to be

discussed and should record its conclusions in discharging its duties and

responsibilities.

iii. The board should disclose in an informative way, details of the activities of audit

committees, the number of audit meetings held in a year and details of

attendance of each individual director in respect of meetings.

 CHAPTER THREE
METHODOLOGY
3.1 Introduction

This chapter presents the research approach, design of the study that will be

investigated, sample size and sampling methods and procedures, source of data and

collection methods, data processing and analysis as well as trustworthiness of the data

and ethical consideration.

3.2 Research approach

Generally, there are three approaches or methods to conducting research: qualitative

methods, quantitative methods and mixed methods (Creswell, 2013; Creswell & Plano-

Clark, 2017; Teddlie & Tashakkori, 2019). This study intends to assess the state of

compliance of corporate governance best practices in the listed firms in Tanzania. The

study will employ a qualitative research approach that requires deeply immersing in the

local context of compliance of corporate governance best practices to collect well

description and grounded non-numerical data concerning the study. Additional to that,

qualitative researches are designed to provide the researcher a means of understanding a

phenomenon by observing or interacting with the participants of the study (Denzin &

Lincoln, 2018). Commonly, the qualitative research enables the researcher to get in-

depth descriptions about the state of compliance of corporate governance best practices

in the listed firms in Tanzania

3.3 Research design

Research design is procedures for collecting, analyzing, interpreting and reporting data

in research studies (Creswell & Plano-Clark, 2017). In other words, the research design

sets the procedure on the required data, the methods to be applied to collect and analyze

this data, and how all of this is going to answer the research question (Dai, Liu & Hu,

2014). Therefore, this study will make a good use of descriptive case study research

design. This design is expected to assess the state of compliance of corporate

governance best practices in the listed firms in Tanzania. With the support of past

studies, this design will provide a wider room to explore and understand in depth about

the extent of compliance with corporate governance best practices promoted through the

DSE Corporate governance guidelines in Tanzania, factors motivating listed companies

to comply with the promoted practices, and identifying factors constraining listed

companies from complying with the promoted guidelines.

3.4 Area of study

This study will assess the extent of the compliance of corporate governance best

practices by looking down and review the financial reports of each of the firms listed on

DSE. However, the study will also gather and consider primary data that will be

collected from three (3) selected companies that are listed in DSE.
3.5 Target population

A population refers to any collection of specified group of human beings or of non-

human entities such as objects, educational institutions, time units, geographical areas

(Kamangar & Islami, 2013). Listed firms in the DSE covers a wide range of institutions

that can be altogether considered as population for the study.

Table 3.1: Listed companies as of June 2021.

No. Code Company Name Sector

1 CRDB CRDB Bank PLC Banks, Finance and Investments
2 DCB DCB Commercial Bank PLC Banks, Finance and Investments
3 DSE Dar es Salaam Stock Exchange Banks, Finance and Investments
4 EABL East African Breweries Limited Industrial and Allied
5 JATU JATU PLC Industrial and Allied
6 JHL Jubilee Holdings Limited Banks, Finance and Investments
7 KA Kenya Airways Limited Commercial Services
8 KCB KCB Group Banks, Finance and Investments
9 MBP Maendeleo Bank PLC Banks, Finance and Investments
10 MCB Mwalimu Commercial Bank PLC Banks, Finance and Investments
11 MKCB Mkombozi Commercial Bank PLC Banks, Finance and Investments
12 MUCOB Mufindi Community Bank Banks, Finance and Investments
13 NICO National Investment Company Limited Banks, Finance and Investments
14 NMB NMB Bank PLC Banks, Finance and Investments
15 NMG The Nation Media Group Commercial Services
16 PAL Precision Air Services PLC Commercial Services
17 SWALA Swala Oil and Gas (Tanzania) Oil and Gas
18 SWIS Swissport Tanzania Limited Commercial Services
19 TBL Tanzania Breweries PLC Commercial Services
20 TCC The Tanzania Cigarette Company Industrial and Allied
21 TCCL Tanga Cement PLC Industrial and Allied
22 TICL TCCIA Investment Company Limited Banks, Finance and Investments
23 TOL TOL Gases Limited Industrial and Allied
24 TPCC Tanzania Portland Cement Company Limited Industrial and Allied
25 TTP TATEPA Limited Industrial and Allied
26 USL Uchumi Supermarkets Limited Commercial Services
27 VODA Vodacom Tanzania Limited Telecommunications
 28 YETU Yetu Microfinance Bank Banks, Finance and Investments

3.6 Sample size

In research studies, it is often not appropriate or feasible to recruit the entire population

of interest (Patton, 2017). Instead, researchers recruit a sample from the population of

interest to include in their study. A selected group of some elements from the totality of

the population is known as the sample (Dai, Liu & Hu, 2014). It is from the study of

this sample that something is known and said about the whole population. Therefore,

this study will gather data from 12 members of the management team of 3 company A,

B and C.

3.7 Sampling procedures

Sampling is the process of selecting a statistically representative sample of individuals

from the population of interest (Kamangar & Islami, 2013). Sampling is an important

tool for research studies because the population of interest usually consists of too many

individuals for any research project to include as participants. A good sample is a

statistical representation of the population of interest and is large enough to answer the

research question (Dai, Liu & Hu, 2014). The following sampling methods will be used

to obtain the samples.

3.7.1 Purposive sampling

Purposive sampling is a sampling technique that qualitative researchers use to recruit

participants who can provide in-depth and detailed information about the phenomenon

under investigation (Dai, Liu & Hu, 2014). It is highly subjective and determined by the
qualitative researcher generating the qualifying criteria each participant must meet to be

considered for the research study (Kamangar & Islami, 2013). Purposive sampling

method will be used to obtain 12 respondents. Basically, 4 members of the management

for each company will be obtained by using purposive sampling method. These 12

respondents will be consulted for data gathering due to the fact that they are most likely

to give the best picture on the extent of compliance with corporate governance best

practices in Tanzania.

3.8 Sources of data and collection methods

Data collection is the process of gathering and measuring information on variables of

interest, in an established systematic fashion that enables one to answer stated research

questions, test hypotheses, and evaluate outcomes (Patton, 2017). This study will use

both primary and secondary data that will be collected through Interviews and

Document Reviews respectively.

3.8.1 Interview

Interviewing involves asking questions and getting answers from participants in a study.

Interviewing has a variety of forms including: individual, face-to-face interviews and

face-to-face group interviewing. (Patton, 2017). Interviews are used to collect first-hand

information and obtain key information. For the case of this study, semi-structured

interviews will be conducted to the management teams of the selected companies to

explore data and information from respondents where necessary in order to compliment

the questionnaires. Interviews are useful because they give out an access for the first-
hand information to be gathered and enables face to face contact with respondents, thus,

if done properly, ensure the quality and reliability of the information.

3.8.2 Document Review

Document review is a way of collecting data by reviewing existing documents

(Kamangar & Islami, 2013). In that context, the researcher will use annual reports as the

main source of data for determining compliance or non-compliance.

3.9 Data processing and analysis

LeCompte and Schensul (2019) emulates data analysis as the process of reducing large

amount of collected data to make sense of them. As indicated by Patton (2017) that

three things occur during analysis: data are organized, data are reduced through

summarization and categorization, and patterns and themes in the data are identified and

linked.

Data in this study will be analysed through thematic data analysis through examining

and recording patterns (or themes) within data. It is performed through drawing a

meaningful explanation on the pertinent subject from the responses of teachers and

students.

3.10 Trustworthiness of the data

In each study, researchers should establish the protocols and procedures necessary for a

study to be considered worthy of consideration by readers (Amankwaa, 2016).

Trustworthiness or rigor of a study refers to the degree of confidence in data,

interpretation, and methods used to ensure the quality of a study (Pilot & Beck, 2014).
Anney (2014) and Gay, Mills and Airasian, (2012) maintain that the trustworthiness of

qualitative study can be recognized by taking into account four important strategies,

namely: credibility, transferability, dependability and conformability.

3.10.1 Credibility

Credibility is defined as the confidence that can be placed in the truth of the research

findings (Macnee & McCabe, 2018). Credibility establishes whether or not the research

findings represent plausible information drawn from the participants’ original data and

is a correct interpretation of the participants’ original views (Graneheim & Lundman,

2014).

3.10.2 Transferability

Anney (2014) postulates that transferability emphasizes the generalization of the

research findings. It refers to the degree to which the results of qualitative research can

be generalized or transferred to other contexts or settings (Yin, 2013). For this study,

researcher will enhance transferability by doing a thorough job of describing the

research context and the assumptions that were central to the research.

3.10.3 Dependability

Saumure & Given (2018) recommended that dependability can be addressed by

providing a rich description of the research procedures and instruments used so that

other researchers may be able to collect data in similar ways. In addition, researchers

may address dependability by conducting a new study on participants with similar

demographic variables, asking similar questions and coding data in a similar fashion to

the original study (Yin, 2013). Therefore, it can be inferred from the above that clearly
stating the demographic of the variables and research questions used to collect data and

the coding techniques should be explained clearly. In this study, therefore, to ensure

reliability: the interview procedure (the timing, content, etc.) and the data analysis

process will be discussed clearly. The profile of interviewees will be explained in detail;

the interview questions that will be used to collect the data from interviewees will be

clearly prepared and incorporated in the annex part of the report; and during the data

collection process, efforts will be made to reduce errors and bias. In this regard, before

closing the interview sessions, the researcher will try to check the accuracy of the data

by discussing the points taken on the note with the participants and getting their

feedbacks.

3.10.4 Confirmability

Confirmability refers to establishing correct operational measures for the concepts in

both quantitative and qualitative studies (Yin, 2013). In other words, the researcher

should ask the question: ‘am I truly measuring /recording what I intend to measure

/record rather than something else?’ (Tashakkori and Teddlie, 1998). For this study,

researchers will address conformability through the use of multiple coders,

transparency, audit trails, and member checks.

3.11 Ethical consideration

Research ethics deals primarily with the interaction between researchers and the people

they study (Gay, Mills & Airasian, 2012). The researcher will adhere to some ethical

issues and considered them useful during data collection processes. These aspects are:

3.11.1 Research permit

Wiles (2021) views research permit as a central concept in ethical research practices and

is one of the key principles underpinning professional guidelines for social scientists.

Getting permission to conduct study provides the research legitimate and decreases

possible obstacles to carry it out. The researcher will obtain the research clearance from

the Vice Chancellor of the University of Dar es Salaam who will allow the researcher to

conduct the study in sampled companies.

3.11.2 Participants’ informed consent

Informed consent is a mechanism for ensuring that people understand what it means to

participate in a particular research study so they can decide in a conscious, deliberate

way whether they want to participate (Anney, 2014). The researcher will inform the

participants about the reason by providing fair and full explanations of the research

problem, purpose and objectives of the study. Further, respondents will be given a

chance to participate voluntarily while all other ethical principles will be taken care off.

Individual will choose whether or not to participate in the study after being informed the

purpose of the study.

3.11.3 Confidentiality

Conversation is a social act that requires give and take, and, because qualitative research

is conversational, it is important for data collectors to maintain clear boundaries

between what they are told by participants and what they tell to participants (Creswell

& Plano-Clark, 2017). In that regard, the respondents will be assured of total privacy

and confidentiality of the information they will provide. This will be done by informing

them the purpose of the study will be just for academic use only and that all information
to be collected will be stored safely in such a way that no any individuals who are not

authorized will access the information.

3.11.4 Anonymity

Creswell and Plano-Clark (2017) refers anonymity to collecting data without obtaining

any personal, identifying information. Participants in the study have the right to

anonymity; they have their identities kept anonymous. In order to ensure anonymity, the

researcher will keep the respondents’ answers private when presenting the findings of

the study. The researcher will use labels, numbers and letters in place of companies.

Moreover, letters A, B and C will be used as substitutes for the actual names of

companies.

3.11.5 Harm to participants

Polit and Beck (2014) emphasizes that the principle of ‘no harm’ to participants ought

to be considered by researchers, who should be aware of the potential harms that might

be inflicted upon study subjects. In this study, the researcher will ensure participants’

defense from any kind of harm, psychological and physical by not asking sensitive and

private issues. Even if the researcher will be informed on sensitive issues still the

researcher will let the respondents know that these issues remained secret.
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 APPENDIX I: LETTER OF INTRODUCTION

Dear respondents,

My name is Rachel Abyud Sanga, a student of University of Dar Es Salaam Business

School (UDBS). I am conducting a study about the Compliance with Corporate

Governance Best Practices in Tanzania, a survey of listed Firms.

This research is purely for academic purpose. It is a partial fulfillment of the

requirements for the award of Masters of Business Administration in Finance (MBA in

Finance). The success of this research will depend heavily on your willingness to

cooperate by providing correct and factual answers. Any information given to me will

be strictly treated as confidential.

I thank you in advance for your participation.

Yours faithfully,

Rachel A. Sanga
APPENDIX II: CORPORATE GOVERNANCE BEST PRACTICES
CHECKLIST
You are requested to tick only ONE letter for the answer that best express your opinion

in each sentence. N means Not at all; S means Sometimes and A means Always.

Section A: Aspects relating to Directors

The Board and Board Committees

Question N S A
Have the board established relevant committees and delegate specific
mandates?
Have the board established an audit and nominating committee?

Directors Remuneration
Is the remuneration of the director sufficient to attract and retain directors
to run the company effectively?
Is the remuneration competitively structured and linked to performance?
Does the non-executive directors’ remuneration competitive in line with
remuneration for other directors in competing sectors?
Does the company have a formal and transparent procedure for
remuneration of directors which should be with the approval of the
shareholders?

Supply and disclosure of information

Is the board supplied with relevant, accurate and timely information to
enable the board discharge its duties?
Does the board in its annual report disclose its policies for remuneration
including incentives for the board and senior management particularly;
(a) quantum and component of remuneration for directors including non-
executive directors on a consolidated basis in the following categories;
(aa) Executive director’s fees
(bb) Executive director’s emoluments
(cc) Non-executive directors’ fees
(dd) Non-executive directors’ emoluments
(b) A list of ten major shareholders of the company
(c) Share options and other forms of executive compensation that have to
be made or have been made during the course of the financial year
(d) Directors’ loans

Board Balance
Does the board compose of a balance of executive directors and non-
executive directors of diverse skills or expertise?

Appointments to the Board

Is there a formal and transparent procedure in the appointment of directors
to the board and all persons appointed or offering themselves for
appointments as directors?
With regard to appointed directors, does the Board, among other things
ensure that:
conflicted directors, disclose the nature and extent of their interests to the
Board and their interests are noted in the company’s interest register?
conflicted directors are given notice to any board meeting at which the
subject matter of the conflict is to be considered?
conflicted directors absent themselves at any board meeting at which the
subject matter of the conflict is to be considered?
directors with a continuing material conflict of interest, consider resigning
from office?

Re-election of Directors
Do all directors submit themselves for re-election at regular intervals or at
least every three years?
Does the executive directors have a fixed service contract not exceeding
five years with a provision to renew subject to..
(i) Regular performance appraisal
(ii) Shareholders approval

Resignation of Directors
Does the resignation by a serving director disclosed in the annual report
together with the details of the circumstances necessitating the resignation?

Section B: Aspects relating to Roles of Chairman and Chief Executive

Is there a clear separation of the role and responsibilities of the chairman
and chief executive which will ensure a balance of power of authority and
provide for checks and balances?
Is there anyone holding a chairmanship in any public listed company at any
one time?
Section C: Aspects relating to Shareholders
Approval of Major Decisions by Shareholders
Does the board provide the shareholders with information on matters that
include but are not limited to major disposal of company’s assets,
restructuring, takeovers, mergers, acquisitions or reorganization?

The Annual General Meeting

Does the board provide to all its shareholders sufficient and timely information
pertaining to the general meeting?
Is the choice of the venue for the meeting convenient to the shareholders’ in
terms of expenses and location?
Do directors give ample time for shareholders’ questions on matters pertaining
to the company’s performances?

Section D: Aspects relating to Accountability and Audit

Annual Report and Accounts
Does the board present an objective and understandable assessment of the
company’s operating position and prospects?
Does the board ensure that the accounts are presented in line with the Tanzania
Financial Accounting Standards issued by the National Board of Accountants
and Auditors?

Internal Control
Does the board maintain a sound system of internal control to safeguard the
shareholders’ investments and assets?

Independent Auditors
Does the board establish a formal and transparent arrangement for
appointment of independent auditors at each annual general meeting?

Relationship with the Auditors

Does the board establish a formal and transparent arrangement for maintaining
professional interaction with the company’s auditors?