The dual role played by the Bank of Botswana Governor as Chief Executive and Chairman of the Board has come under renewed scrutiny in confidential memos written to Ms. Linah Mohohlo by the Central Bank’s former Chief Internal Auditor.
This was after the then Auditor, Joe Mutwale, disagreed with the Governor on the figures that were reported to Parliament.
Mr. Mutwale also points out in his confidential notes to the Chairman of the Bank’s Audit Committee that the arrangement where one person sits as both CEO and Chairman does not augur well for corporate governance.
“The very structures which were put in place as checks and balances to guard against abuse of authority by Management are now being stepped on by the Chief Executive Officer cum Board Chairman,” he writes.
This was not the first time the issue of Executive Chairmanship at Bank of Botswana was raised.
In a series of questions, Member of Parliament for Kweneng East Gordon Mokgwathi had, among other things, also asked the Minister of Finance and Development Planning whether or not he would consider amending the Bank of Botswana Act to ensure that in the spirit of corporate governance, the Governor as the Chief Executive Officer does not also serve as the chairperson of the Bank’s Board.
Issue is also raised of the implications on corporate governance when the Bank’s Chief Internal Auditor is appointed by Management and not by the Audit Committee.
In confidential notes exchanged between him and the Chairman of Audit Committee, Mr. Mutwale asks if it would not be proper for the Auditor to be appointed directly by the Board instead of Management as a way of safeguarding their independence.
“Do you think that the governance structures in the Bank are really effective? Has the Governor not usurped the powers of the Audit Committee? The Chief Executive Officer, as Chairman of the Board prevents the matter from being taken up by the Audit Committee, preferring to discuss it at the Board, which she chairs.”
Mr. Mutwale further asks for his position to be appointed directly by the Audit Committee, not by Management as there are chances that, as his superiors, they would want to erode his independence.
It also turns out that the International Monetary Fund had also advised that the Bank of Botswana Act be changed to allow for more independence of the Internal Auditor.
“This would appear to be in line with modern corporate governance trends, as it was suggested by the IMF in the ongoing review of the Bank of Botswana Act, and that it should be enshrined in the Act. The organization, both in its current and future form, should depict the chief internal Auditor’s functional reporting lines to the Audit Committee.”
“Mr. Chairman the importance of this issue cannot be over-emphasised; Management, by deliberately falsifying figures, have committed fraud and could bring the integrity of the Bank into question if the public were to know of it. Management then attempts to divert attention from the main issue and threatens the Chief Internal Auditor with disciplinary action and possible dismissal and blacklisting in the job market. Then several allegations are suddenly made against the Chief Internal Auditor and the Governor sidelines the Chief Internal Auditor and starts taking decisions relating to the Internal Audit function without consulting the Chief Internal Auditor. The very structures which were put in place as checks and balances to guard against abuse of authority by management are now being stepped on by the Chief Executive Officer cum Board Chairman.”
It also turns out that in one of the exchanges between the Governor and the Auditor, Mr Mutwale was asked if he [Mutwale] “was aware that the Audit Committee was only a sub committee of the main Board of which she was the Chairman. I answered that I was very much aware of it.”
Mutwale also complains to the Governor that he had frequently been reminded of who called the shorts at the Bank.
“The Governor asked me to give instances when she told me that “she calls shorts.” I cited a number of instances during the discussion of the 2006 Annual Financial Statements when she told me to do as she said because she wanted to prove how unreliable the External Auditors were even in situations when, in my view, they were not wholly to blame. She then accused me of using this opportunity to get even with her. I denied that this was the case and pointed out there had been several times before when I had been overruled on professional issues but never attempted to get even with those who held views different from mine,” wrote Mr. Mutwale.