Page 18 - FOL2023

Corporate Governance

to enforce, but rather on practical principles and proven practices for desired outcomes.
The Mohlomi Code, named after Chief Mohlomi, teacher and mentor of King Moshoeshoe I, has filled the
void that had existed up to its launch. The Institute of Directors of Lesotho (‘IoDLesotho’), an industry body
representing directors, convened a committee consisting of representatives of various stakeholders in
corporate governance in Lesotho which compiled the Code. The Code has a total of 22 principles bundled

into six clusters of Board Leadership; Board Conduct; Board Composition, Structures and Remuneration;
Audit, Compliance and Risk; Digitalization Governance; and Sustainability and Integrated Reporting. It is
intended to apply to companies, corporations, state-owned enterprises, not-for-profit companies, non-

profit organisations including political parties and religious bodies, and local government.

One of the key innovations of Mohlomi Code is its adoption of the dual compliance regime of ‘apply and explain’,
applying alongside ‘apply or explain’ principle of compliance. In respect of the first principle, the assumption
is that companies will comply with the principles of the Code and it requires them further to explain how they

achieve their targets. The intention is to move beyond a simple “tick box” approach to corporate governance,
and to task companies with showing how practices that underpin the principles achieve compliance with the
designated principles. By contrast, the second principle stipulates that corporations should comply with the

Code, failing which they should explain reasons why they did not comply. According to the Code, the ‘apply

and explain” is intended to apply to public, listed and governance in Lesotho.
large companies, state-owned companies and foreign
companies. The ‘apply or explain’ principle is intended
to apply to small and medium enterprises, non-profit

organisations, non-governmental organisations and
to local government. However, all the entities to which
the ‘apply or explain’ basis of compliance apply to, may
optionally adopt the ‘apply and explain’ principle. In

this way, there might be healthy competition for these
entities to move to the higher level of compliance and
thereby engender broader culture of good corporate

Market regulation

Market regulation covers that form of regulation which is enforced through a company losing favour and
influence with its stakeholders such as when a bank stops a credit facility on account of the company
not complying with good governance practices or being delisted from the Stock Exchange. For listed
companies, the effective mechanism of ensuring compliance with good corporate governance practices

is incorporation of the principles of a corporate governance code into the listing requirements. It is hoped
that the Maseru Securities Market will incorporate Mohlomi Code into its listing requirements.

Issue 2022 FOL Quarterly 19