POVERTY-TOP THREE CAUSES

13 Oct

THE TOP THREE CAUSES OF POVERTY-CAUSE OR EFFECT?

There is usually a good amount of talk about poverty and poverty reduction in most developing societies. However, little if at all any attention is paid to the causes and hence the root of this scourge. This article aims to highlight the major causes of poverty so that instead of concentrating on how to reduce it, people can pay attention to the roots and perhaps uproot them before the ‘tree’ grows too big.

WHAT IS POVERTY

To start with, we need to know what poverty is. Many writers assert that there are two main types of poverty. These are absolute poverty and relative poverty.

(a) ABSOLUTE POVERTY

With absolute poverty people generally do not have what they need. They are short of basic foodstuff, shelter, clothing and adequate or sufficient health care.

(b) RELATIVE POVERTY

On the other hand just like beauty lies in the eyes of the beholder, poverty may be viewed to be a subjective term and what is poverty to someone may not be poverty to someone else. What is poverty under relative terms is viewed as being what some people lack in relation to other people. Under relative poverty measures, a mean level of income may be established under which a person may be considered to be living in poverty. Any one living above that level may be considered not to be living in poverty.

Whether it is absolute or relative poverty people refer to in any particular argument or conversation, there are certain general causes of poverty. Below are a list of the top three causes:

1. Illiteracy

Nelson Mandela once said, “Education is the most powerful weapon which you can use to change the world.” Another one that catches my attention is Victor Hugo’s saying that “He who opens a school door, closes a prison”. Without education people can not communicate with great effectiveness. They can not share ideas and are taken advantage of. For most people who have developed, they have learnt how to read, how to write numbers and to be disciplined. This has helped them share, innovate and get the best in life. The price; unfortunately, for these who have either refused education or been denied of it, is poverty.

2. Health

Without health, nothing can go well. People can not work, they can not learn and they have to spend huge amounts of money on reviving or trying to revive their health at the expense of other things. Scourges such as cancer and HIV/AIDS have for many years deprived poor people of other basic requirements. With better health, such people may have the opportunity to work harder and spend more on other things that could move them from poverty in absolute terms.

3. Income

Just like Michael Porter argues (in his diamond) that nations have competitive advantage so it is for individuals. A person may be better off in terms of revenue generation solely because of what country an individual is based in. This is the reason some people are always trying to leave the countries they are based in for ‘greener pastures’. If a country created the comparative advantage it needed to retain the best people, maybe just maybe its production capacity would improve and poverty would reduce-a better effect on the production possibility frontier.

The problem with the above causes is that they can also be effects. Whether causes or effects; they are major considerations in poverty and its reduction. This is an argument that would probably be an interesting area of research.

To contact the author-leave a comment and a response will follow. Please note that the email address being shown on other posts may be out of use.

IN THE BLINK OF AN EYE: A DEDICATION TO UNZA/OTHER STUDENTS AS THEY WRITE THEIR EXAMS

9 May

“Everything can change in the blink of an eye, but don’t worry God never blinks”- Unknown

When things are smooth, most people have the perception that ‘life is good.”They think that the world has no teeth. Their grades are sky rocketing, their continuous assessments are at the peak, their B.C just came in and their guardians just sent them some extra monies. For most, it is a time of celebration. The centre becomes their resting place, Arcades shopping complex their backyard garden and rooms of the opposite sex their second home. It is a life without limits for them. A few however, remember their mighty creator and remember to praise and thank Him for the blessings.

A life without limits does indeed have no limits. It can change just in the blink of an eye. In the blink of an eye; while at the centre, someone is hit with a bottle of their favourite beer. From a bottle of ‘black print’ they get a red scar that will really turn into a permanent black label with the passing of the seemingly limitless time. From a life without limits, someone spends days or months in Hospital. The sky rocketing C.A soon becomes meaningless. The ‘ever comforting and daring’ monks, bungwes, pals, exeys and momas are nowhere to dare and comfort. The examinations are nearing and the mighty senate will soon have to pass the rarely questionable verdict.

For most, those are the times when reality begins to sink in. The realisation that life has got teeth that can bite becomes a harsh real life experience. As people around celebrate, it becomes clear that the Bemba saying, “Ichalo lifupa, wakokota washa” (life is but a big bone which you can only bite and leave) is true. Soon, the bed ridden fellow will leave Hospital a wreched person and someone else will come in. For many people, finding themselves in such a situation seems to be the end of the world. They lose even their little faith in their mighty creator and decide to fully turn against Him. “Since He can not protect me from the bad things happening in my life, I will rebel against Him.”

A rich man by the name of Job who lived in the land of Uz went through tough experiences. Knowing God had given a lot of blessings to Job, Satan went to God and said, “Does Job fear God for nothing?” (Job 1:9) With that, the mighty creator allowed the devil to cast many afflictions of Job. However, the devoted servant was able to survive the temptation.

Today, a challenge comes to every one of us. Whether we are facing problems of our own making or problems we do not understand, let us remember that despite the fact that life can change in the blink of an eye, there is a superior being who never blinks unnecessarily. Therefore, He relentlessly watches over you to make sure your burdens are manageable.

I do not know who said it, I do not know how true but always remember-“Everything can change in the blink of an eye but God never blinks” So, He never changes.

Happy sessional period people!

HOW WE STAND ON THE SHOULDERS OF GIANTS

3 Apr

STANDING ON THE SHOULDERS OF GIANTS

“If I have seen a little farther it is by standing on the shoulders of Giants.”- Isaac Newton.

WHAT IS IT?

This is a very famous quote in the world of science. However, in the area of management, it is not as profound. Many have to date agreed that the general principle that the scientist was trying to bring out was that those living in later times seem to see better than those in the past. By using what was discovered in the past, we tend to make better decisions and seem to have more intellect than those in past times. Feed-forward is harder than feedback.

HOW DOES IT APPLY TO YOU?

1. IF YOU ARE IN AN AREA OF RESPONSIBILITY

If you are a manager in today’s world, this could mean the difference between success and failure. Noticing what has worked in the past and using it in the present while avoiding what did not work in the past is cardinal for securing the much needed success in today’s hypercompetitive business environment.

2. IN YOUR PERSONAL LIFE

For many of us, the challenge of seeing further and yet clearly is far greater than the duties or hurdles in our way. Think of a jungle. If you are inside it, chances are that you will spend more time finding your way through the puzzle than a person who is viewing it from the top using a map and campus. (i.e. a wider perspective). The wider perspective makes them seem to have better vision than their colleagues. It helps people set targets that are well informed and reduces the chances of huge variances.

3. IMPORTANCE

From the aforesaid, it is clear that standing on some giant is important for achieving great success. It helps you see further and enables you forecast with greater precision. Such precision can help in establishing goals that are not only attainable but also highly motivating. Remember there are three major types of standards for motivation purposes. There are basic (simple and very easy to attain) standards, attainable (challenging but manageable) standards and ideal (very tough and unattainable) standards. Basic standards are not motivating because they are too easy to achieve. Ideal standards are also de-motivating because they are too difficult or impossible to attain. Therefore, forecasting with precision can help in avoiding setting standards in these extreme ends.

HOW TO STAND ON GIANTS:

Whether we realise it or not, everyone has a ‘giant’ they either stand or wish to stand on-in a particular situation. It can be anyone or anything. It could be an ideology, person or skill. If it makes you see further than others; all else being equal, then it is your giant. When you use, you forecast better. That is how you stand on your giant.

However, not every giant is good for everyone. You must identify what best suits you and makes you achieve success with all the satisfaction. For many of us, this can be very challenging. For managers, taking advantage of this weakness could mean immeasurable success in your leadership role(s). If a person under your management does not seem to be standing on the right giant, your guidance and advice on the correct giant could create a very good rapport between you and the person if it later turns out that they made a good decision by following your advice.

ACCOUNTABILITY IN CORPORATE GOVERNANCE

8 Mar

ACCOUNTABILITY IN CORPORATE GOVERNANCE

DEFINITION OF ACCOUNTABILITY

To account is to give a description or depiction of something that happens or happened. Accountability would therefore be taken to literally mean the process of giving an account of an event. The tricky part; about it, is that for the people to whom the account is being given, the accuracy and probity of the story is very important. To achieve this, accountability usually moves hand in hand with seven other principles. These include, “delegation, responsibility, disclosure, autonomy, authority, power and legitimacy.”- Chansa (2006).

IMPORTANCE OF ACCOUNTABILITY

The separation of ownership from management can cause conflict if there is a breach of trust by managers either by intentional acts, omission of key facts from reports, neglect, or incompetence. One way in which this can be avoided is for entities (in their entirety) to act with transparency and be accountable to the shareholders and other stakeholders. Therefore apart from just being a component of corporate governance, there are many advantages of accountability.

Firstly, it is a key to economic prosperity. If there is poor accountability by players in the economy, stakeholders may lose the confidence they have in it and hence become reluctant to put in their best. For instance; for some developing countries, lack of accountability may lead to a fall in the participation rate in their development programmes by their co operating partners- a situation that leads to further deterioration in the development process. Accountability is also a key to performance measurement. The more accountable corporate governors are, the more likely it is that results of performance measurement processes are going to be a true and fair representative of the performance being measured.

CONCLUSION

Accountability is a very important pillar of corporate governance. Without it, the agency problem would be hard to defeat. With it, the confidence of stakeholders is increased. It is achieved through faithfulness in various aspects of corporate governance especially reporting. The strength and accuracy of the reporting is also strengthened by various standards and regulations.

REFERENCES

Karen Chabala Chansa (2006) Project paper “Accountability: A case study of ZSIC”

Byrne Kaulu (2010) Project paper.”Accountability in Zambia:A case study of the Zambia Institute of Chartered Accountants (ZICA)”.

OBJECTIVITY IN CORPORATE GOVERNANCE

6 Mar

OBJECTIVITY IN CORPORATE GOVERNANCE
WHAT IS OBJECTIVITY?

Basically, all players in the organisation’s corporate governance must be objective. If you are objective, it means you are “not influenced by personal feelings or opinions in considering and presenting facts.”- Concise Oxford English Dictionary. This important corporate governance principle does not just ‘happen’ like a dream. It is achieved through deliberate and consistent steps.

IMPORTANCE OF OBJECTIVITY

Objectivity can be very difficult in an ever subjective and changing environment. It never the less is key to the success of corporate governance. This is because subjective behaviour may bring misunderstandings with stakeholders.
Let us explore the importance of objectivity in relation to one field- accounting. Have you ever heard of the misconception by most people (especially those not in the field) that Accountants are thieves? Because of lack of objectiveness (and other factors), fraudulent acts by some accountants as players in the corporate governance chain have in the recent past put the entire profession in disrepute. One famous example is that of Enron. “The public reputation of the accounting and auditing profession was seriously damaged by the major corporate failures such as Enron and Worldcom. The role of accountants operating within these entities as directors, or associated with them as auditors has raised questions about the integrity of the profession. Globally, ethics in organisations have been subject to increased scrutiny and criticism from the media, regulators and public interest groups.”- ACCA.

WHO SPECIFICALLY SHOULD BE OBJECTIVE IN CORPORATE GOVERNANCE?

There are many groups of people who are involved directly and indirectly in the governance of a corporation. Each group has to exercise objectivity in the role(s) they play in the direction and control of the companies. For hostile acquirers, analysts, credit rating agencies, accounting firms and outside lenders, access to and exercise of objectivity may mean the difference between success and failure.

As a result of high profile fraud cases (such as the ones highlighted above) and the massive number of people depending on financial information, the accounting profession has introduced a number of regulations and codes of best proactive to enhance objectivity. For instance, objectivity is one of the fundamental principles of the International Federation of Accountants (IFAC) code of ethics. It is usually used synonymously with the word independence.

HOW IS OBJECTIVITY EXERCISED IN CORPORATE GOVERNANCE?

Answering this question completely can lead to a large volume of information as for each field that exists; accounting, marketing, economics, finance, engineering etc, various ways are used to enhance objectivity. However some few ways stand out as necessary in all these fields. For instance; the presence of the audit committee and internal and external auditors in the governance structure are needed everywhere. Controls to enhance the independence of the aforesaid are also necessary in any type of firm in order for the accounting functions to be carried out objectively. To enhance independence, various controls are used to prevent threats to objectivity such as self review, self interest, advocacy, familiarity and intimidation threats. Some of the controls include; what are known as Chinese walls, quarantines, declaration of interest (s) – financial or otherwise, rotation of manpower and so on.

CONCLUSION

As a result of it’s importance, Objectivity/independence must be exercised at every level; organisational, departmental and individual levels. Diagnosis of Impairments to independence and implementation of appropriate mitigation/prevention methods have to be undertaken frequently.

REFERENCES

ACCA “Corporate Reporting-Course notes” ACP2CN07 (INT)

Concise Oxford English Dictionary

TRANSPARENCY IN CORPORATE GOVERNANCE

2 Mar

TRANSPARENCY IN CORPORATE GOVERNANCE

WHAT IS TRANSPARENCY?

“Transparency can be defined as a principle that allows those affected by administrative decisions, business transactions or charitable work to know not only the basic facts and figures but also the mechanisms and processes. It is the duty of civil servants, managers and trustees to act visibly, predictably and understandably.”-Transparency international

If something is transparent, it allows light to pass through thereby enabling people to see through it. Using the same concept, an entity is transparent if it enables others to see through it. Transparency works hand in hand with integrity. The more the integrity, the more transparent an entity or person will be. Because of the aforesaid closeness, many people even tend to think transparency is integrity.

IMPORTANCE OF TRANSPARENCY

If a company is transparent enough and reports material facts in real time, stakeholders will have more confidence in the management. Consequently, they will be more willing to invest in the company, thereby reducing the cost of capital. Transparency also helps those in charge to avoid fraud and put measures in place against it. All these factors put together enable the firm’s productive capacity and productivity to improve.

MECHANISMS FOR ENHANCING TRANSPARENCY

From time in memorial, corporate governance chains have undergone various overhauls in order to increase transparency. There is increased regulation on how financial reporting should be done and who should do it. International Accounting Standards (IASs) and other regulations are continually being improved so that what is measured, recognised, disclosed and reported is true and fair. Simultaneously, various trends are occurring in the area of auditing. This is in order for an independent knowledgeable entity to pass an opinion on the truth and fairness of the reports made by the corporations. Apart from these, regulations such as Acts of parliament and codes of best practice are also playing a critical role in enhancing openness. Most of the parliamentary Acts relate to securities exchange, companies in general (Companies’ Acts) and even those that directly target corporate governance such as Sarbanes.

The strife for transparency does not however come without costs. For a small firm, the cost of reporting transactions and the related audit fees can be too much to bear. For this reason, governments around the world exempt certain ‘small’ firms from some of these reporting requirements. However, it is advisable for any entity, no matter what the size to prepare it’s own reports as a management or performance measurement tool.

REFERENCES
http://www.transparency.org/news_room/faq/corruption_faq Retrieved 02/03/2011

FAIRNESS IN CORPORATE GOVERNANCE

1 Mar

FAIRNESS IN CORPORATE GOVERNANCE

Earlier, we established that, a corporate governance system has the main aim of entrenching the principles of fairness, transparency, objectivity, decency, responsibility, accountability, status, judgment and integrity among those charged with the governance of companies. Today we will begin looking at the first of these principles- fairness.

WHAT IS FAIRNESS?

To begin with, one may ask, what is fairness? Fairness means treating people with equality. It entails avoiding of bias towards one or more entities as compared to the other(s).

HOW UNFAIR CAN FAIRNESS GET: IMPORTANCE OF FAIRNESS

In economic development terminology, we usually meet the word fair several times. For instance there are phrases such as the fair distribution of the national wealth, fair value, fair play and so on. Fairness has in the recent past been a controversial issue in corporate governance. For instance, a lot has been said so far with respect to fairness and the governance of Ghana Airways. Although not publicly debated or talked about often, fairness in corporate governance is a matter of national interest for many other state owned companies such as ZESCO, ZSIC and ZNBC among others in Zambia and Africa. As a result of most strategic positions being filled by political appointments, the managers of these firms are split between impressing the people responsible for the appointment and achieving corporate goals and other stakeholder’s interests. Indeed, fairness is an important principle all over Africa and the world.

If you know the contentions that a bad decision as a result of bias in any of the above named companies can bring, then you already know just how critical it is that fairness is practiced in the way companies are directed and controlled.

Fairness is usually considered with various stakeholders of a company in mind. The choice as to what is fair and will most likely be made by taking into account the stakeholder’s position on the power-interest matrix. Some of the stakeholders of a company include; shareholders (including institutional investors), suppliers (creditors), employees, customers and the community at large.

WHAT DO FIRMS DO TO ENHANCE FAIRNESS IN CORPORATE GOVERNANCE

For many company boards, being fair is a very difficult thing. There are big decisions to be made on which a normal person or group with some interest (financial or otherwise) cannot just be fair. In transactions such as mergers or acquisitions for instance, it is very hard to be as fair as possible if you are on the board. For this reason, many companies are turning to what is known as fairness opinions. This involves calling in an independent knowledgeable entity to assess a particular transaction and give their opinion on it’s fairness.

Another way that is being used as a tool to increase fairness is known as corporate governance rating. Here, various companies are assessed on aspects of their corporate governance and the results are published in order to help the firm(s) improve performance on fairness. This is however not a widespread practice and is most likely un-heard of in many developing countries.

CONCLUSION

Various solutions to the problem of unfairness are being developed. This is as a result of the realisation by many firms that fairness is important in the way the companies are directed and controlled. Simple misconceptions on how fair a transaction is can raise serious public debate as in the case of the sale of Zamtel Libya’s Lap green. The fairer the entity appears to stakeholders, the more likely it is that it can survive the pressure of these interested parties.

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