Preamble:
369. The nature and extent of compliance or enforcement of corporate governance principles depend on whether they are required by law or by best practice. If it is the law, then compliance with corporate governance principles is mandatory. Companies must comply or else they face legal consequences. If it is best practice, compliance and enforcement issues are determined by the principles of subsidiarity and soft regulation. The subsidiarity principle
shies away from regulation prescribed by law as a source of corporate governance. The principle simply states that one has to regulate all that which is necessary and do so at the most local level possible. The soft regulation principle, which is in keeping with the subsidiarity principle, seeks to enforce corporate governance principles through entreaty. Code prescriptions supplement and compliment the mandatory prescriptions of the law, including listing requirements.

370. Different terminologies have been used to describe best practice enforcement approaches. Some countries use the “comply or explain” principle and others use the “apply or explain” principle. The two principles are different. The  “comply or explain” approach denotes a mindless application of a code whereas the “apply or explain” principle reflects an appreciation of the fact that it is often not a case of whether to comply or not, but rather a case of
considering how the principles of a code and recommendations contained in it can be applied in the particular circumstances of a given enterprise.

371. Following the “apply or explain” approach in making decisions, the Board can conclude that to follow a recommendation would not, in the particular circumstances, be in the best interests of the company. It can then decide, giving the necessary explanation, to apply the recommendation differently or apply another practice and still achieve the objective of fairness, accountability, responsibility and transparency in corporate governance. Explaining
how the principles and recommendations were applied or, if not applied, the reasons therefore, amounts to compliance. In reality the ultimate compliance officer is not the company’s compliance officer or a bureaucrat ensuring compliance with statutory provisions but the stakeholders.

372. In this Code the “apply or explain” principle has been adopted because it has a bias towards indirect coercion. This Code therefore relies on disclosure principles to encourage compliance through linkage with membership to sector associations, professional bodies and to support the legal license to be and remain in business. It uses the disclosure principles as a means of encouraging the adoption of specific corporate governance practices without mandating actual practices. It recognizes that disclosure alone has a significant coercive effect.

373. Voluntary codes rely on the market as an important mechanism for encouraging compliance with the codes especially where compliance efforts are broadly and widely disclosed or surveyed. Therefore Zimbabwe has two major sources of corporate governance namely, the law and the voluntary codes on corporate governance.

• According to the NATIONAL CODE ON CORPORATE GOVERNANCE ZIMBABWE