In general, South Africa is doing quite well in the corporate governance stakes compared to other emerging countries, according to the experts that cover this sector of business activity.
And while there has been increased activity in the USA and Europe around corporate governance issues, following the introduction of the Sarbanes-Oxley Act (SOX), it is not a given that foreign listed entities or dual listed entities are necessarily better or worse in terms of corporate governance than South African organisations listed only on the JSE.
However, there is a tendency that companies that are subject to dual corporate governance regimes and requirements, will and do have a tendency to implement a broader range of recommended corporate governance guidance. While this can be onerous at times, the expectation is that this would improve governance structures and practices of these organisations.
Notwithstanding that, a high level awareness of required and effective corporate governance structures and practices exist in South Africa, and has done for some time. However, good structures and high awareness of effective practices does not in itself automatically lead to good governance in practice, says Paul Carragher, senior manager of Enterprise Risk Services at Deloitte & Touche.
South Africa and other emerging countries, as well as developed countries have in the past and still continue to have corporate governance lapses. South Africa is also further developing its corporate governance guidelines through Companies Act amendments, Company Law Bill developments, PIC guidelines recently issued, and the King Committee currently working on the King III report.
And while still under development, the committee and various task teams are still busy with their discussions, deliberations and drafting. Perhaps the question should be: What did the King II report miss out on that the King III report is now picking up on?
The King III report will place additional emphasis on a number of aspects to further improve the corporate governance environment in South Africa, including:
o The additional contribution that modern effective internal auditing can make to the wellbeing of corporations,
o Some increased focus on information systems and IT-related governance, risk, management and alignment with and contribution to company operations and performance,
o The increasing demands on directors, including potential liabilities,
o An increasing focus on business rescue rather than business liquidation, an emphasis on capital adequacy rather than share capital, including use of alternate dispute resolution mechanisms.
In addition to this extra emphasis in King III, all matters and issues covered in King II will remain covered in King III and where appropriate enhanced and expanded on.
All of these developments and initiatives continue to heighten the awareness of good corporate governance and, hopefully, will result in better corporate governance practices and more effective and efficient Boards of directors and companies.
Ahmed Banderker, head of finance at Glacier Financial Solutions, says that South Africa has come a long way in following and implementing, and in some cases leading, the corporate change with regard to corporate governance. This is reflected in the international perception of the ease associated with doing business with South Africa, as one of the leading emerging countries. On the other hand corporate scandals, as a result of lack of good corporate governance, obviously do tarnish that view.
Ansie Venter, associate director of corporate governance at KPMG, says that one of the most significant developments in the South African corporate governance landscape are the intended changes to corporate legislation as contained in the Corporate Laws Amendment Act, 2006 and the Companies Bill, 2007.
It is especially the provisions relating to directors’ personal liability in the Bill that are attracting attention. The standards of conduct espoused in sections 91 and 92 of the Bill appear to be a codification of the common law principles, although it is clearly stated in the Bill that it is not the intention of the intended legislation to replace the common law.