Transcript Document

Corporate Governance
and
South Africa
Adapted from:
ENF Corporate Governance Advisory Services
International Perspective
“Corporate governance is concerned with
holding the balance between economic
and social goals and between individual
and communal goals…… The aim is to
align as nearly as possible the interests
of individuals, corporations and society”
Sir Adrian Cadbury
Corporate Governance Overview, 1999
[World Bank Report]
Convergence of Interests
• International Investors
• General Public and Shareholders
• Public Sector Reform
• Multilateral Agencies
• Ethical Interest Groups
• Regulators
• Media
What is Corporate Governance?
Leadership
Accountability
Empowerment
Fairness
Effective &
efficient
management
of Risks
Balance
Liability
Constructive
relationship
building
Transparency
Ethics
“Corporate Governance seeks to promote
 Effective, efficient and sustainable corporations
 Responsiveness and accountable corporations
 Legitimate corporations that are managed with
integrity, probity and transparency
 Recognition of stakeholders rights
 An inclusive approach based on demographic
ideals, legitimate representation and participation”
S Fakie,
Auditor-General
Governance Framework
STATUTORY
ACCOUNTABILITY
EXTERNAL
REPORTING
COMMUNICATION
BOARD
ROLES AND
RESPONSIBILITIES
COMMITTEES
INTERNAL
CONTROLS
ACCOUNTABILITY
FOR RESOURCES
Basis of South African Review
•
Review commenced in 2000
•
Guiding Principles
 International Developments
 SEAAR and SHE
 Compliance and Enforcement
•
Task Team Priorities
•
Progress to Date
•
Release for Public Comment : July 2001
•
Finalise : +/- October 2001
•
Implementation : 1 January 2002?
Good Governance = More than Rules!
“ … the substance of good corporate
governance is more important than its
form; adoption of a set of rules or
principles or of any particular practice or
policy is not a substitute for, and does
not itself assure, good corporate
governance”
The Business Roundtable, USA
Governance Levers in US & UK
•
US Model

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•
Highly regulatory, eg. SEC
Powerful institutional investors
Litigation prominent
Boards predominantly NEDs
UK Model
 Statutory intervention
 London Stock Exchange
 Ethical pressure groups
 “City Code” = Reputation paramount
Governance in Emerging Markets
•
Statutory Intervention, eg. India
•
Government Policy, eg. Malaysia
•
Banking Supervision, eg. Commonwealth
•
Limited Global Investor Participation
•
Shareholder Activism Muted, eg. Australia
•
Regulatory Enforcement Generally Weak
•
Little Correlation between Stocks / Markets
Prevailing Issues in South Africa
•
Lack of Enforcement of Companies Act
•
Undue onus placed on JSE to regulate
•
“Name and Shame” approach of FSB
•
More effective supervision in financial sector
•
Director delinquency largely unchallenged
•
SAPS - Lack of commercial crime skills
•
Judiciary - Main priority on criminal cases
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Emphasis on Form rather than Substance!
•
International perceptions
Issues to Consider
•
Delineate Law and Governance
•
Application of Existing Remedies
 Statutory
 Regulatory
•
What “new” measures are necessary?
•
Balance – Performance v. Conformance
Quo Vadis South Africa?
•
•
Firstly, How serious are we?
Utilise existing, available Remedies
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Enhance enforcement agencies
Better enforcement of existing sanctions
Class actions
Contingency fees
Increased Levels of Disclosure
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Individual directors remuneration
Delinquent directors
Focus on director “education”
Legal backing for accounting standards
Quo Vadis South Africa?
cont.
•
Role of Media
•
Institutional and Shareholder Intervention
 Understand global investor imperatives, eg.
McKinsey, Russell Reynolds, Credit Lyonnais
 NAPF model
 Myners recommendations
 Rating agencies, eg. S&P, Dow Jones
•
Role of Organised Professions and Business
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Role of State Enterprises and Agencies?
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Electronic Technology, eg. proxy voting, etc.
Quo Vadis South Africa?
•
Impact of New Legislation
•
International Developments
cont.
 Triple bottom line reporting
 Global Reporting Initiative
 Transnational Corporations
 Pan-African Forum part of International Agenda
 Earth Summit 2002
 International Conventions, eg. Human Rights, etc.
•
Performance with Integrity!
Shareholders/financial markets
Analysts, fund managers, investment
consultants, pension trustees, independent
financial advisers, ultimate beneficiaries,
stock exchanges
Auditors
Government
Regulatory framework:
company law
competition law
labour law
environment law
human rights law,etc.
plus international
conventions
Voluntary
codes of
conduct and
industry
standards
Creditors
Strategic consultants and
other independent advisors
Including external board advisory
panels
Other market influences
Board of
Directors
Customers, consumer groups
Media
Pressure
groups/
activists
Business
partners
CEOs of joint
ventures,
suppliers,
contractors etc.
Dynamic Participative Approach
External
Stakeholders
Consultants
and advisors
Government
Internal
Stakeholders
Stock
exchange
Lenders
of money
Employees
Board
Directors
Management
Shareholders
Corporate
Governance
Media
Business
Partners
Customers
Suppliers
Environmentalists
Trade
associations
Trade
unions
Auditors
Competitors
Local
communities
Balancing “Conflicting Demands”
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Shareowner Value v. Triple Bottom Line
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Investors v. Stakeholders
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Short-term Profits v. Long-term Sustainability
•
Commercial Confidentiality v. Transparency
•
Increasing Legal Liability and Reputational
Risk
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“.. some of society’s conflicting expectations
of business have become unrealistic, so
Boards have to make choices!” – Sir Adrian
Cadbury
Concluding Remarks
“There are few words more reassuring to
investors than accountability”
“The average company today is a complex
enterprise engulfed by rapid technological
change and fierce global competition. You
have to assess exposure to risk on an ever
changing landscape”
Arthur Levitt, former SEC Chairman
“Thank You!”