Mboniso Sigonyela
The much-awaited review of the King committee will be out for public comment before the end of July. It could not have come at a better time as more and more listed companies continue to flout the original recommendations, especially the one against joining the position of chairperson of the board and that of chief executive.
Some of the high-profile failures to split the roles are Dimension Data, Anglo Gold, Nampak, Old Mutual and Anglo Platinum.
King Two, as the review committee is known, is discussing measures to ensure enforcement and possible sanctions for corporate governance offenders. But it’s not likely to attempt to enforce separation.
“There can be no sanction for that. The committee cannot regulate it since it is up to the company and its shareholders to decide on the composition of their boards,” says Philip Armstrong, MD of Edward Nathan Friedland Corporate Governance.
Armstrong, who is also the convenor of the review committee, says in the United States chairpersons doubling as chief executives is usual practice and even in the United Kingdom, where it is frowned upon, there are still some 17 FTSE 100 companies that have not separated the positions.
Leaving enforcement of the code to shareholders could be a problem in South Africa as they are not as active as their UK and US counterparts.
“But things are not as bad as they seem. Most companies have observed the recommendation,” says Tony Manning of the Institute of Directors. “Our companies want to be seen to be following good practice worldwide. And institutions are beginning to have a bigger influence over share prices through their analysts.”
The report will focus on four main areas of governance: adherence to international best practice; review of recommendations on stakeholder approach and societal responsibility; social, ethical and environmental reporting; and measures for enforcement of the rules.
Although the culture of corporate governance is new in South Africa, King’s recommendations are way ahead of those of both the UK and the US as far as environment reporting is concerned, says Armstrong.