Good Corporate Governance – Alive and Kicking!

September 27, 2017

Reading the news day in and day out it’s difficult to believe that the term ‘good corporate governance’ means anything anymore. Good corporate governance seems to be dead and buried. Has it just become a cliché bandied around to look good and ‘tick the boxes’? It seems as if crime, corruption and cronyism pay off big time. The gravy train and anarchy rule!

In the recent survey on Ethical Practices conducted by the Anti-Intimidation and Ethical Practices Forum (AEPF), only 9% of professionals working in the public sector believe their leaders are ethical, while a substantial 66% private sector professionals believe theirs are. And despite the growth in a powerful and pervasive corporate governance industry, only 26% of professionals across both the public and private sectors believe that doing the right thing is more important than financial success.

So 74% of educated professionals believe that financial success is more important than doing the right thing! Really? Perhaps we should ask a few of the companies conflicted in the Gupta scandal whether they agree with this statement or not?: Bell Pottinger (come and gone) or perhaps KMPG with the investigation into its controversial deals with the Gupta family dating as far back as 2008 or SAP Africa which has announced an interim management team for Africa after four management team members were placed on administrative leave pending the outcome of a forensic investigation into allegations related to one of its (Gupta family) contracts.

This is just one example where it appears that short term gains and dubious deals will eventually catch up with you no matter how invincible you think you are.
The definition of corporate governance for the purposes of King IV (King IV is copyrighted to The Institute of Directors Southern Africa), is defined as the exercise of ethical and effective leadership by the governing body towards the achievement of the following governance outcomes: Ethical culture, Good performance, Effective control and Legitimacy.
Related to the King code, the business judgment rule asks three important questions: 1. If you are conflicted you don’t decide whether you are conflicted, the other party decides. 2. We live in a knowledge world; you cannot act if you are not properly informed; you need to stress test and check your info. You need to know enough and question with an understanding mind. How did you come to your decision? If you don’t know, say so. Be true to yourself, I don’t know, be honest, go and learn. 3. Are you operating in the best interests of the organisation? (a lawful organisation that is).

At a presentation given earlier this year by Michael Judin, partner in the Johannesburg based law firm, JUDIN COMBRINCK INC on ‘Why King IV is not another layer of regulation but creates add-on value’, Michael spoke about business (and country) leaders’ misconceptions that the power lies within the board room. The power really lies with the new millennials and the power of social media and the smart phone. The King code is now part of South African common law. King does not need to be part of statute law. Millennials will ensure that it works: ‘It’s simple; if you don’t comply with good corporate governance, we just won’t buy your product and / or we will trash your reputation’.
So good corporate governance is certainly alive and kicking if the ‘Gupta’ case above is anything to go by!

As a risk / audit / compliance / forensic officer / board / councillor / risk / audit committee member are you speaking the unmitigated truth and asking the unpopular / difficult questions?

  • Are we just paying lip service to good corporate governance?
  • Are we focussed on short-term profits and bonuses without considering the risks and consequences in the longer term?
  • Is our conscience clear that we are doing the right thing?
  • What will the outcome be for our company / department / municipality, if and when ‘this’ reaches the press / social media?
  • Do we have a proper process and controls in place in terms of background and conflict of interest checks?
  • Is an individual or party out to make a personal gain or is this in the best interests of the company and / or the public (whom we serve)?

Written by Jonathan Crisp
Director BarnOwl GRC and Audit Software

Why King IV is not another layer of regulation but creates add-on value. (King IV is copyrighted to The Institute of Directors Southern Africa).