chartered Secretaries Southern Africa conference 2013

36 Pages·2013·3.33 MB·English

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QuARTeR 3 2013
BOARD
ROOM
o f f i c i a l j o u r n a l o f ch a r t e r e d S e c r e ta r i eS S o u t h e r n af r i c a
chartered
Secretaries
Southern Africa
conference 2013
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3rd qUArTEr 2013
B OA R D
R O O M
official journal of chartered SecretarieS Southern af r i c a
3
EDITORIAL COMMITTEE: Stephen Sadie, Rob Furney,
Eugene Shepherd, Shamida Smit, Janine Kusters, Chief exeCutive’s message
Joel Wolpert
Corporate governanCe lapses
CONTRIBUTIONS: The Editor welcomes news items, press
releases and technical articles related to business – Please 4
contact Rob Furney at 011 326 0303 or post your articles to: time to spring Clean your Corporate governanCe – 5th premier
P O Box 41928, Craighall 2024, RSA, or via E-mail to:
[email protected]. Corporate governanCe ConferenCe
ADVERTISING & SALES: 8
Avenue Advertising – Barbara Spence
the right way to govern?
E-mail: [email protected] – P O Box 71308, Bryanston, 2021
Tel: [phone] Fax: [phone] Mobile: [phone]
copyright reserved© . The right of reproduction in any form of
the Changing faCe of the Cio
the whole or any part of any article or other matter published
in BOARDROOM is vested in The Southern African Institute of 12
Chartered Secretaries and Administrators NPC (the Institute). All afriCa has beCome kidnap and ransom hotspot
expressions of opinion in this journal are published on the basis
13
that they are not to be regarded as expressing the official opinion
of the Institute unless expressly so stated. The Institute, authors the uneasy relationship between business resCue proCeedings and
and all persons involved in the preparation and distribution of
liquidation proCeedings
this journal are not thereby giving legal, accounting or other
professional advice and hence do not accept any responsibility 15
for the accuracy of any of the opinions or information contained
what is reputation management and how Can organisations get it right?
in the journal. Readers should not act or refrain from acting
on the basis of opinions or information without first taking 16
appropriate professional advice in respect of their own particular Companies are beginning to put reputation before profit
circumstances. The Institute does not accept any liability to
18
advertisers for the publication of advertisements which may be
held to be contrary to law. wealth Creation and tax reform
Office Bearers fOr Botswana Branch:
20
2013/2014 Brian Dialwa
President: government’s bee fronting legislation has serious impliCations
Tel: [phone]
Raymond Pillay
Fax: [phone]
Senior Vice President:
Zernobia Lachporia E-mail: [email protected] 2013/2014 draft tax amendments – international highlights
Vice President: KZN Branch 26
Johann Neethling Raymond Pillay
Past President: does the new Companies aCt expand the sCope of what Constitutes
Telephone: [phone]
Carina Wessels “oppression”?
E-mail:
Head Office
28
Chief Executive: [email protected]
Stephen Sadie Lesotho Centre: awards Ceremony 2013
Rivieria Road Office Park Robert Likhang 30
(Block C), 6-10 Riviera Road Telephone: [phone]
is your Company seCretary a Chartered seCretary?
Killarney, Johannesburg, 2001. E-mail: [email protected]
32
PO Box 3146, Houghton 2041. Namibia Branch
Telephone: [phone] institute news-eleCtions to membership
Eugene Shepherd
Fax: [phone]
Tel: [phone]
Website: http://www.icsa.co.za
E-mail: BOARDROOM is published by The Eagle Publishing
Company for The Southern African Institute of Chartered
BrancH & centre [email protected]
Secretaries and Administrators NPC, Riviera Road Office
cHairmen Swaziland Centre: Park (Block C), 6-10 Riviera Road Killarney, Johannesburg,
Western Cape Branch 2001. PO Box 3146, Houghton 2041. Telephone: [phone]
Sandile Mbhamali
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CHIEF ExECUTIVE’S ME SSA GE
corporate governance
lapses
By Stephen Sadie
these are challenging times for those of us involved with corporate has launched an enquiry into the
governance. BEE transaction. Gold Fields itself
On the one hand, we have fine documents on corporate governance. commissioned the US legal firm,
Section 7 of the Companies Act, states that the purpose of the Act is to Paul Weiss, to investigate the deal but did not follow their recommendation
“Promote the development of the South Africa economy by… encouraging to “self report to authorities”. The board did not commit the findings to
transparency and high standards of corporate governance”. Michael Katz writing, which could be seen as a cover up. It has been alleged that the
(appears on the cover), chairman of Edward Nathan Sonnenbergs, has R25m share given to ANC chairperson Baleka Mbete could constitute a
been extensively involved with the drafting and the ongoing review of the bribe. As a consequence CEO, Nick Holland waived his 2013 bonus. We
Companies Act. As can be seen in the article on the conference, he says will watch with a keen interest as this story unfolds.
we drew from the best around the world. King III is admired around the 4. collusion in construction industry
world and is a corporate governance document we can all be proud of. The The Competition Commission in fined 15 companies R1.46bn.
PFMA, although it does not have a specific chapter on governance, has According to the Competition Commission, the companies were guilty
many sections promoting good governance. of price fixing, inflating profit margins, and paying competitors to bid
However. we continue to experience severe corporate governance uncompetitively. There were 140 cases stretching back many years
lapses, which if left unchecked will drag us all down. Let us consider a few. including the construction of the world cup stadiums. It is always surprising
1. state-owned companies after the facts emerged as to what the boards were thinking as this took
There are a myriad of problems relating to corporate governance place over decades.
at state-owned companies (SOCs), which are extensively documented 5. sport
elsewhere. I would like to home in on just one aspect i.e. the dramatic Governance in some of our sporting bodies seems to be highly
churn of CEOs. It is almost impossible to have well run SOCs with such a questionable. In the last two years Cricket South Africa (CSA) went through
rapid turnover of CEOs. In the past few years alone, we have witnessed major upheavals. The former CEO, Gerald Majola, was accused of not
the following changes of CEOs: disclosing bonus payments from the IPL to his board. Retired Judge
l SAA – Khaya Ngqula, Sizakele Mzimela, Vuyisile Kona, Monwabisi Nicholson headed up a commission of enquiry to investigate the allegations
Kalawe and made recommendations assisting CSA to get out of their quagmire,
l SABC – Dali Mpofu, Gab Mampone, Solly Mokoetle, Lulama Mokhobo which seems to have happened.
l SAPO – Motshoanetsi Lefoka, Nick Buick, Molefe Mothibe Just when you thought it was safe to get back onto the sports field,
l Telkom – Reuben September, Jeffrey Hedberg, Nombulelo Moholi, Athletics South Africa (ASA) seems to be imploding before our eyes. The
Sipho Maseko ASA seems to be in a terrible mess in terms of its governance. It was
l Transnet – Maria Ramos, Chris Wells, Brian Molefe placed under administration with Zola Majavu appointed as administrator.
The boards too have undergone major changes. A new SABC board Later on he was removed as administrator. SASCOC suspended ASA and
has just been appointed. The last few boards failed miserably in governing a result our athletes could not participate in the Commonwealth Games.
the public broadcaster. There was a mass exodus of SAA directors in ASA president, James Evans, seems to be in the middle of these conflicts.
September 2012. This continual churn of CEOs and directors is not All of this poor governance is having a detrimental effect on our athletes.
conducive to good governance and stability. 6. mtn
2. Public sector There have been three recent senior resignations at MTN which
Within government departments, governance continues to be seriously could suggest governance lapses. Nazir Patel, CFO, abruptly resigned,
compromised. Dina Pule, the former minister of communications assisted which according to the CEO was related to “governance around specific
her partner, Phosane Mngqibisa, to benefit from the huge ICT Indaba. transactions”. Then Robert Madzonga, Chief Corporate Services Officer,
The Sars commissioner, Oupa Magashula did not follow the correct was suspended for alleged involvement in the infamous ICT Indaba. This
employment procedures and seemed to be under the influence of outside was followed by the resignation of Eleanor Potter, GM for branded retail
persons. He fell on his own sword. At least this was a relatively quick channel, which possibly related to an R120m tender irregularity for data
process following a commission of enquiry instituted by the minister of modems that failed tests (Business Day, 23 August 2013). These sudden
finance and headed by former constitutional court judge Zak Yacoob. The changes at the senior level suggest not all is well with governance at MTN.
Auditor-General continues to moan about the poor audits of state entities. There are many more which I have not dealt with here. We can either
Clean audits of state entities went down from 152 to 132 in the past three shrug our shoulders and moan about poor corporate governance. Or
years whereas the trend should be going the other way. we can put our shoulders to the wheel in the quest for good corporate
3. Gold fields governance. Mervyn King can’t do it on his own. He needs all the support
The Gold Fields 2010 BEE deal has turned sour. As Gold Fields he can get. Now is the time to turn the tide against poor corporate
has a dual listing in the NYSE, the Securities & Exchange Commission governance as each of us in our own small way fights the good fight.
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Andre van der Zee (Trifecta Capital
Services) & Stephen Sadie (CEO CSSA) sit
on the closing panel
A full house, 240 delegates attend the 2 day conference
Sibani Mngomezulu (Barloworld) and
Babhekile Matsebula (SwaziBank)
Master of Ceremonies Chris Zernobia Lachporia (Liberty, Senior Vice
Gibbons President CSSA) and Jacky Cuffley (Orient
Capital)
Austin Whiteman (Diligent) and Natasha
Bouwman (National Empowerment Fund)
Integrated Reporting panel speakers Karin Ireton,
Reana Rossouw and Joel Wolpert
Speaker Michael Katz
Wyna Modisapodi (ABSA) and Phumza
Ndinisa (Africa’s Best 350 Ltd) Speaker Michael Judin Candice Viljoen – Bell Equipment
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Time to spring clean your corporate
governance – 5th Premier corporate
Governance conference
By Joel Wolpert, Technical Adviser, CSSA
the 5th Premier Corporate Governance Conference took place on media? (number of Facebook followers for company’s brand).
11 - 12 September 2013 at the Wanderers Club, Johannesburg. l The company must develop a program to educate the board in social
The conference had a record attendance of 240 delegates from Southern media (how to handle a crisis via social media).
Africa, drawn from all walks of the public and private sectors. l The company must develop a social media policy.
The conference advert “Time to spring clean your corporate He highlighted the impact of the Centro case in Australia which
governance” was an appropriate title for a distillation of topical discourse emphasises that board delegation does not permit abdication of
and debate on current pertinent issues to the governance community, such responsibility. He noted that the sting in the tail of the “apply or explain“
as: 2008 Companies Act - an update on current issues after two and a half principle was the potential embarrassment of inadequate explanation
years; King III, a perennial governance topic!; social media; shareholder (risk of tweets complaining about poor governance). He concluded by
activism; boardroom evaluation, structure and behaviour; specific issues stating that the company secretary must guide the board in embracing
affecting the company secretary regarding boardpacks and role as social media. In response to a question regarding POPI, he confirmed
prescribed officers; recent international experience; integrated reporting that all laws apply equally to online communication as they do to print
and the role of CSSA as a professional corporate governance institute. communication.
A bevy of renowned and articulate thought leaders shared their The final presentation under the King III theme was delivered by
experience, insight and knowledge with an enthusiastic audience, who Prof Anton Roodt: Why and how is shareholder activism an essential
participated in a lively manner during the Q&A sessions following the constituent in effective corporate governance.
presentations. The feedback from participants reflected a high level of His presentation emphasised that the company secretary is more
satisfaction with the conference, in terms of venue, organisation and theme than a mere functionary and that shareholders use activism for the
content. good governance of their investee companies. He referred to the social
For the third year in a row, the indefatigable Chris Gibbons as MC kept inter-connectedness between business and society and concluded that
the conference moving along at an animated pace by ensuring audience business is an integral part of society.
interest and keeping the speakers/panelists on their toes!
A synopsis of the presentations follows under the respective inteGrated rePOrtinG
conference themes.
This topic, a sine qua non of the current governance discourse was dealt
KinG iii with via three short presentations delivered by Reana Rossouw, Karin
Ireton and Joel Wolpert.
Jess Schulschenk delivered a presentation on: The adoption of King III The key items covered were:
and the perceptions of corporate governance past, present and future. l The difference between integrated and sustainability reporting.
Her presentation highlighted the South African experience in corporate l Creating, sustaining and communicating value.
governance over the past two decades and concluded that South Africa l Governance reporting and the role of the company secretary.
sets high standards of best practice in the application of King III. Issues
discussed included the cost of compliance and the risk of sinking into a BOardrOOm matters
tick-box mentality. Many felt that the principles were lost in the detail of
compliance. The first speaker under this heading was Tim Anderson who presented on
Michael Judin gave an animated, lively and informative presentation executive remuneration. Major discussion points were: should market price
on: Corporate governance and social media: a brave new world for board be a KPI metric?; non-financial metrics; rewards for failure and government
directors, prescribed officers and committee members. He traced the regulation would not be a good idea.
increasing importance of IT Governance through the chronology of King I, He concluded by saying that companies are outsourcing the whole
King II and King III. In emphasising that the board trusts the company Remco reporting/procedural activity framework to specialist consultants.
secretary to mitigate risk, he highlighted key governance implications for Short-termism was seen as a major risk in setting targets.
social media. Gavin Price spoke about; The virtues of knowledge, courage and
l Does the board understand stakeholder engagement imperative of humility in the boardroom. He focused on a philosophical approach to
social media? boardroom participation, emphasising the importance of “knowing what
l Does board understand the stakeholder power inherent in social you don’t know”. He noted that boards should create an environment to
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encourage the search for knowledge. He complimented the new Business Rescue provisions contained in
Rob Newsome presented on the topic: The dissenting director and Chapter 6 as being the “jewel” of the Act. Key features were the reasonable
the representative director. He noted that both of these matters were dealt prospect of success coupled with the moratorium on litigation.
with in publications of the Corporate Governance Network of the IoDSA He dealt with the Statutory Merger provisions contained in Sections
and provide practical guidance regarding appropriate conduct/behaviour 113, 115 and 116, emphasising that under the 1973 regime only common
in specific circumstances. His presentation dealt crisply with the legal and law mergers could be effected with an inherent commercial disadvantage
governance issues relevant to the topic. of limiting contract assignments without counter-party consents.
He noted that the use of s113 mechanism does not preclude a
INTERNATIONAL TRENDS common law approach, but if one wanted the benefits of s15, one had to
use the s113 method. He noted a major disadvantage of s113 is that it
The first presentation under this heading was delivered by Oliver Ziehn triggers the shareholder appraisal remedy, but has the consequence of
from the UK on: 10 Years of reviewing the board performance of UK automatic implementation per s116.
boards. A key observation was that the company secretary is now regarded He allso summarise other fundamental transactions: s112 Disposal of
as pivotal to internal board evaluation exercises. In regard to third party major portion of assets and s114 Scheme of Arrangement. Takeovers are
evaluations, he noted a key feature as being the confidentiality risk in dealt with in s117/118 /123 et seq.
permitting a non-director to observe board proceedings. It was also felt He discussed the flexibility inherent in the new Act regarding the use of
that observers could stifle the sincerity of meeting conduct. Third party Alterable Provisions in the Moi. He also referred to the effective abolition of
observation could become destructive rather than constructive. constructive notice, and the introduction of the statutory Turquand Rule. He
As far as use of questionnaires was concerned, the design and commented on the abolition of the Capital Maintenance Rule coupled with
crafting of questions was critical. In the UK there is increased sharing the new Solvency and Liquidity test for distributions.
of best practice amongst providers of board evaluation services. One In response to a question he opined that the Shareholder Compact in
should not use headhunters to conduct board evaluations owing to the state-owned companies is not a Shareholders’ Agreement per se, but rather
conflict of interest issue. The facilitator cannot be in the pocket of the chair related to the regulation of performance management in these entities.
of the board. Institutional Investors and regulators have shown interest Mahomed Adam, delivered a presentation on whether the company
in the results of board evaluations. Inappropriate disclosure of findings secretary could be regarded as a prescribed officer. He drew on
could undermine future board participation. After more than a decade governance principles, which have recently pointed to an elevated role
of formalised board evaluations in the UK, ”review fatigue” is beginning for the company secretary as well as the key issues in the James Hardie
to set in. The process must be refreshed, say, by facilitator rotation. The case in Australia. He believes that legislation has not kept pace with current
company secretary is in a unique position of being privy to sensitivities governance thinking.
and understands fundamental boardroom issues. The follow-up of director His key message for company secretaries was: Diligence, courage
competence must be reviewed in private. Board evaluation is not a mere and behaviour build trust. Company secretaries need to get the movement
compliance exercise! for change going and engage executives to get onto the bandwagon!
The main areas of board performance requiring evaluation are: Yaniv Kleitman, presented a summary of important case law under the
l Who briefs/engages facilitator? new Companies Act.
l Design of board agenda. He highlighted recent case law on topics of:
l Risk alignment/assessment. l Business rescue.
l Talent pool consideration. l Winding up of insolvent companies.
l Challenge of execs by Neds. l De-registration and subsequent re-registration.
l Strategy setting process. l Shareholder remedies.
l Board members’ knowledge of company activities. l Director delinquency.
l Training and development of board members. He emphasised that the winding up of solvent companies is covered
Andre van der Zee delivered a presentation on: Stakeholder by the new Act but winding up of insolvent companies is dealt with by the
connectedness challenges. His presentation focused on the process/ 1973 Act. He noted that re-registration under the new Act does not have
techniques of communicating leadership and the decision-making process the same retrospective application as applied under the 1973 Act.
in an organisation. He noted that in many cases the minority view is the
catalyst for change. CSSA AND ELECTRONIC PAPERS
COMPANIES ACT Stephen Sadie, presented on: Good corporate governance – but who will
do it?
The first presentation under this heading was delivered by Michael Katz, His presentation looked at 4 questions – why, who, what and where.
who didn’t disappoint with his comprehensive outline: Key challenges and l In terms of why, he illustrated examples of governance lapses in some
learnings in the Companies Act. SoCs, Gold Fields, the construction industry, ASA, Fidentia, MTN and
He emphasised that the SA Companies Act was no longer based on Blue Financial Services.
English Law, but was an eclectic blend of jurisprudence from the UK, Asia, l In terms of who, he spoke of CSSA as a professional body with
USA, Ghana, Canada and Australia. This meant that it was compatible members and students who could improve on corporate governance
from a foreign investor/trading partner viewpoint. together with other professional bodies, legal and auditing firms.
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Grant Manicom and Llewellyn Walters Delegates get involved in the
(Verifone Africa) Q&A sessions
Cocktail function
Charlie Horrell of Diligent
Boardbooks a sponsor of the
Delegates conference
Speaker Gavin Price engages
Speaker Oliver Ziehn Mohamed Adam (Eskom) with the crowd
l In terms of what, he emphasised the need to create a strong pipeline l Fiduciary duties-reasonable test.
of students flowing into corporate governance. He mentioned how l King III/sections 5 and 7 of Act.
the qualification, conference, CPDs and publications of CSSA all The final presentation was delivered jointly by Sibani Mngomezulu and
contributed to building a good governance culture. Lerato Manaka dealt with: The 21st century non-executive director.
l In terms of where, he mentioned prominent company secretaries The key points were:
located in various companies, and our Southern African and l Appointment process.
international presence. He noted the special contribution that the l Duties.
Chartered Secretary can make to corporate governance throughout l Attributes.
the world. l Independence, Gender, Remuneration, Number of Boards.
l Red flags [cross directorships, conflict of interest].
directOrs l Board tenure/term limits.
l Technology/experience/learning.
Charlie Horrell, presented on: Electronic board papers - the future of the
boardroom. His presentation made effective use of how two South African cOncLUsiOn
case studies, Bidvest and First Rand have implemented electronic board
packs in their organisations. All in all, the best conference yet! The conference was efficiently organised
Jason Dorning, presented on: The best interest of the company – by a team consisting of Colette Diamond (event manager), Janine Kusters,
what it truly entails within the context of the Companies Act, 2008, and its Stephen Sadie and Joel Wolpert.
relevance for directors. A big thank you to our sponsors and exhibitors. Chartered Secretaries
The key points were: has established a footprint as a respected thought leader in the field of
l Enlightened shareholder/stakeholder model. Southern African corporate governance.
l Long-term/short-term.
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The right way
to govern?
By Nicole Dando, Head of Projects, Institute of
Business Ethics UK
trust is an essential facet of an organisation’s
license to operate and as such is a valuable asset.
If a board’s core purpose is to ensure the survival, or
indeed the flourishing, of a business through setting
its strategic direction, guarding that asset must form
the core of the remit of those running a company; and
be central to ensuring good corporate governance.
With this in mind, we may well wonder why so many
high profile cases of corporate misconduct have
been caused by senior individuals crossing ethical
boundaries? Is there a lack of ethics in what is
considered ‘good’ governance?
The business case in favour of behaving ethically is easy to put tHe rOLe Of etHics in cOrPOrate
forward when you consider the costs and impact of an event which GOvernance
damages the organisation’s reputation. Attention from the media,
regulators, campaign groups, investors and governments makes it Questions of ethics, or the ‘right way to run a business’, are
critical for boards to be aware of the range of stakeholders that are relevant to all aspects of corporate governance, and to every board
scrutinising, and are affected by, the way it does business. A recent decision and action. From the discretionary decisions a board takes
example is the issue of tax avoidance faced by companies such as when delivering on its duties as set down in law, or demanded by
Vodafone, Starbucks, Google and Amazon. How aggressive should shareholders and other stakeholders, to the choices made in pursuit
companies be in legally minimising their tax bills? of core business strategies, and the way the
They have a duty to shareholders not to pay board directs the business. These choices have
more tax than is necessary, but are they risking tOne frOm tHe tOP far-reaching consequences and directly affect
reputational damage if they end up paying little is a term that originated in the field the lives of the company’s employees and other
or no tax as a result of their efforts1? Reputations of accounting and is used to describe stakeholders.
are based not only on the delivery of quality an organization’s general ethical As well as in decision-making, business ethics
products and services, but also on judgments climate, as established by its board of is relevant to the way the board organises and
about the nature of a company’s relationships directors, audit committee, and senior conducts itself, and the way that individual board
with its stakeholders, and the way in which it does management. Having a strong tone members choose to behave in carrying out their
business. at the top is believed by business role. The behaviour of individual board members
The extent to which business decisions ethics experts to help prevent fraud can pose an integrity risk in itself, and is also
reflect ethical values and principles, such as and other unethical practices. significant in terms of the culture of the organisation
honesty, fairness, integrity, openness and as a whole, which will be strongly influenced by the
respect, will be a key to long-term success. It is the directors who nature, and not just the quality, of the leadership shown by the board.
bear ultimate responsibility for the business, and so it is imperative ‘Walking the talk’ is important; it means applying a code of ethics to
for boards to embrace ethical standards explicitly, in the way the directors’ behaviour, as well as to staff conduct. Consider, for example,
company is run, and in the way the board itself operates. how the board handles conflicts of interests. Is the board diverse? Is
Ethical behaviour and practices within the boardroom have board remuneration and recruitment fair and transparent?
arguably never been more important. Yet research carried out by the In a PwC survey3, 43% of respondents said that, ‘on the occasions
Institute of Business Ethics (IBE) suggests that explicit reference where Tone from the Top had been undermined it was due to the fact
to ethical principles and terminology has generally been absent that leadership actions did not reconcile with the ethical messages
from corporate governance guidance and regulation at the EU being delivered.’
level2. Although the research found similarities in general corporate A board is responsible for determining, articulating and
governance principles and requirements within most member communicating the values and standards of the whole of the business,
states, a comparison of explicit ethics drivers and imperatives within and for ensuring that the policies, procedures and controls in place
governance codes was not actually possible, as they were not act to embed, rather than to hinder, ethical values throughout the
evident. business.