An Overview

*Contemporary corporate governance

started in 1992 with the Cadbury report

in the UK
*Cadbury was the result of several high
profile company collapses
*is concerned primarily with protecting
weak and widely dispersed shareholders
against self-interested Directors and
managers

*Shareholders those that own the

company

*Directors Guardians of the Companys

assets for the Shareholders

*Managers who use the Companys assets

*Primarily concerned with public

listed companies i.e. those listed on

a Stock Exchange

*Focused on preventing corporate

collapses such as Enron, Polly Peck

and the Maxwell companies

*What relevance does it have to Africa

where there are few public listed
companies

*Most companies are non-listed,

private family owned businesses

where the shareholders and the
managers are often the same people

*Accountability
*Fairness
*Transparency
*Independence

* Ensure that management is accountable to the

Board

* Ensure that the Board is accountable to

shareholders

*Protect Shareholders rights

*Treat all shareholders including
minorities, equitably

*Provide effective redress for

violations

Ensure timely, accurate disclosure on

all material matters, including the
financial situation, performance,
ownership and corporate governance

*Procedures and structures are in

place so as to minimise, or avoid

completely conflicts of interest

*Independent Directors and Advisers

i.e. free from the influence of others

* In 1994, The King Report in South Africa also

included within its Code of Corporate

Governance requirements on sustainability and
ethical standards
* King Report II on Corporate Governance (2002)
* King Report III on Corporate Governance (2009)
* This was due to the context of a developing
country and business ethics in Africa

*No generally accepted definition

*Most commonly used is from the

Brundtland Report for the World

Commission on Environment and
Development 1987 which defines it
as:

development that meets the needs

of the present without compromising
the ability of future generations
to meet their own needs

*Sustainability recognizes stakeholder

rights i.e. the rights of interested

parties e.g. employees, the community,
suppliers, customers etc.

*Encourage co-operation between the

company and its stakeholders in
creating wealth, jobs and economic
stability

*Established values and principles a company

uses to inform and conduct its activities

*Should permeate a companys culture and

drive its strategy, business goals, policies
and activities

*Usually found in a code of ethics

*Good Board practices

*Control Environment
*Transparent disclosure
*Well-defined shareholder rights
*Board commitment

*Clearly defined roles and authorities

*Duties and responsibilities of Directors
understood

*Board is well structured

*Appropriate composition and mix of skills

*Appropriate Board procedures

*Director Remuneration in line with
best practice

*Board self-evaluation and training

conducted

*Internal control procedures

*Risk management framework present
*Disaster recovery systems in place
*Media management techniques in use

*Business continuity procedures in

place

*Independent external auditor

conducts audits

*Independent audit committee

established

*Internal Audit Function

*Management Information systems
established

*Compliance Function established

*Financial Information disclosed

*Non-Financial Information disclosed
*Financials prepared according to
International Financial Reporting
Standards (IFRS)

*Companies Registry filings up to date

*High-Quality annual report published
*Web-based disclosure

*Minority shareholder rights formalised

*Well-organised shareholder meetings
conducted

*Policy on related party transactions

*Policy on extraordinary transactions

*Clearly defined and explicit dividend
policy

*The Board discusses corporate

governance issues and has created a

corporate governance committee
*The company has a corporate
governance champion
*A corporate governance improvement
plan has been created
*Appropriate resources are committed to
corporate governance initiatives

*Policies and procedures have been

formalised and distributed to relevant

staff
*A corporate governance code has been
developed
*A code of ethics has been developed
*The company is recognised as a
corporate governance leader

*Corporate Governance applies to all

types of organisations not just

companies in the private sector but also
in the not for profit and public sectors

*Examples are NGOs, schools, hospitals,

pension funds, state-owned enterprises

*Corporate Governance is by way of

legislation or best practice Code

*US adopted legislation in 2002 Sarbanes Oxley Act
*Most other developed and emerging
market countries have adopted best
practice Codes e.g. Combined Code in
the UK, Cromme Code in Germany and
the King III Code in South Africa

*These Codes are voluntary and are

enforced by shareholders

*Most of them operate on a comply

or explain approach

*The Media also play a part in

highlighting good or bad practices

*Better access to external finance

*Lower costs of capital interest rates
on loans
*Improved company performance
sustainability
*Higher firm valuation and share
performance
*Reduced risk of corporate crisis and
scandals