Despite the proliferation of cor­­porate governance codes worldwide, and their constant revisions, we still see some gover­nance failures of big proportions. It’s disap­pointing that a tick-box mindset and form over substance have infiltrated the corporate governance landscape as it has evolved.

The benefits of good corporate governance are obvious and well-publicised – to prevent corporate catas­­trophes, ensure the long-term success of a company, create shareholder value, attract capital and, in a broader sense, promote the integrity of financial markets. Good governance principles encourage a positive corporate culture, reduce corruption and mismanagement, and benefit employees as well as a wide range of stakeholders. But after decades of developing frame­works for how businesses should be run, we’re not yet there.

There are still tightly knit clubs of boards, committees and shareholder representatives looking after common and entrenched interests. Lone shareholder activists are too often treated as pariahs, and whistleblowers are not always appreciated.

There are many other gaping holes in the corporate-governance environment. Some state or public-sector organisations are serial offenders and their violations are palpable and insulting to the taxpayer. And it is concerning that we lack genuine business acumen and skills on how to successfully manage company operations at the coalface. There are examples of companies being run into the ground despite slavish adherence to so-called ‘good corporate governance’. Executives mess up and slink away with huge termination packages.

A principled approach to corporate gover- nance was introduced in South Africa in 1994, with the publication of the groundbreaking King Code. While its intentions – and those of its successors – were noble, its ideals have sometimes been lost in a mechanistic checklist approach. This mindset has been a global problem, and regulation for regulation’s sake appears to have been in the ascendancy with some companies taking comfort in box-ticking while ignoring the intrinsic moral health of the organisation.

One needs only to consider the glaring and serious corporate scandals of the late 1990s, such as Enron and WorldCom in the US. America’s corporate governance response to these in the form of Sarbanes-Oxley did little, if anything, to limit the impact of the 2008 global financial crisis. The most recent update in South Africa – King IV – aims to reduce the tick-box approach, which has not always guaranteed corporate sustainability.

In a letter to members, Prieur du Plessis, chairman of the Institute of Directors in Southern Africa, talks about probity and morality, and how these are lofty goals. Nevertheless, they are ones we must pursue, as no amount of exhorting people to be better corporate citizens within an organi­sation is going to work if the fundamental morality within that business is lacking. Morality is essential and without that, no amount of pontification or internal self-regulation will work.

Outside South Africa, the rest of the continent has sometimes lagged on corporate governance. But it’s now actively pursuing this key aspect of business so it may also enjoy all the accompanying benefits of well-run companies, such as greater access to capital. The African Corporate Governance Network was established in 2013 to build capacity in this regard. African countries are fortunate as they can learn from the mistakes and failures evident elsewhere, assess what works and what doesn’t, and leapfrog to the most evolved and best-practice governance frameworks, while keeping it local and suitably applicable to emerging markets.

By Chris Gilmour
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