Kaizer's Musing Part of the SiteSet to feature prominently in the public discourse this year is the so-called National Dialogue, a superfluous event if ever there was any. The so-called National...
MORE EFFORT SHOULD BE DEDICATED TO PROMOTING INTEGRITY IN THE COUNTRY, INCLUDING IN BUSINES
Kaizer’s Musing
Part of the Site
Common sense, the observation was made an aeon ago by the likes of Voltaire and others, is really not so common. If that was the case then, it is much more so now, where many would swear passionately in social media and elsewhere that the sky is any colour but blue.
However, common sense is not the only thing that is in short supply in the world today; integrity is in even in greater short supply. Since we find ourselves here in the southernmost tip of Africa, it is understandable that we follow developments here more closely and conclude erroneously that the shortage of integrity is something peculiar to our country.
Integrity is something that is a stranger to most politicians in the world today. As former United States President Barack Obama admitted during an address at the 100th Nelson Mandela birthday celebration in Johannesburg in 2018, “politicians have always lied”, almost without exception. After all, it takes a certain kind of personality to be a politician for a living.
We know that well in this country, where far worse things have been done by politicians across different political parties over the past 27 years of our democracy. Naturally, the spotlight has fallen more brightly and harshly on those who have been in power during this period, but chances are that many in the opposition parties would have fared the same, if not worse, were they in power.
We have been subjected every day to all sorts of lies, hypocrisies and contradictions – as though we were unthinking children. Recently our putative saviour from unmitigated State capture, President Cyril Ramaphosa, defended the indefensible when he appeared before the Zondo Commission, and showed himself to be more a politician than a man of integrity.
Sadly, politicians are not found only in Parliament, our provincial legislatures and the councils of our woefully-run and often bankrupt municipalities. A growing number are also found in business, comfortably ensconced in the Boards of various companies and other entities. The damage that they do – and they do inflict harm – in those structures is limited only by the fact that some of the people with whom they serve on those Boards may not themselves be politicians in business clothing, or may not be easily pliable.
Some do so maliciously, while many others cause harm unintentionally, as a result of either ignorance or being under the spell of the outspoken politicians in the guise of businessmen or businesswomen. The latter group of individuals go along with the former merely because they seek to please, or have no courage to voice a contrary view. They have no views of their own, and go with the wind. Such individuals have no backbones and have no business to be on any Boards of Directors. Ultimately, they may, in fact, be more dangerous than those who seek to advance malicious agendas at odds with a company’s best interests.
In recent weeks I have had cause to go through the Companies Act 71 of 2008, the King III Code of Governance Principles, the King IV Code and a number of Practice Notes issued by the Institute of Directors. Among the main observations that I have made was that the annual corporate governance training sessions that I have attended over the past eight years left out some of the most important provisions of the Companies Act. It is interesting that the main purpose of the Act is given as the promotion of the Bill of Rights as found in our Constitution, followed by the promotion of the development of the local economy and the encouragement of transparency and high standards of corporate governance, among others.
By definition, promotion of the Bill of Rights means respect for others not only on the Boards, but also throughout and outside the company, and tolerance of their contrary views. King IV considers ethical leadership and the creation of an ethical culture in an organisation to be among the most important responsibilities of Directors. Among other things, ethical leadership promotes robust debates in Board meetings, without anybody taking anything personally, in order to ensure that the decisions that are reached are, indeed, in the best interests of a company and its stakeholders.
When it comes to the standards of Directors, the Companies Act is clear that a person may not use his position on the Board of an entity to advance his own interests, and is emphatic that a Director should use the authority of his position “in good faith and for a proper purpose”, in the best interests of the entity and with the degree of skill, care and diligence which may reasonably be expected of somebody in that position. The liabilities faced by a Director who uses his Board position for his own interests are spelt out in section 77 of the Act – and they are considerable.
Yet, in the various Boards on which I have served over the past five years, I have encountered individuals who advanced their own interests, such as gaining exposure to future business opportunities for themselves or their companies. I have dealt with people who have acted in the name of the Board, without the prior authority of that structure, and without subsequently reporting back to it on their actions.
In one organisation I arrived to find an Executive Director, who had a fiduciary duty to that organisation, not only drawing a salary from it, but double-dipping by also having his wife providing catering services at its various functions. So, the entity was not only his employer, but also his customer, through his wife. I brought an end to it as soon as I became aware of it.
In another company, the Directors carried all the legal liabilities of holding that position, but exercised none of its authority. They met twice a year, drank tea or coffee, exchanged pleasantries with one another and routinely approved either the budget or the proposed salary increases. There was no independent Company Secretary, so the CEO took high-level, one-sentence minutes. Board meetings were over within 30 minutes.
Repeated efforts to point out that that was a Board in name only bore no fruit. It was not until one sent strongly-worded correspondence to the Board last year, threatening action, that the situation was finally corrected.
On the only State-owned entity on whose Board I had the misfortune to be appointed, thinking that it was now safe to contribute to one’s country in the era of Thuma mina, I dealt with some individuals who had not an inkling of what corporate governance entailed, and with a Chairman who ignored Board resolutions or had them amended after Board meetings. In meetings of that Board, only the interests of the shareholder were paramount, and the Board considered itself as an extension of the Shareholder Minister’s Department.
I resigned from that Board hardly a year after joining it, for my continued participation would have meant that I approved of my fellow Directors’ conduct and stood to tarnish my reputation.
However, the Board of a white, family-owned company which had recently concluded a BEE deal was the most dysfunctional, thanks to the majority shareholder, who was also the CEO. A black, professional couple had purchased 40% equity into the company and had taken senior management positions at the company and seats on the Board. For some reason unknown to us, the CEO – who, as shareholder, had willingly concluded the BEE deal – would simply have no truck with this thing called corporate governance.
He could not distinguish between the company’s resources (especially finances) and his personal or family resources. As Interim Chairman, I realised early on that as a Board we would have our work cut out for us, so I arranged a corporate governance training session for everybody ahead of the first Board meeting. That notwithstanding, in Board meetings the CEO simply could not distinguish between a Board meeting and a shareholders’ meeting. Whenever he did not like the direction which a discussion was taking (which was almost every time), he took off his Director’s had and put on his shareholder’s hat, repeatedly referring to the fact that he was “the majority shareholder”.
Despite the Board’s efforts, that business partnership was doomed from the beginning and fell apart post-haste.
For corporate governance to be taken seriously in South Africa, it is very important that the actions taken by the SAA Pilots Association and the Organisation Undoing Tax Abuse against Dudu Myeni, in her capacity as the airline’s Chairperson, are taken as a matter of course against others. There are many other suitable candidates for the delinquent director status in this country. Unfortunately, as things currently stand, it is costly and takes time to get to a stage where somebody can be so declared.
In the meantime, a bigger effort should be dedicated to the active promotion of integrity in our country, including in business.
