Appendix H
Appendix H
Appendix H
The philosophy of the King III Report revolves around leadership, sustainability and
corporate citizenship.
1. Good governance is essentially about effective leadership. Leaders should rise
to the challenges of modern governance. Such leadership is characterised by the
ethical values of responsibility, accountability, fairness and transparency and
based on moral duties that find expression in the concept of Ubuntu. Responsible
leaders direct company strategies and operations with a view to achieving
sustainable economic, social and environmental performance.
3. The concept of corporate citizenship which flows from the fact that the company
is a person and should operate in a sustainable manner. Sustainability
considerations are rooted in the South African Constitution which is the basic
social contract that South Africans have entered into. The Constitution imposes
responsibilities upon individuals and juristic persons for the realization of the
most fundamental rights.
Principle 1.1: The board should provide effective leadership based on an ethical
foundation
Principle 1.2: The board should ensure that the company is and is seen to be a responsible
corporate citizen
Principle 1.3: The board should ensure that the company’s ethics are managed effectively
Responsible leadership
The board’s responsibilities
Ethical foundation
Ethics risk and opportunity profile
Code of Conduct
Integrity ethics
Assessment in monitoring reporting and disclosure of company’s ethics.
STAKEHOLDER RELATIONSHIPS AND SHAREHOLDER TREATMENT
Principle 8.1: The board should appreciate that stakeholders’ perceptions affect a
company’s reputation
Principle 8.2: The board should delegate to management to proactively deal with
stakeholder relationships.
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Principle 8.3: The board should strive to achieve the appropriate balance between its
various stakeholder groupings, in the best interest of the company.
Principle 8.4: Companies should ensure the equitable treatment of shareholders.
Principle 8.5: Transparent and effective communication with stakeholders is essential
for building and maintaining their trust and confidence.
Principle 8:6: The board should ensure that disputes are resolved as effectively,
efficiently and expeditiously as possible.
Principle 2.15: The board should consider business rescue proceedings or other
turnaround mechanisms as soon as the company is financially distressed
as defined in the Act.
GROUP AND SUBSIDIARY BRANDS
Principle 2.24: A governance framework should be agreed between the group and its
subsidiary boards
Principle 2.16: The board should elect a chairman of the board who is an
independent non-executive director. The CEO of the company
should not also fulfill the role of chairman of the board.
Principle 2.17: The board should appoint the chief executive officer and establish a
framework for the delegation of authority.
Principle 2.18: The board should comprise a balance of power, with a majority of
non-executive directors. The majority of non-executive directors
should be independent.
Principle 2.19: Director should be appointed through a formal process.
Principle 2.20: The induction of, and ongoing training and development of directors
should be conducted through formal processes.
Principle 2.21: The board should be assisted by a competent, suitably qualified and
experienced company secretary.
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Knowledge, skills, resources, size, diversity and demographics of board to be
considered.
A minimum of two executive directors (CEO and Finance Director).
The King Report provides detailed guidance on the role of the chairman and the
CEO.
DEFINITION OF INDEPENDENCE
Does not have a direct or indirect interest in the company (including any
parent or subsidiary in a consolidate group with the company) which is either
material to the director or the company. A holding or five percent or more is
considered material.
Has not been employed by the company or the group of which he currently
forms part, in any executive capacity for the preceding three financial years.
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Backgrounds and references should be checked before nomination.
Principle 2.1: The board should act as the focal point for and custodian of
corporate governance.
Principle 2.2: The board should appreciate that strategy, risk, performance and
sustainability are inseparable.
Principle 2.3: The board should provide effective leadership based on an ethical
foundation.
Principle 2.4: The board should ensure that the company is and is seen to be
responsible corporate citizen.
Principle 2.5: The board should ensure that the company’s ethics are managed
effectively.
Principle 2.6: The board should ensure that the company has an effective and
independent audit committee.
Principle 2.7: The board should be responsible for the governance of risk.
Principle 2.8: The board should be responsible for information technology (IT)
governance. (5.1)
Principle 2.9: The board should ensure that the company complies with applicable
laws and considers adherence to non-binding rules, codes and
standards.
Principle 2.10: The board should ensure that there is an effective risk-based internal
audit.
Principle 2.11: The board should appreciate that stakeholder’s perceptions affect the
company’s reputation.
Principle 2.12: The board should ensure the integrity of the company’s integrated
report.
Principle 2.13: The board should report on the effectiveness of the company’s
system of internal controls.
Principle 2.14: The board and its directors should act in the best interest of the
company.
Principle 2.15: The board should consider business rescue proceedings or other
turnaround mechanisms as soon as the company is financially
distressed as defined in the Act
4. DUTIES OF DIRECTORS
Principle 2.14: The board and its directors should act in the best interest of the
company.
Principle 2.22: The evaluation of the board, its committees and the individual
directors should be performed every year.
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Principle 2.25: Companies should remunerate directors and executives fairly and
responsibly.
Principle 2.26: Companies should disclose the remuneration of each individual
director and certain senior executives.
Principle 2.27: Shareholder should approve the company’s remuneration policy.
Performance Assessment of Directors
The performance of the board, its committees and individual directors should
be evaluated every year by the chairman or an independent provider. Results
should assist training and be disclosed in the integrated report.
King III requires the board to consider whether the evaluation of performance
should be done in house or conducted professionally by independent service
providers.
7. LIABILITIES OF DIRECTORS
RISK MANAGEMENT
Principle 4.1: The board should be responsible for the governance of risk. (2.7)
Principle 4.2: The board should determine the levels of risk tolerance.
Principle 4.3: The risk committee or audit committee should assist the board in
carrying out its risk responsibilities.
Principle 4.4: The board should delegate to management the responsibility to
design, implement and monitor the risk management plan.
Principle 4.5: The board should ensure that risk assessments are performed on a
continual basis
Principle 4.6: The board should ensure that frameworks and methodologies are
implemented to increase the probability of anticipating
unpredictable risks.
Principle 4.7: The board should ensure that management considers and
implements appropriate risk responses.
Principle 4.8: The board should ensure continual risk monitoring by
management.
Principle 4.9: The board should receive assurance regarding the effectiveness of
the risk management process.
Principle 4.10: The board should ensure that there are processes in place enabling
complete, timely, relevant, accurate and accessible risk disclosure
to stakeholders.
Principle 3.8: The audit committee should be an integral component of the risk
management process.
Principle 5.5: IT should form an integral part of the company’s risk
management.
Principle 6.3: Compliance risk should form n integral part of the company’s risk
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INTERNAL CONTROLS
Principle 2.13: The board should report on the effectiveness of the company’s
system of internal controls.
1. RISK MANAGEMENT
The board is responsible for the governance of risk (to be specified in the
board charter). The board responsibilities include the following:
Appoint a risk committee which considers the risk policy, plan and
monitoring. The risk committee may comprise a minimum of three
members from executive, non-executive directors, senior management
and independent risk experts. It should meet at least twice a year.
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2. INTERNAL CONTROLS
King III requires the audit committee to conclude and report annually to the
stakeholders and the board on the effectiveness of internal financial controls.
This has to be supported by a formally documented annual review of internal
financial controls performed by internal audit. The external attestation of
internal financial controls is not expected, contrary to the requirements of the
Sarbanes Oxley Act.
INTERNAL AUDIT
Principle 7.1: The board should ensure that there is an effective risk based
internal audit. (2.10)
Principle 7.2: Internal audit should follow a risk based approach to its plan.
Principle 7.3: Internal audit should provide a written assessment of the
effectiveness of the company’s system of internal control
and risk management.
Principle 7.4: The audit committee should be responsible for overseeing
internal audit. (3.7)
Principle 7.5: Internal audit should be strategically positioned to achieve
its objectives.
EXTERNAL AUDITOR
Principle 3.9: The audit committee is responsible for recommending the
appointment of the external auditor and overseeing the
external audit process.
INTERNAL AUDIT
The board should ensure that there is an effective risk based internal audit
function which is governed by an internal audit charter approved by the board,
and which adheres to the IIA Standards and code of ethics.
Have an internal audit plan that is informed by the strategy and risks
Be independent from management and objective
Provide a written assessment on the effectiveness of the company’s
system of internal controls and risk management to the board
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Provide a written assessment of internal financial controls to the audit
committee (after formally documenting and testing internal financial
controls annually).
The CAE should be able to attend all executive committee meetings, and
should develop a quality assurance and improvement programme.
2. AUDIT COMMITTEE
Principle 3.1: The board should ensure that the company has an effective and
independent audit committee. (26)
Principle 3.2: Audit committee members should be suitably skilled and
experienced independent non-executive directors.
Principle 3.3: The audit committee should be chaired by an independent non-
executive director.
Principle 3.4: The audit committee should oversee integrated reporting.
Principle 3.5: The audit committee should ensure that a combined assurance
model is applied to provide a coordinated approach to all
assurance activities
Principle 3.6: The audit committee should satisfy itself of the expertise,
resources and experience of the company’s finance functions.
Principle 3.7: The audit committee should be responsible for overseeing of
internal audit.
Principle 3.8: The audit committee should be an integral component of the risk
management process.
Principle 3.9: The audit committee is responsible for recommending the
appointment of the external auditor and overseeing the external
audit process.
Principle 3.10: The audit committee should report to the board and shareholders
on how it has discharged its duties.
Principle 4.3: The risk committee or audit committee should assist the board in
carrying out its risk.
Principle 5.7: A risk committee and board committee should assist the board in
carrying out its IT responsibilities
AUDIT COMMITTEE
The board should ensure that it has an effective and independent audit
committee, with approved terms of reference. The audit committee is an
integral part of the risk management process with oversight of financial
reporting risks, internal financial controls, and fraud and IT risks relevant to
financial reporting.
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Consist of at least three independent members, all of whom should be
independent non-executive directors. The chairman of the board should
not be chairman of, nor a member of, the audit committee. The audit
committee chairman should be elected by the board, set the agenda and
be present at the AGM.
Meet at least twice a year (at least once a year external and internal
auditors should attend without management).
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- financial statements and accounting practices
- effectiveness of the internal financial controls
- its role, composition, meetings and activities
We expect that many audit committees may need support in relation to the
following:
The practicalities of how the risk committee works with the audit
committee.
3. RISK COMMITTEE
Principle 4.3: The risk committee should assist the board in carrying out its
risk responsibilities.
Principle 5.7: A risk committee and audit committee should assist the
board in carrying out its IT responsibilities.
The risk committee (or audit committee) should consider the risk management
policy and plan, and should monitor the whole risk management process.
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IT as it relates to financial reporting and the going concern of the company
should be the responsibility of the audit committee. The risk committee has
the responsibility to oversee the broader risk implications of IT.
4. REMUNERATION COMMITTEE
The remuneration committee should assist the board with setting and
administering remuneration policies (which should address base pay,
bonuses, contracts, severance, retirement benefits, share and incentive
schemes).
The board of directors is expected to ensure that prudent and reasonable steps
have been taken in regard to IT governance. The focus of IT Governance should
be on strategic alliance with the objectives of the company, development of an IT
governance framework, risk management in safeguarding IT assets, disaster
recovery, continuity and on the protection and management of information.
6. COMPLIANCE GOVERNANCE
Principle 6.1: The board should ensure that the company complies with
applicable laws and considers adherence to non-binding rules,
codes and standards.
Principle 6.2: The board and each individual director should have a working
understanding of the effect of the applicable laws, rules, codes
and standards on the company and its business.
Principle 6.3: Compliance risk should form an integral part of the company’s
risk management process.
Principle 6.4: The board should delegate to management the implementation
of an effective compliance framework and processes.
COMPLIANCE
Ensure the company complies with applicable laws and considers adherence to
rules, codes and standards.
Implications: There may be an increased demand for compliance officers and the
role and positioning of the function will have organisational structure and
reporting implications.Companies will also have to incorporate compliance
methodologies into the risk management and combined assurance frameworks.
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7. INTEGRATED REPORTING AND DISCLOSURE
Principle 9.1: The board should ensure the integrity of the company’s
integrated report. (2.12)
Principle 9.2: Sustainability reporting and disclosure should be integrated with
the company’s financial reporting.
Principle 9.3: Sustainability reporting and disclosure should be independently
assured.
Principle 3.4: The audit committee should oversee integrated reporting.
The King III Report provides for all companies to prepare an Integrated Report,
which contains information about operations, sustainability and financial
reporting (3.17).
The Audit Committee is charged with the review of the Integrated Report on
behalf of the Board.
It is recommended that the Board should confirm, in the Integrated Report, that
appraisals of the Board and its Committees have been carried out.
The Integrated Report should name the members of Board Committees (1.140).
King III calls for integrated reporting (reporting of financial information with
sustainability issues of social, economic and environmental impacts) and
recommends that the audit committee engage an external assurance provider
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toprovide assurance over material aspects of the sustainability reporting in the
Integrated Report.
Implications: The skill set of the audit committee will have to include member/s
proficient in sustainability.
2. INTEGRATED REPORT
We have endeavoured, as with King I and King II, to be at the forefront of governance
internationally. We believe this has been achieved because of the focus on the
importance of conducting business reporting annually in an integrated manner i.e.
putting the financial results in perspective by also reporting on:
How a company has, both positively and negatively, impacted on the economic
life of the community in which it operated during the year under review; and
How the company intends to enhance those positive aspects and eradicate or
ameliorate the negative aspects in the year ahead.
INTEGRATED REPORTING
The market capitalization of any company listed on the JSE equals its economic value
and not its book of value. The financial report of a company, as seen in its balance
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sheet and profit and loss statement, is a photograph of a moment in time of its
financial position. In buying a share on any stock exchange, the purchaser makes an
assessment of the economic value of a company. The assessment considers the value
of matters not accounted for, such as future earnings, brand, goodwill, the quality of
its board and management, reputation, strategy and other sustainability aspects. The
informed investor assesses the quality of the company’s risk management and
whether it has considered the sustainability issues pertinent to its business.
Individuals today are the indirect providers of capital. They are consumers and, as
citizens, they are concerned about the sustainability of our planet. Those who prepare
integrated reports should give the readers the forward-looking information they want.
Today’s stakeholders also want assurance on the quality of this forward looking
information.
By issuing integrated reports, a company increases the trust and confidence of its
stakeholders and the legitimacy of its operations. It can increase the company’s
business opportunities and improve its risk management. By issuing an integrated
report internally, a company evaluates its ethics, fundamental values and governance,
and externally improves the trust and confidence which stakeholders have in it.
The integrated report should have sufficient information to record how the company
has both positively and negatively impacted on the economic life of the community in
which it operated during the year under review, often categorised as environmental,
social and governance issues (ESG). Further, it should report how the board believes
that in the coming year it can improve the positive aspects and eradicate or ameliorate
the negative aspects, in the coming year.
King III supports the notion of sustainability reporting. But make the case that
whereas in the past it was done in addition to financial reporting it now should be
integrated with financial reporting.
3. STRATEGIC LEADERSHIP
Transparency: The board should disclose information in a manner that enables
stakeholders to make an informed analysis of the company’s performance, and
sustainability.
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STAKEHOLDER AND SHAREHOLDER RELATIONSHIP
The board should disclose in its integrated report the nature of its dealings with its
stakeholders and the outcomes of these dealings.
39. If the board appoints a chairman who is a non-executive director but is not
independent or is an executive director, this should be disclosed in the integrated
report, together with the reasons and justifications for the appointment;
88. The board should recognize that high levels of timely disclosure and transparency
enable shareholder to make their own informed assessment of directors, be it in
regard to independence, remuneration or other issues. The following aspects
regarding directors should be disclosed in the integrated report;
88.1 The reasons for the removal, resignation or retirement of directors. The purpose
of this is to enable shareholders to fulfil their role as the ultimate arbiters of who
should sit on the board. Complete, timely, relevant, accurate, accessible and
honest disclosure will reduce speculation and uncertainty;
88.2 The composition of the board and board committees and the number of meetings
held, attendance at those meetings and the manner in which the board and its
committees have discharged its duties;
88.3 The education, qualifications and experiences of the directors;
88.4 The length of service and age of directors;
88.5 Whether supervising of new management is required in which case retention of
board experience would be called for;
88.6 Other significant directorships of each board member;
88.7 Actual or potential political connections or exposure; and
88.8 Any other relevant information.
Principle 2.12: The board should ensure the integrity of the company’s integrated
report.
Principle 2.13: The board should report on the effectiveness of the company’s system
of internal controls.
BOARD PERFORMANCE EVALUATION
114 The board should state in the integrated report whether the appraisals of the
board, its committees have been conducted. The report should provide an
overview of the results of the performance assessment and the action plans to be
implemented, if any.
DIRECTOR REMUNERATION
180 Companies should provide full disclosure of each individual executive and non-
executive director’s remuneration, giving details as required in the Act of base
pay, bonuses, share-based payments, granting of options or rights, restraint
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payments and all other benefits (including present values of existing future
awards). Similar information should be provided for the three most highly-paid
employees who are not directors in the company.
181 In its annual remuneration report, to be included in the integrated report, the
company should explain the remuneration policies followed throughout the
company with a special focus on executive management, and the strategic
objectives that it seeks to achieve, and should provide clear disclosure of the
implementation of these policies.
BOARD MEETINGS
REPORT ON OPERATIONS
RISK MANAGEMENT
INTERNAL CONTROLS
INTERNAL AUDIT
EXTERNAL AUDITORS
NOMINATION COMMITTEE
112. The chairman, through the nominations committee, may lead the overall
performance evaluation of the board and board committees with the assistance
of company secretary. However, independent performance appraisals should be
considered in the interest of eliciting candid responses. The board should
discuss the board evaluation results at least once a year.
AUDIT COMMITTEE
COMPLIANCE GOVERNANCE
10. The board should disclose in the integrated report on how it has discharged its
responsibility to ensure the establishment of an effective compliance framework
and processes
36. A company should consider disclosing in its integrated report the number and
reasons for refusals of requests for information that were lodged with the
company in terms of the Promotion of Access to Information Act, 2000.
Disclosure will necessitate will detrimentally affect the company or breach
confidentiality or any agreement to which it is a part.
Summarised information
41. Due the volume and complexity of information conveyed in the integrated report,
users benefit from a summary of the integrated report. The company should
therefore prepare a summarised integrated report in addition to the complete
integrated report.
42. The objective of the summarised integrated report is to give a concise but
balanced view of the company’s integrated information. In preparing the
summarised integrated report, companies should give due consideration to:
42.1 Providing key financial information. The International Financial Reporting
Standard on Interim Reporting (IAS 34) provides useful guidance as to
which financial information and notes should be included;
42.2 Providing sufficient commentary by the company to ensure an unbiased,
succinct overview of the company’s financial information; and
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42.3 Providing the company’s key performance measures regarding
sustainability information.
43. Summarized integrated information should be derived from the underlying
integrated report and should include a statement to this effect.
44. The audit committee should engage the external auditors to provide an assurance
report on summarised financial information, confirming that the summarised
financial information is appropriately derived from the annual financial
statements.
45. Both the complete and summarised integrated report s should be made available
to stakeholders electronically and should be placed on the company’s website.
The board should however consider the nature of its stakeholder base in
determining the appropriate method of disseminating the summarised integrated
report. Where a large proportion of stakeholders do not have electronic access to
the company’s information, hard copies of the summarised integrated report
should be made available to all the stakeholders on written request to the
company’s secretary or directed to the company’s registered office.
Principle 9.1: The board should ensure the integrity of the company’s integrated
report.
Principle 9.2: Sustainability reporting and disclosure should be integrated with the
company’s financial reporting.
Principle 9.3: Sustainability reporting and disclosure should be independently
assured.
5. KING III AND LISTED COMPANIES
Following the release of King II, the JSE Listings Requirements were significantly
revised and a new set of Listings requirements were adopted in 2003.
All listed companies were required to comply with the principles of the King
Code or explain the extent and reasons for their non-compliance. Briefly, listed
companies are required to:
Have a mandatory separation of the role of the chairman of the board and the
CEO.
Disclose any changes to their boards of directors or the company secretary within
24 hours (or the end of the business day following) the resignation or appointment
(LR 3.59).
In the wake of King II, the regulations under the Public Finance Management Act (the
PFMA), which apply to government departments and state owned entities, were
completely revised and promulgated in late 2002 as an updated Protocol on Corporate
Governance for State owned Enterprises. State owned entities are governed by
collectively by their founding legislation, if applicable, the Companies Act, the
PFMA, the King code and the Protocol.
Appointment with the matter of board appointment, the Protocol largely mirrors
the recommendations of King II, calling for a formal, transparent and credible
procedure for director appointment to avoid the propensity for “tokenism”;
The leadership of a capable non-executive chairman who brings out the best in
each member;
The planning of board size, composition and succession in line with the strategic
objectives of the organisation. It goes further than King II (and indeed further
even than King III) in recommending that the term served by all directors should
be determined in advance and should form part of a comprehensive letter of
appointment in which performance criteria for directors should be agreed upon.
In line with international practice, the Protocol recommends that directors’
remuneration should be linked, at least in part, to the performance of the organization
and the board and should accurately reflect the responsibility and risk involved in
being an effective director. Like the King Reports, it endorses the principle that
directors’ remuneration be “balanced between an amount at which it would lose
significance for the director and a level at which the director may lose independence”.
The protocol provides for the ultimate sanction of non-executive remuneration by the
shareholders (government) after a recommendation has been made by the
remuneration committee.
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The independence of directors of state owned companies is considered a critical area
as, it is argued, that the appointment of the board by the state makes board
independence more difficult and even more necessary. A distinction is drawn between
the state’s influence as a shareholder and “undue political influence”. The Protocol
stresses that the ability of the state, represented by the relevant government Minister,
to appoint the board and to approve key strategic and business plans and other.
Aspects of performance management must be framed in terms of acceptable and
recognised procedures. There is a fine line, however, between acceptable state
oversight and the point at which state bounds and seeks to influence the organization
without being publicly accountable. The recent stand-off between the Minister of
Communications and some board members at the SABC is an interesting case in
point. The following case study is a précis of a comment piece I wrote with a
colleague in August 2009 as the furore was unfolding.
Despite the recommendation that the content of the organisation’s strategic and
business plans be approved by the stakeholders, the Protocol stresses that the board
should retain “total accountability for all corporate activity”, including:
Responsibility for strategic planning and direction, major plans of action, risk
policy, annual budgets and business plans, performance objectives, major capital
decisions, and for monitoring good governance.
Ensuring that technology and systems used are adequate for running the business
properly for it to remain a meaningful competitor.
Regular assessment of its own performance and effectiveness, and that of the
individual directors.
Regular review and reporting on internal procedures.
Like the King Reports (II and III), the Protocol emphasizes the individual and
collective fiduciary duties of directors. The directors are responsible for ensuring that
the business enterprise is financially viable and properly managed. Unlike a normal
public company where shareholders have no input on staffing, the Minister
representing the shareholder (the state) retains the right of final approval of the
appointment of senior management by the board.
In line with the recommendation in the King Reports that the board adopts a charter in
which it outlines its responsibilities relative to management, but going somewhat
further, the Protocol recommends that each board have a performance agreement
which defines how its performance will be monitored and assessed. It further
recommends the adoption of international best practice in respect of board decision
making, which requires the board to:
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Vote on all material issues.
Ensure that minutes of meetings accurately record decisions taken and, where
appropriate, the views of individual board members.
Finally, the Protocol suggests that the role of the shareholder in decision-making by
the board should be clearly agreed on and defined in a shareholder compact between
the state and the organization.
FINANCIAL REPORTING
Much of the financial reporting requirements of state owned entities are now
governed by the PFMA. The Protocol endorses international best practice in the view
that there should be total independence of the audit process and that directors
collectively remain ultimately responsible for the integrity of the audit. Like King II,
it requires directors to report on the financial and other internal control mechanisms
within the organization and warrant their adequacy.
Ethics and probity in relation to corporate governance have received much attention in
the Protocol which, in line with the principles of the PFMA, is also aims at disciplined
management of the public resources and establishing a culture of financial probity and
accountability. The Protocol requires organizations to develop a formal code of
conduct defining the standards of personal behaviour to which individual board
members and all employees should be required to subscribe.
The Protocol recommends that a code of ethical conduct be adopted by all SOEs to
ensure that their stakeholders have confidence in the integrity of the institutions. Its
principles include the a commitment by all employees not to hold conflicting financial
interests or to engage in financial transactions using non-public internal information
to further any private interest and not, except pursuant to such reasonable exceptions
as are provided by regulation, to solicit or accept any gift or other item of monetary
value from any party doing business with, or conducting activities regulated by, the
employee’s organization.
SHAREHOLDER COMPACTS
The Protocol provides a detailed framework for shareholder compacts, which will be
entered into individually by the Cabinet minister representing the state and the
relevant state owned entity. Annexures to the shareholder compacts will include the
organisation’s five-year strategic plan, a one-year business plan,(updated annually)
the organisation’s code of ethics, its corporate governance schedules, a register of
conflicts of interest for management and the board, a risk control plan (including a
strategy for fraud control) and a statement of responsibility signed by the board of
directors.
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