The South African Treasurer within the Contemporary Corporate Governance Framework
by Vaughan E Firman, Finance Director - South African Operations, Netcare Ltd
Jean Renoir’s classic film, ‘La Règle du jeu’ (‘The Rules of the Game’) and contemporary corporate governance within the Corporate Treasury Department might not be readily discernible. Renoir’s film, a box office flop at the time of its release in 1939, was notable for displaying a set of strictly ordered social rules and mores of the French haute bourgeoisie, which dissolves as the film progresses. Renoir said that his aim in making the film was to show “a rich, complex society where ... we are dancing on a volcano”.
In the early years of the twenty-first century corporate malfeasance and individual scandals rocked the capital markets, led to the loss of fortunes by the rich, bankrupted the poor and destroyed the confidence and faith of investors in many institutions that were and are fundamental to making the capitalistic markets work. A sampling of headlines that were splashed across financial journals during that time included:
- ‘Special Report: The crises in Corporate Governance’
- ‘Trouble in the Boardroom’
- ‘Enron’s Demise has taken the shine off the Boardroom Table’
- ‘Tyco Board is criticised for Kozlowski Dealings’
- ‘The Wickedness of Wall Street’
Following on from these international corporate collapses, contemporary corporate governance has had a seismic shift, where many jurisdictions such as the USA, UK, Australia, Canada and South Africa introduced a variety of regulatory responses to the corporate scandals. In South Africa a number of self regulatory practices, recommendations and legislations are in the process of being adopted and have been adopted by many listed and unlisted corporates. These include regulations such as the JSE Limited regulations issued in terms of the Securities Services Act 2004, Sarbanes-Oxley Act of 2002 and Public Finance Management Act best practice guidance such as the King Report on Corporate Governance for South Africa (King ll report) or the COSO Enterprise Risk Management Framework.
Governance within South African corporates
In the Top 10 Challenges facing corporates Brinkpoint Consulting in their February 2005 article list ‘Redefining Risk: Think Landscape not Garden Plot’ as one of the 10 Challenges. Such enterprises need to approach corporate governance holistically by applying the Group’s strategic decision-making processes to maximise shareholder value, whilst recognising the enterprise’s ultimate strategic purpose. Corporates need to acknowledge that in return for their ability to function, they are subject to the rules and constraints of society and stakeholder imperatives. As such the twin requirements of conformance and performance need to be complied with. The organisational culture where sound corporate governance becomes a way of corporate life for each member needs to be achieved by embedding the under mentioned practices in the enterprise’s strategy:
- Compliance with the law and adherence to commercial legitimacy;
- Fair treatment of employees and business partners;
- Responsibility to the environment and the community in which it operates; and
- Probity, integrity and business ethics in operational practices.