Corporate Governance & Civil Society
01 September 2009
“Kings are earth's gods; in vice their law's their will.” William Shakespeare
Today marks the day we see the release of the final King III Report & Code. Some of you may be wondering, what in the blazes is this about? If you know, great! If you don’t, allow me to explain. This is the third report issued, since the establishment of the King Committee in 1992, considering corporate governance in the context of South Africa.
The King I considered aspects of corporate governance beyond the financial and regulatory. It actually advocated for an integrated approach that is in the interests of a wide range of stakeholders. Under this report the motto could be described as “...enterprise with integrity…” Along came King II. It focused on sustainable corporate governance practices. The report made the argument that sustainability is achieved through a strategy that is focused on the triple bottom line (planet, people and profit), as opposed to the bottom line, profit.
The King III Report & Code is significant in that it:
-is built with a frame embracing leadership, sustainability and corporate citizenship; and
-applies to all South African organisations regardless of its form, manner of establishment, whether in the private, public or the non-profit sector.
Unlike the preceding reports, which were only applicable to incorporated businesses, this report is now to include civil society organisations. Despite this, the bias towards for-profit organisations is markedly noticeable in the language employed in the Report & Code. One gets the sense that the Report & Code applies to the civil society sector as, “Oh..by the way... you must also make sure you apply it.” There is no dedicated effort put into the code to specifically ensure an appropriate application.
Save for its “apply or explain” point of departure, this approach is no different to that employed in our recently replaced Companies Act 61 of 1973. Under this Act, the entity available for the incorporation of non-profit organisations (Section 21 companies) was deemed public companies. The same provisions relevant to public companies were therefore applicable. Having assisted many involved with “section 21 companies” this made for a lot of confusion. Those seeking guidance often compared their anxieties as similar to being lost in a vast and unknowable world. Our legislatures with the new act at least recognised and corrected this with the enactment of the Companies Act 71 of 2008.
Having worked through the draft Code released in February this year, I have no doubt that King III has the potential to add great value to the non-profit sector. However, without dedicated effort to orientate civil society organisations, perhaps simply through the inclusion of a chapter recognising the challenges unique to the non-profit sector, the King III could potentially leave non-profit organisations, in particular community based organisations with the same confusion and anxieties as our erstwhile Companies Act 61 of 1973. It would be interesting to see what would the cost implications be, and, the measures taken by smaller non-profit organisations in their attempt to apply King III.
Comments
Post a Comment