Companies’ regulator puts more emphasis on corruption busting
Lawyer describes new guidelines as an unrealistic wishlist, while corporate governance expert says more monitoring of existing law is needed
New guidelines from the companies’ regulator, focusing on ethics and corruption, attempt to beef up the corruption-busting responsibilities of the social and ethics committees (SEC) of listed and state-owned companies considerably.
The guidelines, which were issued in the second half of November by the Companies and Intellectual Property Commission (CIPC), could make the previously downplayed SEC the most powerful board-appointed committee, giving it oversight even of the board’s audit function.
The guidelines have been issued as the government and the private sector grapple with high-profile cases of corruption that have cost the economy billions of rand and undermined the standing of the public and private sector.
The most controversial aspect of the new guidelines, which were described as an unrealistic wish list by one corporate lawyer, is that the SEC will now be responsible for ensuring the company has a clear and concise accounting policy that prohibits off-the-books accounts, as was seen at Steinhoff, for example, or inadequately identified transactions.
“The company must monitor its accounts for inaccuracies and for ambiguous or deceptive bookkeeping entries that may disguise illegal payments made by or on behalf of a company,” said the commission.
Linda de Beer, a corporate governance expert and nonexecutive director of four JSE-listed companies, said these issues were already highly regulated and the Companies Act assigned these duties to the audit committee.
“It now seems as if this duty to have a ‘clear and concise accounting policy that prohibits off-the-books accounts’ is being given to the SEC,” said De Beer. The act requires compliance with IFRS international accounting standards "and this guideline has no regard for IFRS, which already sets rules in this respect”.
Other new duties include that the SEC must ensure the company knows with whom it is doing business. It must also set out standards and procedures for company policies dealing with gifts, hospitality, customer travel, political contributions, charitable donations and facilitation payments.
A commission spokesperson, commissioner Rory Voller, said the guidelines were “a mechanism to assist SECs to effectively perform their functions and thereby create an enabling environment" for better corporate citizenship.
One company secretary, who has worked for state-owned companies and private companies, welcomed the focus on ethics, which is missing from the existing regulations, but said the level of detail suggested it was a kneejerk reaction to the year’s dramatic events.
“After the JSE released its consultation document and the proposed changes to the debt-listing requirements, the CIPC evidently felt it had to make a contribution to the debate,” said the company secretary, who did not want to be named.
De Beer said the companies caught up in corruption scandals ignored the existing laws and regulations aimed at addressing corruption because of inadequate monitoring. “My view is that focus on implementation efforts would have been more useful. Holding directors responsible in terms of the levers already in existence in section 76 and 77 of the act would go a long way as a deterrent.”