Our Opinions

14
Feb

Changes for Social and Ethics Committees

Social and Ethics Committees – Company Law Regulations due to change

Working with professional people is always fun – especially if you get to learn something as well.

During the last few months I have been involved at the Department of Trade and Industry (DTI).  At stake are proposed changes to Social & Ethics Committee requirements as detailed in the Companies Act Regulations.

The interventions surprised me.  A positive surprise is the attention to detail and professionalism displayed by DTI, CIPC and Companies Tribunal representatives.  Another positive aspect is the receptive nature with which criticism and suggestions are accepted.  On the negative side is the apparent lack of interest by several professional firms, industry bodies, academia and listed companies, that simply never engaged.  Another worrying aspect is the disdain sometimes displayed for the general progress made by South Africa’s Social & Ethics Committees, which we know to be significant.

During the most recent seminar, held at the DBSA auditorium in Midrand, several influential speakers gave the audience a “behind-the-curtains” view of South Africa’s company law process.  Also, giving their insights, were other role players, representing professional firms, trade unions, social groups and governance consultants – including Candor Governance.

The discussions were very general, and presented, mostly, speaker wish-lists.  Clearly those wish-lists often represented a distinct bias to the relevant organisation’s objectives.  Without attributing statements to speakers or their offices, the following sentiments were raised during the seminar:

  • Compliance notices – May be issued to companies not complying with Social & Ethics Committee requirements;
  • CEO salaries – Caps on executive salaries may be considered;
  • Clear responsibilities – New legislation may be more prescriptive than before;
  • External companies – May be required to comply with Social and Ethics Committee requirements if present in South Africa;
  • Exemptions – Exemptions and exemption processes may be tightened;
  • Annual returns – A statement on compliance with Social and Ethics Committee requirements may be included in annual returns;
  • Policing – Stricter policing of Social and Ethics Committee requirements with meaningful penalties may be required;
  • Performance management – It was suggested that the Companies Act may require that targets and strategies should be disclosed and audited;
  • Performance – A focus on action, as opposed to current “monitor and report” approach;
  • Complaints – It was mooted that stakeholders should have an opportunity to report Social and Ethics Committee issues to the regulator;
  • Social and Ethics Committee skills – Similar to Audit Committees, it was suggested that Social and Ethics Committee members should have relevant skills to enable them to perform their tasks;
  • Foreign codes – It was suggested that the South African constitution and legislation should be used, as opposed to foreign UN Global Compact, OECD recommendations on Corruption and the ILO protocol;
  • Time – Social and Ethics Committee duties should have a time aspect coupled, as opposed to current open-ended responsibilities;
  • Operational focus – Consideration should be given to operational managers, responsible for carrying out policies and the types of industry and international standards they work towards.

Note that the aspects listed above includes all parties’ wish-lists for discussion purposes only.  Many aspects are unlikely to be included in future legislation.

The recent seminar had a general feeling that Social and Ethics initiatives are not having the desired effect on the South African community.  In addition, there were some radical opinions raised, especially given that we were discussing company law.  I tried to address that issue by reminding the audience that:

  • Advancing governance is a slow process;
  • South Africa leads the world by including Social and Ethics matters in its company law;
  • Legislators need to be careful to not undermine the shareholder and creditor protection foundation of company law; and
  • Policing relevant environmental, labour and societal laws should rather occur in their own domain.

 

Contact Candor Governance if your organisation would like to know our predictions for changes to Social & Ethics Committees and what our practical implementation suggestions are.


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