It’s a riddle to which you probably know the answer. What is the golden thread of governance tying together some of South Africa’s most fraud-ridden companies of the past decade, such as Steinhoff, Tongaat, Eskom and Transnet?
There are many, of course, including boards of directors that assumed everyone else was looking at the small print, venal executives and lamentable oversight. But what is also blindingly apparent in their glossy annual reports is the number of cookie-cutter pledges that all these delinquents complied with best-in-class corporate governance.
Like a tax return from the mafia, these “governance statements” were put together with all the sorts of vows of celibacy you’d expect of fiscal philanderers.
In Eskom’s 2016 annual report, while it was being looted by friends of the Gupta brothers, it swore up and down in a 10-page governance report that it had committed to applying “the principles and practices of the King code”.
Tongaat Hulett, while busily backdating land sales and inflating its assets by R10bn, was equally effusive. Haughtily, Tongaat said that “governance is regarded by the board not as a mere compliance exercise … but rather confirms that best practice principles are effectively utilised and embedded [in] its day-to-day activities.”
And in Steinhoff’s 20-page governance report in 2016, the retailer droned on about how it “fully endorses [and] is compliant with the Dutch Corporate Governance Code”, where it was listed, and that it had a “strictly enforced” insider trading policy. Never mind that CEO Markus Jooste swindled R106bn, while liberally tipping off his mates about share trades.
What good, then, is the King code if the skelms can so easily boast about compliance as a badge of honour while weaving around it so easily?
This was a point that Mohamed Adam, the deputy chair of the King Committee, probed during a presentation to the Chartered Governance Institute of Southern Africa’s annual conference in Sandton a few days ago.
“Take Eskom. If you picked up the integrated report [in the state capture era, it] stated it complied with King, it had a board charter, it had a diverse board, more independent directors, all of these things. And the King committee was criticised, [critics] said ‘look, they apply King and nothing happens, so King is actually useless’,” he said.
But, Adam said, Eskom had completely flouted the very first principle of the King code, which was “ethical and effective leadership”. What this showed is that the worst companies applied the form rather than the substance of the code, using what they liked and ignoring what they didn’t.
Eskom’s delinquency at the time nearly broke the fiscus. During that era, an average crooked tender that went through Eskom would have probably been vetted by four committees, about 40 people. Yet the problem wasn’t that those 40 people were all corrupt, Adam said.
“The main problem was, people can sit on a committee and hide behind collective responsibility,” he said. “[They] say ‘I don’t like this decision, so can you just record that I think this is wrong’. So that’s great, the minutes have it captured, and that’s it — I fold my arms because I’ve done my job.”
We have enough laws
Superficially, that might look like enough. But it falls far short of true leadership and accountability, and a country mile away from a good outcome.
That was one criticism of the King code, but another is that it’s simply a “voluntary guide” rather than a system of clear rules.
For Adam, this goes to a conundrum at the heart of the South African state: a mistaken belief that we need more laws and legislation to get to the right place, rather than to just make sure that people actually do what they’re meant to do.
“If you look at what we’ve come through as a country, if you take the Zondo commission and you look at the corruption, we have in the country all of the laws that would have allowed us to deal with the people, the bad actors. You have the PFMA, you have the Companies Act, and you have all the legislation,” he said.
“So what was the problem? It was an ethical one, that people are not behaving ethically. And people are not accountable."
Essentially, Adam argues that we’ve had a failing of people rather than of the legal framework. And this seems to be most evident in South Africa’s runaway crime rate, and shoddy policing and prosecutions.
It is not that the laws aren’t there to prevent murder, theft and gender-based violence. It’s that the police, mandated to prevent these crimes and others, are instead often focused on how to score an extra cooldrink, or help their friends milk a tender from the Tembisa Hospital.
It’s a critical point as, with more bodies emerging in Ekurhuleni, some ahistorical politicians are now calling for the reinstatement of the death penalty. “We propose that the Constitution be revised with the aim of restoring the death penalty for femicide,” said the African Christian Democratic Party leader Kenneth Meshoe, among others.
Adam’s crisp point, which applies as squarely to this scenario as it does to dodgy tenders, is that you should use existing laws before imposing new ones.
The big gap in organisations, including municipalities and the police, is “the ethical side, personal accountability and leadership”, he says. And where people fall short on these metrics, consequences should follow.
New laws, in other words, can never hope to heal a situation where people aren’t doing what they should in the first place.
