The newly launched King Three report on corporate governance has stricken fear into directors and executives who are queuing for updated courses to ensure they don’t go to jail for decisions they make as directors, Liza van Wyk, CEO of major training organisation AstroTech said.
“For some time our corporate governance report had seen declining interest but with the publication of the new provisions attendance and bookings have soared. During courses directors and executives confide their concern that this has dissuaded some from becoming directors and for all who serve on boards or assist directors there is a significant sense of extra responsibility.”
The report has dramatically tightened directors’ responsibilities making them personally liable for decisions that make the company criminally negligent.
The report is the toughest yet and comes at a time when the world is putting much more pressure on companies to be transparent and behave in an ethical manner. “All of us have a responsibility to pay our fair share – that’s accountability,” said US President Barack Obama recently reiterating his campaign promises which included shutting down offshore tax havens and corporate loopholes that allowed the sort of excess that has plunged the world into a global recession.
This has become contagious as the world stands up, questions and moves to change. Recently the G20 finance leaders met and took aim at excessive pay packages and bonuses for bankers, particularly those employed by firms that have received billions of dollars in government support.Similarly President Jacob Zuma has put a strong emphasis on accountability and delivery, his administration has been the first since South Africa attained democracy to swiftly fire, suspend, shame or take action against non-performing or corrupt public officials.
Nigeria made its own banking history in August when the government sacked CEO’s of badly managed banks. Governor of Central Bank Nigeria, Lamido Sanusi said this was the most definitive move in history to reverse “a general weakness in risk management and corporate governance” in Nigerian banks. He declared September 30 as deadline for all banks to effect full disclosure of non-performing loans.
In South Africa, King 3 covers various business best practice, including corporate citizenship, audit committees, risk management, internal audits, integrated sustainability reporting and disclosure as well as compliance with laws.
From March 2010 company directors who do not comply with the King 3 report will be replaced said report author Mervyn King.
"We are asking companies to comply or explain. If they do not comply and explain, then we will use the Investors Code to deal with them," King has said. The Code will be launched toward the end of the year.
The King 3 report on corporate governance also, for the first time, includes Information Technology governance and its strategic alignment with business. King 3 demands that directors "ensure that prudent and reasonable steps have been taken in regard to IT governance." They will have to focus on four areas, namely:
||- "strategic alignment with the business and collaborative solutions, including a focus on sustainability and the implementation of 'green IT' principles;
- "value delivery: concentrating on optimising expenditure and proving the value of IT;
- "risk management: addressing the safeguarding of IT assets, disaster recovery and continuity of operations; and
- "resource management: optimising knowledge and IT infrastructure."
King 3 also says COBIT may be used as a check for the adequacy of the company's information security. It says too that IT should be on the board agenda, audit committees should oversee IT risks and controls and too, IT performance should be measured and reported to the board.
Van Wyk said their “Corporate Governance” course and their “IT and the Law” course had been updated to give directors, executives and managers an overview of corporate governance globally and then progress in South Africa from King 1 to King 3. “South Africans can be proud of these measures that ensure our country is seen by global investors as one of the best governed economies.”
AstroTech’s Corporate Governance course is aimed at executives, managers and auditors that are looking for the following benefits: