Improving the quality of corporate governance in SA

2012-01-24 00:00

SOUTH Africa’s non-executive ­directors have heeded to the call of good corporate governance in the wake of the global economic re­cession, according to a report ­issued by Professional Services Firm Pricewaterhouse Coopers (PwC).

Despite the increasing levels of legislation, such as the new Companies Act and Consumer Protection Act, including ­additional risk placing greater demands on non-executive directors, the role still remained fulfilling and challenging for a large number of South Africa’s non-executive directors.

The fifth edition of the PwC ­Annual Review of Non-Executive Directors’ Practices and Fees Trends Report revealed that more prominent businesspeople are now sitting on boards, and are keen to improve the quality of corporate governance in South Africa.

Gerald Seegers, director for ­human resources services at PwC, said: “The global financial crisis of 2008 has also forced directors to ­re-examine their roles and adhere to more stringent corporate governance practice. South Africa’s non-executive directors have raised the bar for good governance in that they have adhered to the principles in performing their duties efficiently and diligently.”

However, while the talent pool in South Africa is plagued with a shortage of non-executive directors, the number of non-executive directors in South Africa rose by 13% to 2 267. In 2010, the number of non­executive directors in South Africa decreased significantly for the first time, by seven percent or from 2 159 to 2002.

Seegers said that the increase in the number of non-executive ­directors sitting on boards can also be ­attributed to a rise in the ­proportion of non-resident non­executive ­directors, to just over nine percent from 6,24% from last year.

The largest percentage of foreign non-executives comes from the United Kingdom (2,4%), followed by Australia (1,28%) and the United States (one percent).

It is interesting to note that there has also been an increase in the number of Chinese nationals and nationals from ­African countries, now serving on South African boards.

Despite the additional time ­commitment and reputational risk associated with the role, the current fee levels of South African non­executives are significantly lower than that of their international counterparts, particularly in the UK and U.S.

The median fee for non­-executive directors in the 2011 ­report is shown to be R242 000 (previous year R240 000). In the UK, the median fee for non-executive directors for the publicly listed top-250 companies is £43 000 per annum (about R533 000).

However, Seegers said that the ­increase in executive pay varies considerably from industry to industry and across large, medium and small-cap companies.

Transformation continues to be a priority for boards. At 36%, the number of black directors is still short of a demographically representative figure, said Seegers.

The ongoing development of ­corporate-governance principles, such as the King III Report, has not only resulted in increased responsibility for non-executive directors, but has also been accompanied by an increase in accountability and reputational risk. “It is, therefore, not surprising that during this ­reporting period, it was found that non-executive directors have, in certain instances, taken on ­additional positions in other ­companies, while retaining their present position,” Seegers said.

During the reporting period, 59 non-executive directors sat on more than three boards.

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