Corporate Governance and IT in South Africa

What is corporate governance?

There are many definitions of corporate governance. Simply put, corporate governance is doing what is right, decent, honest and proper in order to hold a balance between, on the one hand, economic and social goals and, on the other hand between the goals of individuals and the community. The aim of corporate governance is to align, as nearly as possible, the interest of individuals, corporations and society. This basically is the definition of corporate governance by Sir Adrian Cadbury in his world famous corporate governance overview, 1999 (a report for the World Bank).

Stripped of all of its frills, corporate governance is nothing else but “governing properly“: doing the right thing. It flows from this (i) that it is essential that the company does the right thing insofar as IT is concerned and (ii) that some companies are simply better governed than others. This entails ensuring that the IT department is run competently and efficiently, by professional persons who are rated among the best in their field.

Corporate governance encompasses complying with applicable law, implementing best practices and managing risks.

Corporate governance in South Africa

Corporate Governance in South Africa was first institutionalised by the publication of the King Report on Corporate Governance in November 1994 following the formation of the King Committee on corporate governance which was formed in 1992 under the auspices of the Institute of Directors to consider corporate governance (which was becoming of increasing interest around the world) in the context of South Africa.

This was followed by the King Report on Corporate Governance for South Africa – 2002 which was prepared by the King Committee on corporate governance (“the King Report”). It was released during or about March 2002.

It is important to understand what is meant by what has come to be known as the King Report. The King Committee decided to issue their Report as a work of reference with aspirational recommendations from which the Code evolved.

The Code is known as the Code of Corporate Practices and Conduct and is contained in the Report. With effect from March 01, 2002 the new Code replaced the old Code which was contained in the King Report 1994.

So there is the Report which is a work of reference and then there is the Code which is self regulatory but is binding on companies listed on the Johannesburg Securities Exchange (JSE) by virtue of a requirement of the JSE that listed companies must comply with the Code in order to maintain their listing. Listed companies are required to state annually that they are complying with the Code and if they do not do so then they run the risk of their listing being suspended.

Tags: corporate governance, IT Governance, King III