Corporate Governance – some learnings from Africa for all companies

March 16, 2022

Given that the UK was one of the first countries to really try to get to grips with the issues of Corporate Governance in the 1990’s (via the Cadbury Code), and that there has been continued development of best practice in this area through various bodies such as the FRC, IA and QCA since then, there may be a temptation to think that practices elsewhere will need to follow our lead rather than vice-versa.

However, the recent case of the South African Stock Exchange (JSE) banning two listed company directors of a high profile company from serving on any listed boards for the next 5 years highlights that corporate governance is alive and well across the globe.

In South Africa, the equivalent of the UK Corporate Governance Code and/or QCA Code is the “King Code” and whilst many aspects of it will be familiar to those dealing with this area in the UK, there are two interesting differences that should be noted.

Firstly, the last revision of the King Code (in 2016) changed the landscape such that, unlike the UK which uses a notion of “comply or explain”, the King Code requires organisations to “apply and explain”.  This therefore places a much heavier emphasis on explaining how corporate governance principles are being used in the business.  It is fair to say in the UK that many of the institutional bodies around corporate governance are still highlighting that whilst complying with the code, there are still low levels of explanation from even some of the biggest companies.

Secondly, and more radically, the language of the King Code was changed such that it now applies not just to listed companies but to any organisation – so this would include unlisted businesses as well as NGOs, charities, government departments and local councils.

Some people may question how much influence changes in South Africa could have here in the UK, but it is interesting to note that South Africa was the first jurisdiction to introduce the recommendation that the Board of the Company would have to introduce remedial action around remuneration policy or practice if more than 25% of the shareholders voted against a proposed measure.

MM&K are well placed to help with matters of corporate governance in Africa through our membership of the Global Governance and Executive Compensation Group (GECN Group) and our close links with its African member firm 21st Century.  Should you want to have someone help you explore your thinking on this issue, please contact Stuart James in the first instance.

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