Companies must have a conflict of interest policy, the Institute of Directors in Southern Africa (IoDSA) said on Monday.

This followed "the furore" over Eskom's decision to award a contract to Hitachi, in which the ruling African National Congress (ANC) held over 25% of the shares, (IoDSA) said in a statement.

IoDSA also called for urgent moves towards legislation to govern the conduct of business between government institutions, public entities and political parties.

"Various political parties have demanded that the ruling party rid itself of shares that benefit from public contracts," it said, adding, however, that it supported a 2008 report by the Public Protector.

In this report it was found that although then-Eskom chairperson Valli Moosa acted improperly in failing to declare a conflict between his personal interest in the ANC and his duty towards Eskom when the board awarded the contract, the award was nevertheless not in any way affected by his improper conduct.

"The mere fact that a decision was made where a board member was conflicted does not render the decision invalid," IoDSA CE Lindie Engelbrecht said.

"The critical question to ask is whether the Eskom board would have reached the decision to award the contract to Hitachi even if no conflict existed or if the correct process to manage the conflict was followed."

Engelbrecht said that one could not presume to know the answer, although the Public Protector's report appeared to confirm that the conflict did not unduly influence the award - "an opinion all would do well to respect."

According to Engelbrecht, stakeholder activism - where decisions could be questioned and accountability demanded - was one of the drivers of good governance.

"However, it should be exercised in a responsible manner and not second-guess the decisions of any board in the absence of factual information."

The IoDSA recommended that companies ensure they had a conflict of interest policy that firstly stated that conflict of interest should be avoided where possible.

Secondly, the policy should set out the process that should be followed in the event of a conflict arising.

"Regarding the ANC's shareholding in companies that tender for government contracts: I believe that this is a matter of ethics and policy which should be resolved as part of the party's policy reform process," Engelbrecht said.