Acceptable business practice has to be consistently reviewed to ensure that it meets with governance requirements for fairness, transparency and probity. This is according to Thina Siwendu, Director and corporate governance specialist at Cliffe Dekker Hofmeyr business law firm.

Siwendu notes that the recent results of the Ernst & Young's 2012 Global Fraud Survey say a lot more than they initially reveal.

“The results of the survey demonstrate that the reach of the law has its limits and there are aspects of corporate behaviour that cannot always be regulated,” she notes.

“For example, most senior executives would qualify as “prescribed officers” in terms of the new Companies Act. They are now required to disclose their financial personal interests. Senior executives as prescribed officers owe the same fiduciary duty to their companies as other directors. There is a need to re-induct them to this elevated role and fiduciary responsibility.

“The other aspect of the survey that merits comment is the general pressure on senior executives to deliver short-term returns in sometimes difficult trading environments, with their remuneration rewards based on these returns. This has been found to be at the root of unethical practices as it creates a fertile ground, and is a perverse incentive, for risky corporate behaviour,” Siwendu says.

“Companies can reduce the propensity towards unethical behaviour by putting into practice the governance imperatives in King III as well as the spirit of the new Companies Act, particularly the non- financial aspects of the social and ethics committee.

“If they do so, senior executives and their boards will hopefully start shifting their thinking and reward systems away from the narrow definition of corporate value to the more qualitative longer-term aspects of corporate performance envisaged by King III and the Act,” she adds.

For more information:
Thina Siwendu, Director, Corporate and Commercial practice, Cliffe Dekker Hofmeyr,
Tel: +27 (0)11 562 1326, or email: thina.siwendu@dlacdh.com

Andrea Collocott, Head: Marketing, Cliffe Dekker Hofmeyr,
Tel: +27 (0)11 562 1281 or email: andrea.collocott@dlacdh.com

Angela Graham, Tel: 073 505 9012 yeahwrite@worldonline.co.za