PROMINENT South African Senior Counsel and former Supreme Court Judge Mervyn E King says profit with intellectual honesty is the essence of good governance anywhere in th
King, now a businessman and consultant, sits on more than 24 international company boards listed on the Johannesburg, London and Luxembourg Stock Exchanges and was in Zimbabwe this week to address the business community on good corporate governance. Renaissance Merchant Bank, led by Pattison Timba, hosted the event.
In his presentation entitled, “The essence of good corporate governance”, King said he felt non-executive directors should not receive the same amount of remuneration.
“Sometimes one of your non-executive directors can bring in business that earns the company a substantial amount of money and should, in all fairness, be rewarded for it,” he said. “Simply giving these guys the same payment makes them either to lose energy or interest.”
King said intellectual honesty could be achieved and practised by being aware of common law duties and constantly quizzing oneself.
He said some questions included whether when a decision was being made, was there any conflict, were all facts available, was it a rational business decision based on all the facts, was it in the interests of the company, and was the decision transparent.
King said directors also needed to ask themselves whether the company was acting in a socially responsible manner and being a steward of the company’s assets.
The former judge said one needed to ask whether the board would be embarrassed if its decision and the process employed in arriving at it appeared on the front page of a national newspaper.
King said the days of “gin and tonic” boardrooms were fast being abandoned.
“Cases of just going to the golf club and picking on your buddies to become board members simply to rubber-stamp your actions are ending,” he said. “I see this happening in the United States and in the Commonwealth where I have much experience.”
He said corporate governance could be divided into eras such as that of the entrepreneur, professional manager, corporate governance and the 21st century.
King said the era of the entrepreneur was dominated by shareowner dominance while that of the professional manager involved the “boss” taking effective control of the company.
He said in the 21st century, however, a borderless world had been created with multinationals and environmentalists playing an active part in company strategies.
King said when an individual was appointed a company director they should immediately realise that development met the needs of the present without compromising the ability of future generations to meet their own needs.
“Ownership creates responsibility,” King said. “One needs to be socially responsible and consider safety, health and environmental issues.”
He said corporate governance included duty of good faith, care, skill and diligence.
King said a company was a separate legal entity with assets.
“The chairman is the boss of the board,” he said. “The CEO is the boss of the operations. Collectively workers lead the company.”