Business Day (Johannesburg)
Sanchia Temkin
1 July 2009
Johannesburg — A NEW corporate governance code that recommends principles and guidelines for institutional investors is on the cards.
Lindie Engelbrecht, CE of the Institute of Directors , said yesterday the institute was discussing a code of corporate governance with other stakeholders for institutional investors. "South African shareholders are generally complacent and need to be more active," Engelbrecht told a media briefing in Sandton.
At the stage of drafting the third King report on corporate governance, the issue of a code for institutional investors was brought up. Institutional investors needed to take a more active role in enforcing and monitoring governance principles, she said.
The Companies Bill, which will be passed into law next year, will introduce a new regime under which directors may be declared delinquent. This would involve an application being made to court by the shareholders or representatives of employees of the company.
Engelbrecht said there were some directors who should be "unemployable" for what they had done. Although directors might be disqualified, it was still possible for them to set up a small company under the company laws. She said this provision needed to be removed from the legislation.
Engelbrecht said a number of changes had been made to the draft third King report in light of comments received from some parties. These included tightening the definition of an "independent nonexecutive director" to, for instance, prevent such a director from having a contractual relationship with the company. Further, the 5% holding rule had been clarified, she said.
According to corporate governance code guidelines in some foreign jurisdictions, including France and the UK, directors lose their independent status after serving for about nine to 12 years on the board of a company.
However, Engelbrecht said a director's independence might be impaired after the first day, month or year serving on the board. The third King report took the decision to strengthen the evaluation of independence by performing this annually and not waiting for a prescribed period to lapse, as was the case in some jurisdictions.
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