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Cape Town - South African listed companies must move away from only talking about governance and truly practise it, said Inoxico CEO André Stürmer on Thursday in a statement.
A study conducted by the risk solutions firm found that JSE-listed companies in the telecommunications, technology and health industries have the highest governance risk at board level.
The Inoxico Index researched the number of other external board positions held by directors of a specific organisation.
It also took into account the total number of directors per company, BEE ratings, gender and age and the market capitalisation of the companies.
The index found that the directors of South Africa’s 20 largest companies on average held 14 external directorships.
Stürmer said the index highlights the governance risks an organisation is exposed to through excessive and typically unidentified conflicts.
It also makes the directors themselves aware of the exposure they have to legislation such as the New Companies Act, he said.
"Directors have fiduciary duties which can simply not be complied with by sitting on an excessive number of boards and it is questionable whether they can add value if their attention is spread too widely.”
Stürmer said South African organisations need to apply more concrete measures to improve corporate governance to avoid falling on the wrong side of the law.
“The safe harbour provision of the New Companies Act gives protection to directors implicated in negligent behaviour if they ‘reasonably’ informed themselves prior to decision-making.
However, he cautioned, this falls away as soon as any conflict of interest is established.
“South African listed companies still need to apply themselves much more strongly to ensure that governance is not only talked about, but truly practised," said Stürmer.
- Fin24
A study conducted by the risk solutions firm found that JSE-listed companies in the telecommunications, technology and health industries have the highest governance risk at board level.
The Inoxico Index researched the number of other external board positions held by directors of a specific organisation.
It also took into account the total number of directors per company, BEE ratings, gender and age and the market capitalisation of the companies.
The index found that the directors of South Africa’s 20 largest companies on average held 14 external directorships.
Stürmer said the index highlights the governance risks an organisation is exposed to through excessive and typically unidentified conflicts.
It also makes the directors themselves aware of the exposure they have to legislation such as the New Companies Act, he said.
"Directors have fiduciary duties which can simply not be complied with by sitting on an excessive number of boards and it is questionable whether they can add value if their attention is spread too widely.”
Stürmer said South African organisations need to apply more concrete measures to improve corporate governance to avoid falling on the wrong side of the law.
“The safe harbour provision of the New Companies Act gives protection to directors implicated in negligent behaviour if they ‘reasonably’ informed themselves prior to decision-making.
However, he cautioned, this falls away as soon as any conflict of interest is established.
“South African listed companies still need to apply themselves much more strongly to ensure that governance is not only talked about, but truly practised," said Stürmer.
- Fin24
