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Worst-ever score for corporate governance in SA - index

Nov 01 2018 21:42
Tehillah Niselow, Fin24

Less than half of audit executives surveyed in a new report believe ethics is integral in the workplace.

That's according to the Institute of Internal Auditors SA whose Corporate Governance Index report revealed that the overall ranking of ethics, compliance and assurance dropped 6.6% compared to 2017.

South Africa has seen a dip in corporate governance - the lowest overall scoring since the index's inception in 2013.

The report further noted that a fraction of those in the public sector could vouch for risk management in their organisation.

Ethics in decline 

Th report surveyed 302 Chief Audit Executives in the public and private sector, in conjunction with the University of South Africa (Unisa). 

Internal auditors are in a key role to asses corporate governance as they act as advisors to management, through the audit committee, and provide assurance on the organisations’ ability to meet its objectives, governance, risks and controls. 

The news comes as the number of corporate scandals have been piling up in recent years, stretching from Steinhoff to KPMG, VBS Mutual Bank and McKinsey and Bain & Co. 

The survey examined seven governance dimensions: Ethics, Compliance, Leadership, Operational Risks, External Risks, Performance and Assurance. 

Shock statistics

The Ethics and Assurance categories both saw the highest decline, with a 9.6% drop in attitudes in 2018. 

According to the survey, 48% of all audit executives inside institutions believe ethics is integral to the workplace, dropping from 68% in 2013, when the Corporate Governance Index was first launched. 

Audit executives in the public sector also painted a bleak picture.

Just 6% in national government strongly agreed that they had the necessary human resources to effectively execute strategy. 

Meanwhile, 4% of audit executives at state owned companies (SOC’s) said the process for identifying and managing risks was "adequate and aligned to the organisation’s strategic objectives." 

Tick-box approach

Former chairperson of the King Committee on Corporate Governance, Professor Mervyn King, attended the launch on Wednesday, and said despite the gloomy outcomes of the survey, the situation was not as dire as some believe. 

"In fact, the state of governance is more advanced [in South Africa] than the rest of the world. In the latest King Report, its outcomes are based in line with the outcomes-based framework of Integrated Reporting and the outcomes-based sustainable development goals of the United Nations.

Thus, there is a mindless, tick-box approach to governance as opposed to a mindful one."

"A few rotten apples do not make the whole basket rotten," King said.

However, he conceded that in the public sector, state-owned enterprises were "in a shocking state". 

The Institite of Internal Auditors CEO, Dr Claudelle von Eck admitted that the audit profession has come under greater scrutiny due to recent controversies, and said the CGI figures showed the sector was not equipped with the necessary resources. 

Von Eck added that the latest Index revealed sentiment in the public sector remained significantly lower than in the private sector, and hoped the 2018 index would be a "wake up call" to leaders. 

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