Good Corporate Governance in the World Economy
Corporate governance, or rather lack of it, has been cited as one of the main reasons for some of the most recent spectacular national and international corporate failures. Most companies claim to endorse the principles, and profess to comply with the spirit and standards of good corporate governance. However, the proof of the gap between theory and practice is often reflected in the collapse of even major corporates.

In recent years, South African shareholders have been deprived of billions of rands in value as seemingly mighty companies crashed or shed substantial value due to overtly bad governance and leadership. Coupled with this, and spurred on by the Enron disaster, shareholders and analysts alike are increasingly demanding that, to avoid any possible conflicts of interest, there must be a differentiation and separation of the auditing and consulting services provided by companies' accountants.

Therefore, in order to have any credibility, issues such as conformance with corporate governance best practice must be measured and tested by an independent body. This specific issue was emphasised by the Minister of Finance, Trevor Manuel in his 2002 Budget Speech in parliament. The implication is clear: be proactive, or face legislation.

The JSE Securities Exchange (JSE) has recently proposed changes to the listing and disclosure requirements, which are due to take effect from 1 November 2002, to bring them in line with the recommendations of King III. These changes include, inter alia, the following:

• All boards and individual directors have a duty and responsibility to ensure that the principles set out in the second King Report on Corporate Governance are observed.
  
  
• A company will now be required to include in its annual report:
  1. A narrative statement of how it has applied the principles as set out in the Code of Corporate Practices and Conduct, as contained in the King Report, providing an explanation that enables its shareholders to evaluate how the principles have been applied; and
  2. A statement addressing the extent of the company's compliance with the King Code and the reasons for non - compliance with any of the principles in the Code, specifying whether or not the company has complied throughout the accounting period with all the provisions of the King Code, and indicating for what part of the period any non- compliance occurred

This list is not exhaustive and there are many other disclosure requirements relating to the description of directors, their shareholding and trades herein, their emoluments etc.

By bringing the listing requirements in line with the recommendations of King III, the JSE Securities Exchange has indicated its seriousness about enforcing compliance with the Code of Corporate Practices and Conduct. Clearly therefore, companies no longer have a choice in the matter and failure to comply could have serious repercussions. Time is now rapidly running out for companies to conform.

Until now there has been no way to monitor conformance, nor has there been any recognised body that could offer such a service. This is where CGA can assist you, while you continue with your core business.