Corporate Governance Failures: Is it the End of Governance as we Know it?

Abstract

In the recent past there have been a plethora of corporate governance failures in South Africa, both in private and public sector. The poor corporate governance failures are causing immeasurable damage to South Africa’s reputation when it comes to corporate governance matters. These failures happen despite the recent publication of King IV code of good practice. Corporate governance failures were experienced at Eskom which is a state-owned enterprise and Steinhoff International which is a private sector which is dual listed entity both in South Africa and in Germany. These corporate governance failures are not the first, as there were high profile collapses in the pasts which included the likes of Enron, WorldCom in the United States of America and Saambou and Fidentia in South Africa. In the accounting and auditing fields, there have been lapses in ethics and governance, this includes in companies like KPMG about the work done at SARS and Deloitte with regards to the work done at Steinhoff and this has made these professions to be ethically suspects (Lane, 2016:229). Corporate governance embodies the processes and the systems by which the entities are directed, controlled and how they should be held accountable (Khurama, 2016:3592). There are legislative requirements that are based on companies Act in the case of private sector and Public Finance Management Act in the case of public sector and all these are also solidified by the principles contained in the King code, which is currently King IV. It is now also evident in the Companies Act 71 of 2008 that the matters of corporate governance are no longer just regulated in the codes of best practice but they are now part of the legislation as contained in section 76(3) (b) of the Act, while section 72(4) provides that there should be committee that will deal with social and ethics. This paper will show how corporate failures come about. Is the subscription to principles of good corporate governance helpful, if that is the case, why then did they fail? Does the drafting and publication of code of good governance make companies and organisations that subscribe to them healthier and sustainable? Will such subscriptions reduce the amount of failures or collapses of companies? Is the failure caused by the box ticking mentality?