Corporate governance in the south African government -a perspective on state owned Enterprises (parastatals)

Abstract

Corporate governance principles have been widely accepted as means of conducting business, allaying fears of conflict of interest between owners and managers and a way of attracting the much needed financial injection in depressed and developing economies. The application of corporate governance was seen for a long time as being only relevant to publicly listed entities, however, with the changing business and political landscapes in many parts of the wor d, the application has now become relevant to State Owned Enterprises (SOE) as well. SOEs occupy and play a significant role in economies where they still operate and it therefore becomes critical that their management and operation is of a sound standard. There has been no single application/prescription of corporate governance that has been suitable for all countries, hence the development of various models such as the Cadbury Report, the Sarbanes-Oxley Act and the King II report. Individual countries face different challenges and the development and application of corporate governance in these countries has to take these unique situations into consideration. Countries have taken what they consider best practises from these guidelines and adapted them to suit their conditions. South Africa, despite its classification as a developing nation, competes fairly well with most developed nations in its application and development of corporate governance. The application of corporate governance in South African SOEs as recommended in the King II report has been remarkable. Challenges remain in areas such as the appointment of real independent board members, but compliance in areas such as the formation of board committees and the separation of the role of Chairperson and Chief Executive is visible.