Whither Civil Society Governance

transparency governance ngos accountability
Wednesday, 13 September, 2006 - 10:38

Transparency and Accountability: Are we meeting the mark?

Reporting on the SAA’s Annual Report for 2006, The Star Business Report 11 September 2006 noted that poor attendance by Board members at Board meetings of the state-owned enterprise was a cause for concern. 

Only 5 of 12 members attended all eight of the Board meetings, an attendance rate of only 41%. The worse attendance record was by Mohammed Valli Moosa, past Minister of Environmental Affairs who attended only four meetings an attendance record of 50% only.  More disturbing is the report that only one member of the Audit committee attended all six of the committee meetings.

Last week the New York Times 8 September 2006 reported that the Attorney General of California was investigating allegations that Hewlett Packard had hired private investigators to identify which of its Board members was leaking information apparently on the orders of Patricia Dunn, HP’s Chairwoman. Whilst Board member George Keyworth lll has been identified as the source of the leak, he has refused to resign. Thomas Perkins, another Board member has however resigned in anger over the way the investigation has been carried out by HP.

These events and earlier concerns about leaks on the occasion of the dismissal of Carla Fiorina’s dismissal as CEO in 2005 have led to monitoring of all phone records of Board members by investigators to gain access to personal records of journalists.

A number of questions have to be raised regarding the rights of reporters being violated but also the privacy rights of the various Board members.  How little trust exists amongst the members of the HP Board will be determined at the next AGM when re-elections take place.

South African corporates have not gone unscathed.  First, the Leisurenet scandal and more recently, the Corpcapital board battle has clearly indicated that South African Boards are also terrains of subterfuge where privacy is no longer guaranteed and no holds barred board room fights abound. 

2005 saw an ugly battle develop between various parties in the Cancer Association of South Africa, which required a commission of inquiry and caused considerable damage to the image of the organization and no doubt affected its fundraising drive.

More recently, the dispute in Jubilee 2000 between Board and staff has gone to the Labour Courts, required intervention by the SAPS, and has split the organization into two parts and no doubt reduced its internal and foreign influence considerably.

The SACP Johannesburg branch has also witnessed an internal constitutional battle with elections being abandoned two months ago and now rescheduled for mid-September. 

The Western Cape Red Cross has also witnessed a board-CE fight that has led to various public allegations which affect the operations of the Red Cross in the province as well as nationally.

What then is going on in both the corporate world and civil society?

Many of these battles are personality clashes amongst either Board members or between Board members and Chief Executive Officers.  How these clashes manifests themselves in differences of opinion which escalate to conflicts leave no doubt that  organizations need to invoke their Code of Conduct and discipline the recalcitrant Board member or CE.  Where the trust relationship breaks down, it is preferable that an exit strategy is developed without negative publicity affecting the organization or its day to day operations or its fundraising strategy.

In a recent review of the conventions on corporate governance, the Higgs Review (2003) suggested that Boards in the UK, should focus on performance and effectiveness as the very core of its activities.  Too often, Higgs claims Boards have focused on narrow sectarian visions attempting to establish great short term profit advantages instead of focusing on long term drivers of survival and success of the organization.  Often the Boards have concentrated mainly on executive pay with insufficient attention to the maximizing of shareholders interests, long term viability and protection of employees and products.

Curiously  whilst promoting the “comply or explain” dictum (established by Adrian Cadbury) the Higgs Review also makes a startling recommendation which should resonate with African culture.  Higgs recommends that a senior independent director should be identified who meets the test of independence.  This director should be available to shareholders and other stakeholders, if they have concerns which are not resolved through the normal channels of contact through the CE or the Chairperson.

An adoption of this recommendation and public dissemination of information on such a director would no doubt improve not only the image but also resolve the conflict in many of our for-profit and non-profit Boards.

Mervyn King, whilst preparing the King II report decided that non-profit and for-profit Boards did not need separate governance codes.  However, with non-profits entering entrepreneurial ventures with BEE organizations, the conflicts of interest these consortiums will develop require closer examination and review.  Safe to say that, a quick review of trade union investments company’s yields the disclosure that they have neither saved nor created jobs in our economy in a successful way.

A further concern that such joint ventures between for-profit and not-for-profit entities will need to focus on before slipping into such convenient silk bed sheets, is the role of the Chairperson or the CE.  Often these two individuals, individually or collectively have tremendous say over the unfolding of events and the terms of the engagements that they undertake.

Private arrangements are not new to corporate South Africa.  These were undertaken by the past owner of Edgars Stores and more recently by Whitey Basson of Shoprite Checkers whose family has extensive interests in companies which sell produce to Shoprite.  Such conflicts with supplier companies and recipients needs to be explored publicly when non-profits engage with either prominent political figures from the ruling party and other corporates bidding for new government contracts.

In August 2006, the Dorbyl Chief Executive Bill Cooper was involved in a company which made a considerable sum of money when it sold an asset it had bought from Dorbyl.  Foschini is another company which has been generating lucrative benefits for its Chief Executive Dennis Polak and Finance Director Ronnie Stein who “each hold a portion of the outside shareholders interest in RCS Investment Holdings”.  This was realized only recently when Standard Bank took over RCS, R20 million going to Polak and R16.1m to Stein.  The other R119m went to five other Foschini Directors.

In these times of high profiteering and unscrupulous but lucrative deal making should Civil Society Organizations and Trade Unions join the fast Did-not-join-the-Struggle-to remain-poor train?  How can stakeholders and beneficiaries protect themselves from such patently unprincipled deals?  What has happened to the old adage of service before self?  Has our liberation eaten away at our principles?

- Phiroshaw Camay, Director, Co-operative for Research and Education

Picture acknowledgement: www.fotosearch.com

 

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