Days of corporate secrecy over

With the regulatory noose tightening, the days of corporate secrecy are over. Unethical and criminal behaviour by companies, their employees and their agents, including suppliers, will no longer be tolerated. This was the message from Dr Janette Minnaar-van Veijeren at the recent 12^th Annual Conference of the Compliance Institute SA.

Section 69(8) of the new Companies Act contains a comprehensive list of circumstances involving fraud, misrepresentation or dishonesty under which directors will be disqualified. Section 29(6) states that anyone involved in preparing or publishing incorrect or misleading financial information will be guilty of an offence. And regulation 43 of the Companies Regulations 2011 compels every listed company, state owned company, and any company with a public interest score of over 500 points to establish a social and ethics committee.

“This effectively covers larger companies as any company with more than 500 employees or a turnover of more than R500 million will fall in to the latter category,” Minnaar-van Veijeren said.

The social and ethics committee will monitor the company’s activities and report to the board on a long list of matters including compliance with relevant legislation, rules and codes of best practice. The OECD recommendations regarding corruption and the 10 UN Global Compact Principles are specifically mentioned. Principle 10 states, “Companies should work against corruption in all its forms including extortion and bribery.”

Minnaar said the UK Bribery Act is another piece of legislation companies should study. It exposes any company with an office in the UK to potential criminal liability for acts of bribery committed by an employee or agent anywhere in the world.

Then there is King III, which states that all decisions and actions of the board and executive management should be based on the ‘RAFT’ ethical values; namely responsibility, accountability, fairness and transparency.

“While companies face no sanction for non-compliance with King III, they are accountable to their shareholders and will have to explain their reasons for opting not to implement the recommended practices. Failure to comply with King III also carries reputational risks,” Minnaar-van Veijeren said.

She said companies must build an ethics culture, as even the best set of policies will have little impact if the culture is unethical.

“Conversely, when there is a culture of ethics things tend to be done right even if the policies aren’t in place.”