GOET NOTES TEST 2.docx

**LEARNING UNIT 2** **LO1: Purpose & General Content of Corporate Governance Guidelines Established by International Organisations** **1. United Nations (UN) Global Compact** The UN Global Compact promotes corporate sustainability by integrating principles of human rights, labor, environmental pr...

**LEARNING UNIT 2** **LO1: Purpose & General Content of Corporate Governance Guidelines Established by International Organisations** **1. United Nations (UN) Global Compact** The UN Global Compact promotes corporate sustainability by integrating principles of human rights, labor, environmental protection, and anti-corruption into business operations. Companies are expected to adopt these principles across all their operations to foster ethical business practices and sustainable growth. The **Ten Principles** guide companies to: - Support and respect human rights. - Ensure non-complicity in human rights abuses. - Uphold freedom of association and collective bargaining. - Eliminate forced labor, child labor, and employment discrimination. - Promote environmental responsibility and sustainability. - Combat corruption in all forms. By embedding these principles into their strategies, businesses establish integrity and pave the way for long-term success. **2. Organisation for Economic Co-operation and Development (OECD) Corporate Governance Guidelines** The OECD Guidelines, established in 1999 and revised in 2004 and 2015, provide a global benchmark for corporate governance. These guidelines enhance financial market integrity, attract investors, and support companies in achieving superior performance. The **Six OECD Principles** are: - Establishing an effective corporate governance framework. - Ensuring rights and equitable treatment of shareholders. - Outlining the role of institutional investors, stock markets, and intermediaries. - Clarifying the role of stakeholders in corporate governance. - Emphasizing disclosure and transparency. - Defining board responsibilities. These principles are widely adopted and play a key role in fostering sound corporate governance systems globally. **3. International Corporate Governance Network (ICGN) Global Governance Principles** The ICGN Principles are designed to promote effective standards of corporate governance worldwide. These principles enhance the dialogue between boards and shareholders to improve corporate performance. ICGN's **Global Governance Principles** serve as a framework for: - Influencing public policy on corporate governance. - Fostering global governance dialogue. - Encouraging peer connection and collaboration. These principles are adaptable to national legislative frameworks and local norms, allowing for flexible application by individual companies and markets. They aim to create well-governed companies that are transparent, accountable, and responsible in their operations. **LO2: How International Corporate Governance Guidelines and Common International Corporate Governance Principles Informed the Need for Corporate Law Reform by the Department of Trade and Industry (DTI) in South Africa** International corporate governance guidelines have been instrumental in shaping the need for corporate law reform in South Africa. The South African Companies Act of 1973, outdated by modern standards, required reform due to: - **Globalization and modern business structures**: International corporate governance guidelines stress the importance of modern governance practices to remain competitive in a globalized world. The old South African corporate structures did not reflect the developments in global financial markets and business models. - **Corporate failures and governance issues**: Global principles have exposed the defects in corporate governance that led to corporate failures, highlighting the need for South Africa to adopt international best practices to prevent investor losses and business collapses. - **Ethical concerns and social responsibility**: International frameworks such as the UN Global Compact emphasize the role of corporations in ethical business practices, social responsiveness, transparency, and accountability. This pressure influenced South Africa's need for a law that demanded corporate responsibility and better governance to meet local and global ethical standards. - **Increased competition for capital**: The OECD and ICGN guidelines show that good corporate governance practices help attract international investment. South Africa needed to update its laws to ensure investor-friendly policies and compete globally for capital, goods, and services. - **Harmonization with international laws**: With increasing foreign investment and trade since the end of apartheid, South Africa had to align its corporate laws with international standards to remain attractive to global investors and encourage the smooth operation of foreign businesses within the country. - **The growth of the small business sector**: International corporate governance principles, especially the OECD guidelines, advocate for governance systems that cater to different business sizes. This aligned with South Africa's need to develop laws that were more accessible and practical for small businesses. **LO3: How Corporate Governance Came to Be Institutionalised in South Africa** Corporate governance in South Africa became institutionalized through several key initiatives: - **The King Committee on Corporate Governance (1994)**: The King Committee was a pivotal step in developing a comprehensive corporate governance framework. The **King I Report** (1994) laid the foundation for corporate governance in South Africa, focusing on best practices, accountability, and ethical leadership. It set the stage for later iterations (King II, III, and IV) that would further refine governance principles. - **The 2008 Companies Act**: This legislation was a crucial milestone in the formalization of corporate governance in South Africa. It incorporated many of the international best practices laid out by frameworks like the OECD and ICGN. The Act emphasized the responsibilities of directors, the protection of shareholders, transparency, and accountability in corporate activities. - **The JSE Corporate Governance Code (2002)**: Companies listed on the Johannesburg Stock Exchange (JSE) were required to comply with specific corporate governance standards, which were aligned with international principles. The **JSE Listing Requirements** made compliance with governance frameworks like the King Codes mandatory for listed companies. - **Ethical culture and stakeholder value creation**: The King IV Code, introduced later, embedded a culture of ethical leadership, transparency, and accountability as key aspects of governance. It emphasized performance and value creation for stakeholders, ensuring that companies operate responsibly in the interests of the public and shareholders alike. - **Precedent and common law system**: South Africa's legal system, influenced by common law, played a role in enforcing corporate governance through legal precedents, which further institutionalized good governance practices within the legal framework. - **Socio-political changes**: The end of apartheid and the reintegration of South Africa into the global economy catalyzed the need for improved governance. Globalization and the influx of foreign investments required South Africa to adopt governance structures similar to international norms. As a result, South Africa now boasts one of the most developed corporate governance frameworks in Africa, with a strong emphasis on transparency, ethical conduct, and the protection of stakeholder interests. **LO4: Voluntary and Compulsory Mechanisms that Regulate Corporate Governance in South Africa** **Applicable Legislation** - **Companies Act of 2008**: The primary statute governing companies in South Africa. It provides legal structures for company formation, regulation, and governance, ensuring that companies are created as separate legal entities through founding documents like the **Memorandum of Incorporation (MoI)**. - **State-Owned Entities (SOEs)**: Created by their own founding legislation (e.g., **Broadcasting Act for the SABC**). The Act defines how these entities operate, their rights, obligations, and the consequences of non-compliance. - **Regulatory Bodies**: Various bodies (e.g., the Companies Tribunal) are established under the Act to ensure the proper application of corporate law, aiding the swift and effective enforcement of regulations. - **Key Areas of Legislation**: The Act covers a wide range of governance issues, including competition, marketing, health and safety, employment practices, and tax obligations. **The Common Law** - Directors and officers of companies have **common law duties** that supplement their statutory duties under the Companies Act. South African company law is heavily based on **English law**, and court rulings often consider English company law precedents. - **Common law duties** are not codified in statutes but have been established through **custom, usage, and judicial decisions**. Despite the enactment of the Companies Act, common law principles still apply and have been integrated into the Act, rather than replaced. - Unlike the UK, where the **2006 Companies Act** replaced common law, South Africa continues to use common law principles in conjunction with statutory law. **Legal Precedent** - **Legal precedent** refers to court decisions that establish legal principles and guide future cases with similar facts. These precedents contribute to the **common law** and are binding in subsequent cases, especially when handed down by higher courts (e.g., the Court of Appeal). - The **Companies Act** codifies many principles from judicial precedent and common law. Section 5 of the Act allows courts to consider **foreign company law** and factors such as **economic development** when interpreting the Act. This flexibility ensures the Act remains relevant in a changing business environment. **The Application of Foreign Law** - Certain **foreign laws** apply to South African companies, especially in cases of international operations: - **US Foreign Corrupt Practices Act (1977)**: Prohibits corrupt practices globally. - **UK Bribery Act (2010)**: Known for its wide-reaching anti-corruption regulations. - **US Foreign Account Tax Compliance Act (2010)**: Enforces tax compliance for US citizens holding foreign accounts, including partnerships with other countries to ensure transparency. - These foreign laws, along with **international anti-corruption legislation**, affect corporate governance practices in South Africa, particularly for companies with international dealings. **The King Code IV** - Established in **1992** under the Institute of Directors of South Africa, led by **Justice Mervyn King**. It aimed to develop a framework for corporate governance and ethical conduct in South African enterprises. - **King I (1994)** to **King IV (2016)** laid out governance guidelines, focusing on: - Financial reporting and accountability. - Responsibilities of directors and auditors. - A code of ethical conduct for companies. - The King Codes are **voluntary**, but widely followed, and have influenced global corporate governance standards, emphasizing transparency, accountability, and ethical behavior in South African companies. **JSE Listing Requirements** - Following **King II** and **King III**, the **JSE Listing Requirements** were revised to incorporate corporate governance standards aligned with the King Reports. - These requirements, consistent with **international best practices**, grant the JSE broader discretionary powers and impose stricter obligations on the directors and sponsors of JSE-listed companies. - Listed companies are required to comply with the King Code and disclose any non-compliance in their annual reports, explaining reasons for deviations from the guidelines. The JSE's enhanced requirements ensure that listed companies maintain high governance standards. This summary highlights the interaction between voluntary and compulsory corporate governance mechanisms in South Africa, ensuring that companies are held accountable both through statutory frameworks and widely accepted best practices. **LO5: Analyze the Interaction Between the Companies Act and King IV** The **Companies Act of 2008** and **King IV** work in tandem to ensure corporate governance is effective and up to date in South Africa. The Act provides the legal framework, defining the rules under which companies operate, while King IV offers best practice principles for governance. King IV goes beyond the legal requirements of the Companies Act by promoting ethical leadership, sustainability, and value creation. Though King IV is voluntary, judicial interpretation often incorporates its principles into case law, making some aspects binding. However, if there is a conflict, the Companies Act prevails. **LO6: Explain the Approach Taken by King IV as Well as its Purpose and Legal Status** **King IV** refines concepts from previous versions and promotes governance as integral to business operations. Its objectives include fostering ethical culture, ensuring accountability, enhancing performance, and promoting legitimacy. King IV uses \"organization\" to broaden its scope beyond companies, applying to retirement funds, municipalities, and more. It is a **voluntary code**, but it gains binding status when cited in legal precedent. King IV focuses on outcomes rather than strict rules, and while not legally binding, it strongly influences corporate governance practices. **LO7: Evaluate the Extent of Legislative Regulation of Corporate Governance in South Africa** The **Companies Act of 2008** provides a statutory framework for corporate governance, ensuring companies are created and operate under legal standards. It includes provisions on company formation, reporting, health and safety, employment, and tax obligations. Directors' common law duties, derived from English law, complement these statutory duties. Courts use both statutory and common law principles when interpreting governance issues. South Africa also draws from international frameworks, such as the **US Foreign Corrupt Practices Act** and the **UK Bribery Act**, making global compliance a key consideration for companies. **LO8: Discuss the Concept of Legal Personality** A **company** is a separate legal entity from its shareholders and directors. It has its own legal personality, allowing it to own property, sue and be sued, and engage in business. Shareholders' liability is limited to their shares, and they have no direct control over company operations. This separation is vital for protecting shareholders from personal liability for company debts. However, legal personality can be disregarded in cases of fraud or misuse, where courts may hold shareholders or directors personally accountable (e.g., **Salomon v Salomon** and **Dadoo Ltd v Krugersdorp Municipal Council**). **LO9: Explain the Consequences of Separate Legal Personality and When It Will Be Disregarded** The **consequences** of a company\'s separate legal personality include the following: - The company's assets belong exclusively to it, and shareholders have no claim to them. - Shareholders are not liable for the company's debts unless they have given personal guarantees. - Only the company can seek redress for wrongs done to it. - The company can participate in legal proceedings in its own name. However, courts can **disregard** this separation in cases of fraud, reckless trading, or abuse, allowing personal liability for directors or shareholders (piercing the corporate veil). **LO10: Elaborate on the Concept of Personal Guarantees by Directors and Shareholders** **Personal guarantees** are often required from directors or shareholders to secure company debts, especially in new companies with no credit history. These guarantees can be joint or several, and while not encouraged, they are common in private companies. Guarantees typically last as long as the debt exists and may be called up at any time, making shareholders personally liable for company debts. Directors may also be held accountable for breaches of fiduciary duties, reckless trading, or non-compliance with statutory requirements under the **Companies Act**. **LO11: Explain the Consequences of Non-Compliance with the Companies Act** The **Companies Act** enforces compliance through bodies like the Companies Commission and the Companies Ombud. While non-compliance is decriminalized, companies may face administrative fines up to 10% of their turnover or R1 million. The Act also allows for **substantial compliance**, meaning minor formal defects in documents do not invalidate them unless they materially affect the substance. Non-compliance can lead to reputational damage, legal penalties, and limitations on the company's ability to operate or engage in contracts. **Prescribed Material:** **Airport Cold Storage v Ebrahim (Summary)** **Facts:** Airport Cold Storage (Pty) Ltd, a creditor of Sunset Beach Trading 232 CC (trading as Global Foods), sold imported meat and frozen vegetables to the corporation. When Sunset Beach was liquidated in 2005, a debt of R278,377.19 remained unpaid. The liquidation yielded no assets, and the plaintiff, Airport Cold Storage, received no dividend. The plaintiff sought to hold Mr. Nizaar Ebrahim (the sole member and manager of Sunset Beach) and his father, Mr. Abbas Ebrahim, personally liable for the debt, alleging abuse of the corporation\'s juristic personality. **Court:** The court reaffirmed that incorporation creates a separate legal entity, shielding directors and members from personal liability. However, this protection is not absolute. The court has the power to \"pierce the corporate veil\" when there is evidence of abuse of the corporate form. In this case, the court had to decide whether the corporate veil should be lifted to hold Mr. Ebrahim and his father personally liable for the corporation's debts. **Hulse-Reutter v. Godde (2001) Summary** **Background:** The case involved a dispute over the ownership of a property. Hulse-Reutter claimed ownership based on a verbal agreement with Godde, which Godde denied. **Key Issue:** The central question was whether the verbal agreement was legally enforceable and could transfer ownership of the property. **Court\'s Decision:** The Supreme Court of Appeal (SCA) ruled that the verbal agreement was not legally enforceable under South African law. The court emphasized that formalities, such as registration of the property transfer in the Deeds Registry, are required for ownership of immovable property to be transferred. Since these formalities were not met, ownership could not be transferred. **Cape Pacific Ltd v Lubner Controlling Investments (Summary)** **Facts:** Lubner Controlling Investments (LCI) sold its shares and a loan account to Cape Pacific (CP). These shares entitled the holder to the use of a flat in Clifton. However, LCI later denied the sale and transferred the shares to Gerald Lubner Investments (GLI). Lubner, who controlled LCI, was its sole shareholder. CP approached the court, seeking the transfer of the shares from LCI, claiming improper conduct. **Court:** The court ruled that while a company may be legally established and operated, its separate legal personality can be disregarded if it is misused to perpetrate fraud or for dishonest or improper purposes. In such cases, the court may \"pierce the corporate veil\" to hold those behind the company accountable. **LEARNING UNIT 3** **LO1: Explain the Role of Shareholders in Governance** **Ultimate Control and Ownership:** - Shareholders are considered the de facto owners of the company and hold ultimate control over the company's affairs. - Their primary role in governance is to appoint directors and auditors, ensuring the right individuals are in place to oversee the company and ensure proper governance. **Governance Structures:** - The two main governance structures in a company are: - **The General Meeting (of shareholders)**: Where shareholders exercise their powers. - **The Board of Directors**: Appointed by shareholders to manage the company. **Powers of Shareholders:** - **Common Law Position**: At common law, shareholders in general meetings hold powers not expressly given to directors by the Companies Act, the company's Memorandum of Incorporation (MOI), or shareholders\' agreement (for private companies). - **Appointment of Directors**: Shareholders appoint directors to manage the company's business. They can also impose restrictions through the MOI or shareholders\' agreements. **Statutory Presumption (Section 66(1) of the Companies Act):** - **Board's Authority**: Unless otherwise stated in the MOI, the board holds all the power and authority to manage the company's business and affairs. **Case Law - Shareholders\' Powers (Australasian Centre for Corporate Responsibility of Commonwealth Bank of Australia):** - **Limits on Shareholders\' Authority**: In this case, the court ruled that shareholders in a general meeting could not pass resolutions to express opinions on matters under the exclusive control of the board. Dissatisfied shareholders should use their power to remove the board instead. **Specific Powers and Limitations of Shareholders:** - **Power to Elect and Remove Directors**: Shareholders have the authority to vote for the election or removal of directors. - **Restrictions on CEO Appointment**: Shareholders cannot appoint the CEO. - **Dividends**: They cannot force the payment of dividends. - **Business Operations**: Shareholders have no authority to change the company's line of business or prevent directors from spending on certain matters (e.g., employee benefits, donations, or corporate expenses). **Mechanisms of Governance:** - **Shareholders' Meetings**: Shareholders exercise their authority primarily through meetings. - Under the 2008 Companies Act, shareholders' meetings are now called **\"general meetings\"**, replacing the previous terms \"extraordinary general meetings\" and \"annual general meetings\" used under the 1973 Act. **Conclusion:** The role of shareholders in governance is centered around appointing the board, holding it accountable, and ensuring the company is managed properly. While they have significant authority, much of the day-to-day management is reserved for the board. Shareholders are limited in their ability to influence business decisions directly but can exercise power through mechanisms such as removing directors or influencing broader governance decisions at general meetings. **LO2: Explain How the Balance Between Power and Accountability Is Achieved Between the Board of Directors and Shareholders** 1. **Balance of Power and Accountability:** - Effective corporate governance requires an optimal balance between power (authority) and accountability. - While the board of directors is given the authority to manage the company's affairs, shareholders hold the power to ensure accountability by electing and removing directors. 2. **Division of Power:** - The balance of power is determined by the **Companies Act**, the **Memorandum of Incorporation (MOI)**, the **shareholders\' agreement**, or **common law**. - Authority is vested either in the shareholders or the board; power cannot be exercised collaterally. This is reflected in **John Shaw & Sons v Shaw**, where it was established that a company is distinct from its shareholders. 3. **Director's Powers:** - Where authority is unclear, powers relating to the management of the company are typically conferred on the directors. Shareholders exercise influence mainly in matters expressly reserved for them in the MOI or through their voting rights at meetings. 4. **Shareholders\' Power and Meetings:** - Shareholders maintain accountability by exercising certain powers at **general meetings**, such as: - Appointing and removing directors. - Amending the MOI. - Approving significant transactions, like the disposal of assets. **LO3: Advise on All Aspects of Shareholders' Meetings** 1. **Convening Shareholders' Meetings:** - The **board of directors**, or a person authorized in the **MOI**, may call a shareholders\' meeting. - Shareholders' meetings are required in certain situations: - When the board or MOI mandates a decision by shareholders. - To fill vacancies on the board. - Upon written and signed demands from shareholders. - As required for an **Annual General Meeting (AGM)**. - Under a court order. - If no directors are available, a shareholder or the **Companies Tribunal** may convene a meeting. 2. **Notice and Proxies:** - Shareholders must be given notice of the meeting, as required by the Act and the MOI. The notice period may be shortened with unanimous consent. - Shareholders are entitled to appoint a **proxy** to attend, participate in, and vote on their behalf. 3. **Quorum Requirements:** - The meeting can only commence once the required **quorum** (minimum number of shareholders) is present. The quorum threshold can be altered in the MOI. 4. **Voting Procedures:** - **Resolutions** are voted on at shareholders\' meetings, either by a **show of hands** (one vote per shareholder) or by a **poll** (votes proportional to shares held). - Meetings may be held using **electronic communication** as long as all participants can communicate effectively. **LO4: Distinguish Between Shareholders' Meetings and the Annual General Meeting (AGM)** 1. **Purpose of Shareholders' Meetings:** - Shareholders\' meetings provide a forum for debating and voting on significant company matters. Shareholders use their powers, such as: - Amending the MOI. - Electing and removing directors. - Approving major transactions, like the sale of significant assets. 2. **Annual General Meeting (AGM):** - An AGM is a specific type of shareholders' meeting held once per calendar year, no more than 15 months after the previous AGM. - **Key functions** of the AGM include: - Presenting the company's financial statements. - Electing auditors and directors. - Addressing other legally required matters. - **Under the 2008 Companies Act**, private companies are not required to hold an AGM unless the MOI states otherwise. **LO5: Differentiate Between the Two Types of Shareholder Resolutions and Apply to a Set of Facts** 1. **Ordinary Resolutions:** - These resolutions require a **simple majority** (more than 50%) of the voting rights exercised. - They are used for routine matters, such as electing directors or approving ordinary business transactions. 2. **Special Resolutions:** - Special resolutions require a **higher threshold** of at least **75% of the voting rights** to pass. - They are typically reserved for significant matters outside the normal course of business, such as amending the MOI or approving mergers. - The company's MOI may specify different voting requirements, but there must always be at least a **10% margin** between the thresholds for ordinary and special resolutions. 3. **Application to a Set of Facts:** - If shareholders need to approve an ordinary transaction, such as appointing a new director, they would use an ordinary resolution, requiring more than 50% approval. - For major changes, like altering the MOI or dissolving the company, a special resolution with at least 75% approval would be necessary. **LO6: Fully Explain the Derivative Action with Reference to the Appraisal Rights of Dissenting Shareholders** **Derivative Action:** - A derivative action is a legal mechanism that allows shareholders or other interested parties to bring a lawsuit on behalf of a company. This action is used when a company has been wronged, but the company itself has not taken legal action, often due to the directors or management being complicit or neglectful. **Appraisal Rights of Dissenting Shareholders:** - **Common Law vs. Statutory Law:** Traditionally, common law did not allow shareholders to bring actions for wrongs done to the company, which could only be pursued by the company itself. Section 165 of the Companies Act replaces this common law position, allowing interested parties to bring derivative actions on behalf of the company. - **Dissenting Shareholders:** When a shareholder disagrees with a resolution, such as a merger, they can exercise appraisal rights. This involves: 1. **Written Objection:** A dissenting shareholder must send a written notice of objection before the shareholders\' meeting and vote against the resolution. 2. **Demand for Fair Value:** After the resolution passes, the company must notify dissenting shareholders. They then have 20 days to demand fair value for their shares. 3. **Company\'s Offer:** The company must make an offer to purchase the dissenting shareholder\'s shares at what the board considers fair value. 4. **Court Determination:** If the offer is deemed inadequate or if the company fails to make an offer, the shareholder can apply to court to determine the fair value. The court will then decide the fair value and may order either the withdrawal of the demand or the sale of shares to the company at the determined fair value. **LO7: Elaborate on How the King IV Code Approaches the Recognition of Stakeholder Interests, Including That of Shareholders** **King IV Code and Stakeholder Inclusivity:** - **Stakeholder-Inclusive Approach:** King IV advocates a stakeholder-inclusive approach, which means the interests of shareholders are not automatically prioritized over those of other stakeholders. Instead, the board should consider all relevant stakeholders, including employees, consumers, and the community, as integral to the company's well-being and long-term success. - **Directors\' Duties:** According to King IV, directors owe their duties to the company as a whole, which includes balancing various stakeholder interests. The company is considered a separate legal entity, and directors must act in the best interests of the company, considering a blend of all stakeholder interests over time. - **Long-Term Sustainability:** King IV emphasizes that the interests of shareholders and other stakeholders are interdependent. Adopting a stakeholder-inclusive approach aims to enhance the company\'s long-term sustainability by aligning various interests and promoting overall value creation. - **Applicability:** This approach is relevant not only for companies but also for other entities like retirement funds and non-profit organizations, where governance should reflect the interdependence of members and stakeholders. **LO8: Critically Discuss the Concept of Shareholder Activism and Differentiate Between the Two Schools of Thought** **Shareholder Activism:** - **Concept:** Shareholder activism involves shareholders actively influencing or controlling the company's policies and decisions, often by asserting power over the board and management. It can be driven by concerns about governance, financial performance, or other strategic issues. **Two Schools of Thought:** 1. **Proponents\' View:** - **Enhanced Performance:** Advocates argue that active shareholders can drive better company performance by challenging poor governance practices and demanding improvements. They believe that active engagement can prevent complacency and lead to better long-term outcomes for the company. - **Case Studies:** Evidence suggests that companies targeted by activist shareholders often see significant performance improvements. For example, research by Calpers showed that companies under activist scrutiny outperformed the S&P 500 Index after reforms were implemented. 2. **Opponents\' View:** - **Disruptive Behavior:** Critics argue that shareholder activism can be disruptive and counterproductive, especially when it involves uninformed or short-term demands that might undermine strong companies. They caution that excessive activism can lead to instability and distract from the company's strategic goals. **King IV Recommendations:** - King IV supports shareholder engagement as a means to promote good governance and value creation. It suggests that active involvement can help ensure that boards remain accountable and focused on long-term goals. **Response to Activism:** - **Understanding Risks:** Companies should assess their vulnerabilities, such as financial underperformance or excess cash, which might attract activists. - **Transparency:** Full disclosure of both positive and negative information can prevent activists from exploiting gaps. - **Communication:** Regular dialogue with shareholders helps align expectations and minimize potential conflicts. - **Ethical Conduct:** Companies should adhere to high ethical standards and clear governance principles to withstand activist pressures effectively. **LO9: Advise on the Role of Institutional Investors and the Best Practice Guidelines in Relation to Shareholder Conduct** **Role of Institutional Investors:** - **Professional Managers:** Institutional investors, such as pension funds and investment firms, act on behalf of beneficiaries and manage large portfolios of shares. - **Separation of Ownership and Control:** They represent beneficiaries who own the investments but do not directly manage them, thus playing a critical role in overseeing and influencing company governance. **Best Practice Guidelines:** 1. **Active Engagement:** Institutional investors should actively engage with companies to promote good governance and long-term value creation. 2. **Transparency:** Ensure transparency in both financial and non-financial reporting to build trust and mitigate risks of activist intervention. 3. **Communication:** Maintain open lines of communication with companies to understand their strategies and provide constructive feedback. 4. **Ethical Standards:** Adhere to a set of ethical principles and governance practices that guide investment decisions and interactions with companies. By following these guidelines, institutional investors can help foster robust corporate governance and contribute positively to the long-term success of the companies they invest in. **LO10: Distinguish Between a Unitary and Two-Tiered Board Structure** **Unitary Board Structure:** - **Description:** In a unitary board structure, there is a single board of directors that includes both executive and non-executive directors. - **Composition:** The board should ideally consist of more non-executive directors than executive directors to ensure effective governance. Non-executive directors are expected to be independent, with no conflicts of interest, to provide unbiased oversight. - **Governance Model:** This structure emphasizes the independence of non-executive directors, who help govern the company in the best interests of shareholders. - **Benefits:** Companies with a unitary board structure tend to have a higher market-to-book ratio and better return on equity, suggesting enhanced market performance and shareholder value. **Two-Tiered Board Structure:** - **Description:** Common in Europe, this structure features two separate boards: - **Management Board:** Composed of executive directors responsible for the daily operations of the company. It is typically chaired by the CEO. - **Supervisory Board:** Includes representatives from major shareholders, financiers, and trade unions. This board provides strategic oversight and is chaired by the chairman of the board. - **Function:** The supervisory board is tasked with setting the strategic direction and overseeing the management board's execution of day-to-day operations. - **Benefits:** The separation of management and oversight roles can lead to more focused strategic decision-making and better monitoring of management performance. **LO11: Critically Discuss the Role and Functions of the Governing Body (Board of Directors)** **Role of the Board of Directors:** - **Strategic Direction:** The board is responsible for defining the company\'s purpose and setting its strategic direction. This includes determining the company\'s values and ensuring that operations align with these values. - **Oversight and Governance:** The board oversees the company's performance, ensuring compliance with legal and regulatory requirements while balancing risk and opportunity. - **Composition and Qualities:** An effective board should have a balance of independence, integrity, competence, inclusivity, and diligence. Board members need to be informed about the company and its environment to make sound decisions. **Functions of the Board:** 1. **Strategy Setting:** Establish long-term goals and strategies for achieving them. 2. **Risk Management:** Identify and manage risks while ensuring compliance with applicable laws and regulations. 3. **Financial Oversight:** Review and approve financial statements, budgets, and major investments. 4. **Performance Monitoring:** Evaluate the performance of the CEO and senior executives, ensuring alignment with the company\'s goals. 5. **Corporate Governance:** Ensure adherence to good governance practices, including transparency and accountability. 6. **Compliance:** Delegate responsibility for compliance to an executive, but maintain overall responsibility for ensuring that the company complies with laws and regulations. **Challenges:** - **Complexity of Modern Companies:** The board may struggle to effectively monitor all aspects of a complex, modern business. There is an argument that expecting non-executive directors to fully understand and oversee complex operations is unrealistic. - **Risk Attitude:** Boards need to strike a balance between aggressive growth strategies and prudent risk management. **LO12: With Reference to a Set of Facts, Advise on the Formalities and Procedures Related to Board Meetings** **Formalities and Procedures:** 1. **Notice and Quorum:** - **Notice:** Directors must be given proper notice of board meetings. Even directors on leave or temporarily absent due to conflicts must receive notice and board papers. - **Quorum:** A minimum number of directors (usually specified in the memorandum of incorporation) must be present for the meeting to be valid. If the memorandum does not specify, a simple majority is typically required. 2. **Board Papers:** - **Distribution:** Board packs, including minutes, reports, and supporting documents, should be distributed at least a week before the meeting. This allows directors to prepare adequately. - **Format:** Distribution may be electronic or physical. 3. **Attendance Registers:** - **Record Keeping:** Although the 2008 Act does not mandate a formal attendance register, it is considered good practice to maintain records for verifying attendance and other administrative purposes. 4. **Role of the Chairman:** - **Authority:** The chairman is responsible for presiding over the meeting, ensuring proper procedure, and resolving any procedural issues. - **Function:** The chairman should call the meeting to order, confirm quorum, and guide the meeting's agenda. 5. **Approval of Previous Minutes:** - **Procedure:** Minutes of the previous meeting should be reviewed and approved. This typically involves circulating the minutes with the board pack and formally adopting them during the meeting. 6. **Debate and Resolutions:** - **Motions:** Items on the agenda are debated and voted upon. The chairman ensures that discussions are conducted properly and that motions are clearly stated for resolution. - **Formal Motions:** Formal motions related to meeting procedures can be introduced at any time and are typically not listed on the agenda. 7. **General Business:** - **Scope:** New business can be introduced under 'General' if it is within the scope of the meeting. Urgent matters can be discussed immediately if all directors agree. By adhering to these procedures, boards ensure that meetings are conducted effectively, decisions are properly documented, and compliance with legal requirements is maintained. **LO13: Advise on all Concepts Relating to the Composition of the Governing Body/Board of Directors with Specific Reference to the Roles, Duties, and Responsibilities of Various Types of Directors** **1. Types of Directors** - **Executive Directors**: - **Definition**: These directors are involved in the day-to-day management of the company. - **Role**: Typically include the CEO and other senior management roles. - **Duties**: Responsible for implementing the board\'s strategy and managing operational activities. - **Appointment**: At least two executive directors are recommended, including the CEO, to ensure multiple points of contact between the board and management. - **Non-Executive Directors**: - **Definition**: These directors do not engage in daily management but provide independent oversight. - **Role**: Monitor and review management\'s performance and contribute to strategic direction. - **Duties**: Offer independent judgment on company issues, protect the company\'s interests, and ensure objective decision-making. - **Remuneration**: Typically receive only directors\' fees and not salaries. - **Independent Directors**: - **Definition**: A subset of non-executive directors who are free from any material relationship with the company that could affect their independence. - **Role**: Ensure unbiased and independent decision-making. - **Duties**: Must act without any conflict of interest or undue influence and maintain objectivity. **2. Roles and Responsibilities** - **Board as a Whole**: - **Strategic Direction**: Define the company's purpose and values. - **Governance**: Ensure compliance with legal and regulatory requirements. - **Oversight**: Monitor company performance and risk management. - **Executive Directors**: - **Management**: Oversee day-to-day operations. - **Strategy Implementation**: Execute the board's strategic plans. - **Non-Executive Directors**: - **Monitoring**: Assess management's performance and adherence to strategy. - **Strategic Advice**: Provide input on strategic decisions and company policies. - **Independent Directors**: - **Objectivity**: Ensure impartiality in board decisions. - **Challenge**: Question and scrutinize management decisions. **LO14: Analyse How the Independence of the Board May Be Ascertained** **1. Definition of Independence** - **King IV Recommendations**: - **Independence in Fact and Perception**: Directors should be independent both in reality and how their independence is perceived by an informed third party. - **Long-Term Service**: Directors who have served for more than nine years may still be considered independent if, after rigorous evaluation, they are deemed to maintain their objectivity and judgment. **2. Assessment Criteria** - **Evaluation of Independence**: - **No Conflicts of Interest**: Directors should not have any material relationships or associations that could influence their independence. - **Regular Review**: Independence should be reviewed at least annually, especially for long-serving directors. - **Balancing Independence**: - **Avoid Over-Independence**: A board overly focused on independence may become risk-averse, which could be detrimental in volatile situations. - **Pragmatic Approach**: Balance between independence and practical business experience is crucial. **LO15: With Reference to a Set of Facts, Analyse the Ways in Which the Governing Body/Board of Directors Can Be Regulated to Create a Competitive Advantage for the Organisation** **1. Strategic Board Composition** - **Alignment with Company Needs**: - **Start-Up vs. Mature Companies**: Different stages of a company's life cycle require different board competencies and experiences. - **Competency Matrix**: Develop a matrix to identify necessary skills and fill gaps through targeted recruitment. **2. Succession Planning** - **Systematic Renewal**: - **Formal Plans**: Implement formal director succession plans to ensure ongoing renewal and alignment with strategic needs. - **Regular Reviews**: Regularly assess board composition and adjust as necessary to meet evolving challenges. **3. Diversity and Balancing** - **Importance of Diversity**: - **Gender and Ethnic Diversity**: Enhancing diversity can bring a broader range of perspectives and improve problem-solving. - **Balancing Talents**: Ensure the board includes a mix of roles such as innovation, analysis, execution, and human relations. **4. Effective Governance** - **Performance Monitoring**: - **Assessment of Directors**: Regularly evaluate directors' performance and relevance to current needs. - **Independent Committees**: Ensure key committees are chaired by independent non-executive directors. **5. Crisis Management** - **Preparedness**: - **Crisis Categories**: Understand and prepare for various types of crises (e.g., financial, technological, legal). - **Crisis-Ready Board**: Build a board that can effectively handle crises and adapt strategies as needed. **6. Keeping the Board Involved** - **Beyond Meetings**: - **Engagement**: Keep directors actively engaged and informed between formal meetings through regular updates and involvement in key issues. By integrating these practices, a board can enhance its effectiveness, maintain its independence, and create a competitive advantage for the organization. **LO16: Critically Discuss the Concept of a Dysfunctional Board** **Concept of a Dysfunctional Board** A dysfunctional board is one that fails to operate effectively due to internal conflicts, lack of transparency, or misalignment with the company\'s best interests. Key characteristics of a dysfunctional board include: - **Extraneous Agendas**: The board allows personal or factional interests to override the company's best interests. - **Lack of Transparency**: Discussions within the board are not open or transparent, leading to misunderstandings and mistrust. - **Internal Divisions**: The board may be divided into factions or camps, which can result in adversarial interactions rather than collaborative problem-solving. - **Voting Based on Allegiances**: Decisions are made based on personal alliances rather than objective considerations of what is best for the company. - **Tension and Hostility**: Open hostility or tension between directors can undermine the board\'s effectiveness. - **Frequent Leaks**: Information from private board meetings is often leaked, eroding trust and confidentiality. - **Overbearing or Non-Participating Directors**: Some directors may dominate discussions or fail to contribute meaningfully. **Implications of a Dysfunctional Board** - **Performance Impact**: A dysfunctional board often reflects in poor company performance, as it may be unable to make coherent or strategic decisions. - **Governance Issues**: Lack of effective governance can lead to regulatory and compliance issues, damaging the company's reputation and operational stability. **Examples and Case Studies** - Historical cases like Enron and Lehman Brothers illustrate how board dysfunction can lead to catastrophic business failures, where internal conflicts and poor governance contributed to the companies\' downfalls. **LO17: Critically Discuss How the Right Boardroom Culture Can Be Created** **Creating the Right Boardroom Culture** 1. **Selecting the Right Directors**: Ensure a balance of independent and experienced directors. Independence is crucial for unbiased decision-making, while experience provides valuable insights. 2. **Director Compensation**: Set appropriate compensation to attract top talent without compromising their independence. Avoid excessively high compensation that may undermine objectivity. 3. **Promote Healthy Dissent**: Encourage a culture where directors feel comfortable expressing dissenting views. This prevents a too-congenial environment and ensures all perspectives are considered. 4. **Nurturing Trust and Integrity**: Foster strong, trusting relationships among directors and between the board and management. This involves transparency, open communication, and respect. 5. **Training and Development**: Train directors in governance and strategic oversight to enhance their effectiveness in their roles. 6. **Regular Evaluations**: Conduct comprehensive board evaluations to identify areas of underperformance and areas for improvement. Address issues proactively to maintain a high standard of performance. **Key Practices** - **Regular Board Meetings**: Increase the frequency of board meetings if necessary, but ensure meetings are well-structured and purposeful. - **Facilitate Constructive Engagement**: Ensure that board discussions are constructive, respectful, and focused on the company's goals rather than personal interests. **LO18: Explain the Purpose, Role, and Requirements of the Various Board Committees with Reference to Legislation and King Code Recommendations** **Purpose and Role of Board Committees** 1. **Audit Committee** - **Purpose**: Focuses on financial reporting, internal controls, and compliance. - **Role**: Ensures accurate financial reporting, maintains effective internal controls, and oversees compliance with laws and regulations. - **Requirements**: Must be composed of independent non-executive directors. The committee is responsible for reviewing financial statements, internal audits, and the external audit process. 2. **Remuneration Committee** - **Purpose**: Develops and oversees remuneration policies for executives and directors. - **Role**: Balances company interests with those of employees by setting fair remuneration policies and practices. - **Requirements**: Should consist exclusively of non-executive directors who are independent of management. The chairman of the board may not chair this committee. 3. **Nomination Committee** - **Purpose**: Identifies and recommends candidates for board positions and oversees succession planning. - **Role**: Ensures the board is composed of individuals with the necessary skills and diversity to meet the company's needs. - **Requirements**: Typically chaired by a non-executive chairman and includes regular reviews of board composition and succession planning. 4. **Social and Ethics Committee** - **Purpose**: Oversees the company's social and ethical performance, including corporate social responsibility (CSR) initiatives. - **Role**: Ensures the company adheres to ethical standards and contributes positively to society. - **Requirements**: The committee must include members with relevant expertise and experience in social and ethical matters. **Legislation and King Code Requirements** - **Companies Act (2008)**: Mandates the creation of certain committees (e.g., audit and social and ethics committees) for certain types of companies. - **King IV Code**: Provides guidelines on the composition, responsibilities, and best practices for board committees, including requirements for independence, transparency, and effectiveness. **LO19: Analyse How the Performance of a Governing Body/Board of Directors May Be Measured** **Measuring Board Performance** 1. **Evaluation Frequency**: Boards should be evaluated at least annually, or every two years as recommended by King IV. 2. **Evaluation Methods**: - **Interviews**: Conduct one-on-one interviews with directors to gather qualitative feedback. - **Questionnaires**: Use structured questionnaires to collect quantitative data on board performance. - **Feedback Sessions**: Hold sessions to discuss findings and develop action plans for improvement. 3. **Key Performance Areas**: - **Compliance**: Evaluate adherence to the board charter and committee terms of reference. - **Strategic Direction**: Assess the board's effectiveness in setting and guiding the company's strategic direction. - **Governance**: Review the board's role in ensuring good governance practices. 4. **Outcome Utilization**: - **Director Reappointment**: Use performance evaluation results to determine which directors should be reappointed or replaced. - **Improvement Plans**: Develop and implement plans to address identified performance gaps and enhance board effectiveness. 5. **Transparency**: Ensure that evaluation results and processes are transparent and contribute to improved governance practices. **LO20: Explain the Concept of a Fiduciary Duty Held by Directors and Other Company Officers** **Concept of Fiduciary Duty** - **Definition**: A fiduciary duty is a legal obligation where a director must act in the best interest of the company, displaying \"utmost good faith\" in all dealings on its behalf. - **Role of Directors**: From the moment of appointment, directors are fiduciaries to the company. They must act with integrity, prioritize the company's interests, and are personally liable for breaches. - **Individual vs. Collective Responsibility**: Directors owe fiduciary duties individually to the company. The board as a collective cannot hold fiduciary duty since it is not a separate legal entity. - **End of Duty**: Fiduciary duties typically end upon termination of directorship but can survive in certain circumstances, such as when a director exploits opportunities created in breach of duty. **What it Means to be a Fiduciary** - **Integrity and Responsibility**: A fiduciary must act as one would wish to be treated, with high integrity, curiosity, sound judgment, and a focus on the company\'s best interests. - **Expectations**: Directors should have a strong interest in the company's business, demonstrate independence of thought, and maintain a high level of diligence and ethical behavior. **LO21: Appraise the Extent to Which Inherent Powers Are Conferred on Directors** **Directorial Powers** - **Historical Context**: Previously, directors derived their powers from shareholders either explicitly (through the memorandum and articles) or implicitly (to the extent not reserved to shareholders). - **Current Position (2008 Companies Act)**: - Section 66(1) confers broad powers on the board to manage the company\'s business, except where restricted by the Memorandum of Incorporation (MOI) or the Act. - Powers are conferred on the board collectively, not on individual directors, who cannot bind the company unless specifically authorized. - **Exceptions**: Individual directors can act on behalf of the company if specifically empowered, such as signing annual financial statements. **LO22: Discuss the Common Law Duties of Directors** **Categories of Duties** 1. **Duty of Care, Skill, and Diligence**: - Directors must manage the company as a reasonably prudent person would their own affairs. 2. **Fiduciary Duty**: - **Duty of Proper Purpose**: Directors must use their authority only for the purpose for which it was granted. - **Duty of Good Faith**: Must act in the best interests of the company. - **Duties to Subsidiaries**: Include proper management and protection of subsidiary interests. - **Independence of Action**: Directors must act independently and not be influenced unduly. - **Duty to Act Intra Vires**: Must act within the scope of authority and adhere to the MOI and board mandates. - **Acts Which Cannot be Ratified**: Certain acts, such as those done in fraud or breach of fiduciary duty, cannot be ratified by the company. - **Liability to Account for Profits**: Directors must account for any personal profit gained from their position. - **Duty to Act "As a Board"**: Decisions should be made collectively, not individually. **Codification by the 2008 Companies Act** - **Section 76**: Codifies common law duties but does not replace them, requiring directors to act in good faith, for a proper purpose, in the best interests of the company, and with reasonable care, skill, and diligence. **LO23: With Reference to a Set of Facts, Explain the Liability of Directors for Breach of Duties as Well as Indemnity Afforded to Directors, with Emphasis on the Business Judgement Rule** **Liability of Directors** - **Breach of Duties**: - **Ultra Vires Acts**: Directors are liable for losses resulting from actions taken outside their authority. - **Breach of Fiduciary Duty**: Includes improper use of powers or acting in conflict with the company\'s best interests. - **Negligence**: Failing to exercise the expected degree of care and skill. - **Business Judgement Rule**: - **Purpose**: Protects directors who act in good faith, are properly informed, free from conflicts of interest, and act in the company's best interests. - **Application in South Africa**: Although not explicitly named in the 2008 Companies Act, Section 76(4) provides similar protection, shielding directors from liability for decisions made in good faith. **Indemnity for Directors** - **Section 78(6) of the 2008 Act**: - Allows companies to indemnify directors unless they acted without authority, recklessly, or fraudulently. - **Exceptions**: Indemnity is not available for directors who knowingly acted beyond their authority, allowed the company to trade while insolvent, or engaged in fraudulent activities. **LO24: Discuss in Detail Other Liabilities of the Director in Relation to the Act** **Liabilities Under the 2008 Companies Act** - **Civil Liabilities**: - **Breach of Statutory Duties**: Directors are liable for losses caused by failing to comply with the Act or the company\'s MOI. - **Shareholder Claims**: Section 20(6) allows shareholders to claim damages for actions that contravene the Act or MOI, provided these are not ratified by shareholders. - **Criminal Liabilities**: - **De-criminalization**: The 2008 Act has largely de-criminalized director liabilities compared to the previous regime. - **Penalties**: In serious cases, directors may face fines or imprisonment for fraud or severe breaches. - **Personal Liability**: - **For Improper Gains**: Directors must compensate the company for any gain made improperly. - **For Losses**: Liability for losses incurred due to unauthorized actions or breaches of fiduciary duty. **LO25: Set Out the Roles of the Following Company Officers** **1. The CEO** - **Developing and Recommending Long-Term Strategy**: - Formulates a long-term vision and strategy to generate satisfactory returns and add value for shareholders. - Proposes this strategy to the board for approval. - **Annual Business Plan and Budget**: - Develops and recommends an annual business plan and budget aligned with the long-term strategy. - **Day-to-Day Management**: - Ensures the company's daily operations are managed effectively based on the authority delegated by the board. - **Corporate Policies**: - Formulates and oversees the implementation of major corporate policies. - **Ethical Leadership**: - Sets the \'tone at the top\' to provide ethical leadership. - Ensures compliance with all relevant laws and regulations. **2. The Company Secretary** - **Administrative Duties**: - Responsible for convening meetings, maintaining statutory records, and ensuring compliance with relevant legislation. - **Legal Responsibilities**: - **§88(2) Expanded Role**: - Advises directors on relevant laws affecting the company. - Reports failures to comply with the MOI or the Act to the board. - Certifies compliance with reporting obligations in the annual financial statements. - Oversees publication of annual financial statements and filing of the annual return with the Commission. **3. Prescribed Officers** - **Definition**: - Individuals designated by the responsible Minister who exercise significant executive control or management within the company, despite not being directors. - **Duties**: - **Compliance with Director Duties**: - Subject to the same duties of care, skill, diligence, and fiduciary responsibilities as directors (Sections 75-77). - MOI binds prescribed officers similarly to directors (S15(6)). **4. External Auditors** - **Audit Responsibilities**: - Examine annual and group financial statements, ensuring they align with accounting records and comply with the Act. - Verify proper accounting records, minute books, and registers of interests. - Ensure compliance with the Companies Act and the Auditing Profession Act. **LO26: Apply the Specific Requirements as per the JSE Listings Requirements** **1. Appointment of Directors** - **Expertise and Experience**: - Directors and senior management must collectively have appropriate expertise and experience for effective governance and management (JSE Listing Requirement 4.8(a)). - **Declaration Forms**: - Directors' declaration forms must be submitted, ensuring directors are free of conflicts of interest (JSE Listing Requirement 4.9). **2. Officers of the Company** - **Executive Financial Director**: - All applicants must appoint an executive financial director (JSE Listing Requirement 4.8(b)). - **Company Secretary**: - A company secretary must be appointed in compliance with the Companies Act and King Code recommendations. The board must evaluate the competence and experience of the company secretary (JSE Listing Requirement 4.8(c)). **3. Directors' Declaration** - **Requirement**: - Directors must complete declaration forms verifying they are free of conflicts of interest (JSE Listing Requirement 4.9). **LO27: Evaluate the Importance of the Remuneration Report** - **Fairness and Transparency**: - The board is accountable for ensuring remuneration is fair, responsible, and transparent, promoting sustainable value creation. - **Remuneration Policy**: - Establishes principles for remuneration across all levels. - Includes details on employment contracts, fairness considerations, and the basis for non-executive director fees. - **Shareholder Engagement**: - The policy should outline measures if a significant number of shareholders vote against it, promoting accountability and responsiveness. **LO28: Critically Analyse Executive Remuneration with an Emphasis on Ethical Considerations** - **Ethical Considerations**: - The wage gap between executives and lower-paid employees has come under scrutiny. - King IV emphasizes fairness in executive remuneration relative to overall employee remuneration. - **Addressing Wage Gap**: - Companies should address disparities in pay and ensure equitable compensation practices. - Consider the impact of race and gender wage gaps and strive for pay equity. - **Disclosure and Responsibility**: - Although specific remuneration amounts need not be approved by shareholders, full disclosure is required. - Companies should demonstrate efforts to mitigate pay disparities and promote ethical remuneration practices. **LO29: Advise on the Approach That Should Be Taken by Directors in Responding to Crisis** - **Immediate Response**: - **Investigate the Issue**: - Gather all facts and documentation related to the crisis. - Request a special board meeting if necessary to address the issue promptly. - **Engage the Board**: - The board should discuss the crisis, assess its implications, and determine appropriate actions. - **Communication**: - If the chairman fails to act, the director can request the company secretary to ensure the issue is addressed. - **Public Announcement**: - Agree on the public announcement of the resignation or crisis response, ensuring transparency in communication. - **Resignation Consideration**: - If a director believes the situation reflects deeper ethical issues, they should consider resigning and communicating their reasons to the board. **PRESCRIBED MATERIAL:** **Levenstein v S:** - **Context:** A letter from the chairman of Regal endorsed a request by CEO Jeffrey Levenstein concerning cash and shares. This endorsement was not dated. - **Meeting Details:** A letter dated January 26, 2000, from non-executive director Mr. PF Nhleko, referred to a meeting of non-executive directors on January 25, 2000. Nhleko expressed support for reviewing Levenstein's remuneration and Regal's restraint agreement, suggesting the establishment of a remuneration committee per the King Code. - **Implication:** The chairman's endorsement was likely made following the January 25 meeting mentioned by Nhleko. **South African Broadcasting Corporation Ltd v Mpofu:** - **Corporate Governance Presentation:** In early 2008, the Board of the SABC attended a presentation by Mr. Mervyn King SC on corporate governance, emphasizing the separation of management and Board roles. - **King Code Recommendations:** The King Code, relevant to public sector enterprises, advocates applying its principles without detailed conduct rules. It supports a unitary board structure and stresses efficient Board meetings, adequate briefings, and comprehensive information for decision-making. - **SABC\'s Governance Practices:** The court noted that the SABC's Board did not adhere to best practices, particularly regarding the respondent's limited and inadequate participation in meetings, which was contrary to King Code principles for public enterprises. - **Ubuntu-Botho Values:** The court emphasized incorporating Ubuntu-Botho values into corporate decision-making, advocating for constructive dialogue and avoiding impetuous decisions. The philosophy of Ubuntu-Botho, reflecting communal values and respect, was suggested as a guiding principle for governance. **S v Brown \[2015\] All SA 452 (SCA)**: **Facts:** - **Background:** The appellant, Mr. Brown, was convicted of murder for killing a man, Mr. O'Neil, during an altercation. Brown claimed he acted in self-defense. - **Incident:** The incident occurred after a heated argument between Brown and O\'Neil. Brown contended that he was attacked by O\'Neil and, in response, used lethal force. **Issues:** - **Self-Defense:** The primary issue was whether Brown's use of force was justified under the circumstances as self-defense. The court had to determine if Brown\'s belief that he was in imminent danger was reasonable and if his response was proportional to that danger. **Judgment:** - **Self-Defense Criteria:** The SCA considered the legal principles of self-defense, including the necessity and proportionality of the force used. For self-defense to be valid, the force must be reasonable and proportionate to the threat faced. - **Application to Facts:** The SCA found that the trial court did not properly consider the evidence regarding Brown\'s belief in the threat he faced and whether his response was appropriate. The SCA emphasized that self-defense must be judged from the perspective of the accused at the time of the incident, not with hindsight. **Conclusion:** - **Appeal Outcome:** The SCA concluded that the trial court erred in its judgment. The SCA set aside the conviction, ruling that the evidence supported Brown\'s claim of self-defense. The case was remitted for a new trial to properly consider the self-defense claim and apply the correct legal principles. **S v Brown** highlights the importance of assessing self-defense claims based on the immediate perception of danger and the reasonableness of the response, reinforcing the need for careful consideration of all evidence in such cases.