Directors: Fighting Corruption via Your Social and Ethics Committee

A4“South Africa has lost R700 billion to corruption over the last 20 years” (Institute of Internal Auditors)

The Companies Act requires a company to set up a Social and Ethics Committee if it is:

  • A listed company
  • A state owned entity
  • A company with a public interest score of over 500 in two of the last five years.

Social and Ethics Committees have a broad mandate to reduce corruption, to ensure that B-BBEE and Employment Equity Act programs are compliant with legislation, to be a good corporate citizen uplifting society around them and to ensure all employees are treated fairly and equitably.

The Companies and Intellectual Property Commission (CIPC) is empowered to issue guidelines and practice notes on aspects of the Companies Act.

The new CIPC guideline

The purpose of this guideline is to get companies to actively fight corruption and to set up a Corporate Compliance Program along the lines of the OECD (Organisation for Economic Co-operation and Development) Recommendation on corruption.

This initiative of the CIPC is a response to State Capture and to corruption scandals in the private sector. Corruption is becoming endemic in our society and can only be turned back and stopped by a comprehensive program.

The compliance program

  1. The starting point is commitment from top management to instil into the culture of the company that corruption is unacceptable across the organisation. Senior management should ensure that the Compliance Program is communicated on an ongoing basis to all stakeholders.
  2. A risk-based approach should be used to identify all potential corruption risks and on a continual basis manage these risks throughout the company. A database of all information gathered should be continually fed back to staff and stakeholders, and shared with other organisations fighting corruption.

All activities in the company should be undertaken with the risk management process underpinning these processes.

  1. An ongoing due diligence program should verify who the company is dealing with.
  2. Policies and procedures should be implemented and these should be clear-cut and easy to understand.
  3. Compliance training is to be undertaken and all staff and key stakeholders included in the training.
  4. Whistle blowing is to be actively encouraged and separate channels should be set up for whistle blowers to communicate any wrongdoing they become aware of. Whistleblowers need to be protected against reprisals and victimisation.
  5. A high level of auditing and investigative capacity needs to be implemented. Corruption, as we know, needs to be continuously attacked until it is completely uprooted.

We are all losers when it comes to corruption, so even if your business isn’t required to form a Social and Ethics Committee, consider what steps you can take to fight it.

Finally, don’t just follow the law and think that is enough. Those implicated in State Capture or private sector malfeasance protest they have broken no laws. Equally important is to practise good governance by implementing transparent and ethical norms.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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