The need for directors to know what they are doing – and what the company is doing…

So the CEO of Telkom has been told to attend a corporate governance and director’s duties course after irregularities in a loan to the CFO (who has subsequently been suspended on an unrelated charge – according to Telkom – this suspension apparently wiped R 573M off Telkom’s market value!

The market cap of company Pinnacle Holdings has pretty much halved after allegations that one of their execs offered someone a bribe – which they deny, they are also going to be investigated for insider trading after the directors (including the one implicated and the CEO) sold shares in the past month while this has all been going on – unrelated issues apparently.

In January 2014 the director of a mining company in Limpopo was also found guilty and personally liable for environmental damage caused by the company – the charges were laid by a foundation representing the community in which the clay-mine operated. The MD has to personally pay R 6.8M to rehabilitate damages – and he received a 5 year imprisonment sentence suspended on condition that he cleans up by 30 April 2014 and does not do it again! His clock is ticking!This case is the first conviction of a director of a mining company, in his personal capacity, for mining-related environmental offences in South Africa. It is also the first time that a Director has been sentenced to imprisonment without the option of a fine and also the first time that a sentence has been linked to rehabilitation.

Without doubt one of the areas of impact in the new Companies Act (applicable since 1 May 2011) and King III Code of Conduct (that applies to ALL entities in South Africa) is the increasing accountability of directors – and potential for personal liability for acts of their companies.

One of the most challenging definitions in the new Companies Act (2008) is one that equates knowledge with position – in brief it states that if you hold the position of director or officer – this definition is very broad in itself and could make many senior people liable – it is assumed that you know what you are doing, or took the measure necessary to find out… the legislation gives NO ROOM for a defence of ignorance. If your run a company (i.e. if you make and/or implement decisions in a company) then you are liable for anything that goes wrong.

We provide a high impact Directors Duties Workshop (either half day or full day) that covers the main areas of the new Companies Act and King III and more importantly provides insight in how directors are expected to both THINK and ACT in this environment of increased liability as they make and implement decisions. We provide this In-House so we can address any issues confidentially.

Alongside the Director’s Duties Workshop we also provide diagnostics to assess your governance structure as well as Directors and Decision Makers Coaching and Mentoring – a valuable way to raise awareness and ensure you think and act in the right way as a director.

Contact me on LinkedIn or roger@sinkorswim.co.za to discuss your needs and requirements – or leave a comment below.

 

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