Ethics Institute of South Africa
5 November 2012
The new Companies Act’s requirement that certain companies must have a social and ethics committee became a reality on 1 May 2012. While some companies were reluctant adoptees of the new committee, others willingly embraced it. However, companies from across this spectrum express some confusion about the actual roles and responsibilities of the committee, and how it should operate.
With the publication of the new Social & Ethics Committee Handbook, that confusion is set to reduce. The Handbook has been compiled by Professor Deon Rossouw, CEO of the Ethics Institute of South Africa (EthicsSA) and a leading authority on business ethics. Professor Rossouw has created a very practical guide to help the members of this new board committee understand what they should be doing, and how their work fits into the bigger corporate governance picture.
Part One of the Handbook provides an overview of the context which created the need for such a committee in the first place. This section looks at the influence of the King Reports on corporate governance on South Africa’s business environment, essentially creating the context for the creation of the new committee by the new Companies Act (71 of 2008). The Act’s one-sentence introduction of the new committee was subsequently fleshed out by the Companies Amendment Act (3 of 2011) and the Companies Regulations (gazetted in 2011).
In Part Two, Professor Rossouw examines in detail the legal requirements for the social and ethics committee, including its composition, powers and mandate. Part Three deals with the nuts and bolts of running an effective committee, and focuses on the charter, membership, work plan and agenda needed.
In his brief conclusion, Professor Rossouw sums up the range of benefits that taking a positive approach to the new committee can yield.
At the most basic level, of course, the formation of such a committee makes the company compliant with the law, but there is more to be gained than strict adherence to the letter of the law.
One benefit of applying the best-practice recommendations from King III to take board responsibility for social and ethics governance is that the company positions itself to consider social and ethics matters that could impact performance at a strategic, board level.
Furthermore, the new committee supplements the company’s existing sustainability and integrated reporting with an additional mechanism for reporting its social and ethics performance to shareholders. Companies that have not yet implemented sustainability or integrated reporting will, in essence, be taking their first steps on that journey when they constitute a social and ethics committee.
A final set of benefits accrue from the enhancement of the company’s management of its social and ethics performance, most notably from increased stakeholder trust and reputational value.
“Constituting a social and ethics committee is only the beginning—to move beyond simply ‘ticking the box’, companies must empower the members of the new committee to make a positive contribution to the organisation’s overall performance,” says Professor Rossouw. “The Social & Ethics Committee Handbook is designed to help companies realise the wider, strategic benefits of having a social and ethics committee.”
** The Social & Ethics Committee Handbook is available as a free download