The State of Organisational Ethics in South Africa

 In a recent survey 242 Chief Audit Executives were polled for their views on various aspects of corporate governance.

By Prof Deon Rossouw

In a recent survey 242 Chief Audit Executives were polled for their views on various aspects of corporate governance. The outcome of the survey was published in the fourth edition of the Corporate Governance Index 2016 – An Internal Audit Perspective (available at: http://c.ymcdn.com/sites/www.iiasa.org.za/resource/collection/1FD175F0-82CB-40AF-9127-7A91E5C1058C/2016_Corporate_Governance_Index_report.pdf).

One of the areas on which the Audit Executives were polled was with regard to their views on Ethics as an integral part of corporate governance.

Ethics is widely regarded as a key component of good corporate governance. In the Third King Report on Corporate Governance of South Africa, the very first chapter of the Report is devoted to ethics – signifying that ethics is one of the fundamental building blocks of good governance. Also in the Fourth King Report that will be released on 1 November 2016 the prominence of ethics is once more underlined by the fact that three principles out of the total of 16 principles in the Report are devoted explicitly to Ethics.

The Corporate Governance Index 2016 indicates that despite the fact that Ethics is one of the areas that is most positively rated by Audit Executives, there is nevertheless a slight decline in perceptions of Ethics. Whereas the overall rating for Ethics in the 2015 Corporate Governance Index stood at 3.4 on a rating scale of 0 to 4, the 2016 score dropped to 3.2 – which represents a drop of almost 3%.

Ethics is viewed much more positively in publicly held companies and large private companies than in public sector organisations on national, provincial and local government levels.

The findings of the Corporate Governance Index 2016 reconfirms the findings of the South Africa Business Ethics Survey (SABES) that was released by The Ethics Institute in May 2016. The SABES report also reported very high levels of ethics awareness in publicly held companies and in large private companies. However, it was also found in the SABES Report that compared to an earlier study in 2013, companies tend to neglect training on ethics and this has resulted in a sharp increase in misconduct being observed in companies.

It is hoped that the release of the Fourth King Report on Corporate Governance for South Africa, will provide a stimulus for governing structures of organisations to ensure that their key stakeholders are familiar with, and adhere to their ethical standards.