A critical analysis of the amendments proposed to the Social and Ethics Committee by the Companies Amendment Bill, 2018

• Author: Mahhumane, D.M.
• DOI: https://doi.org/10.47348/SAMLJ/v33/i2a1
• Published date: 13 January 2022
• Date: 13 January 2022
• Citation: (2021) 33 SA Merc LJ 153
• Pages: 153-175

Articles

A CRITICAL ANALYSIS OF THE

AMENDMENTS PROPOSED TO THE SOCIAL

AND ETHICS COMMITTEE BY THE

COMPANIES AMENDMENT BILL, 2018

DELANI MILTON MAHHUMANE*

Former Postgraduate Assistant, Department of Mercantile Law, University

of South Africa

REHANA CASSIM**

Associate Professor, Department of Mercantile Law,

University of South Africa

Abstract

The Companies Amendment Bill, 2018 proposes certain changes to the

social and ethics committee established in terms of s 72(4) of the

Companies Act 71 of 2008 and reg 43 of the Companies Regulations,

2011. These new provisions are critically discussed in this article.

Although some of these provisions are commendable, others give rise to

certain concerns examined here: the lack of clarity in the functions of the

social and ethics committee, the proposed amendments regarding its

appointment and composition, and the ambiguity in the exemptions

from the requirement to appoint this committee. This article also

suggests further amendments to the current legislative provisions

regarding this committee.

Keywords: social and ethics committee; Companies Act 71 of 2008;

Companies Amendment Bill, 2018; ethics mandate of the social and ethics

committee; composition of the social and ethics committee; exemptions

from appointing a social and ethics committee

*LLB LLM (Unisa). Portions of this article are based on sections of the f‌irst author’s LLM

dissertation, completed under the supervision of the second author.

** BA (cum laude) LLB (cum laude) LLM (cum laude) (Witwatersrand) LLD (Unisa).

Associate Professor, Department of Mercantile Law, School of Law, University of South

Africa; Attorney and Notary Public of the High Court of South Africa.

153 https://doi.org/10.47348/SAMLJ/v33/i2a1

(2021) 33 SA Merc LJ 153

© Juta and Company (Pty) Ltd

IINTRODUCTION

The Companies Act 71 of 2008 (‘the Act’) improved upon its predeces-

sor, the Companies Act 61 of 1973, by requiring certain companies to

appoint a social and ethics committee.

1

From an ethical perspective, one

of the most signif‌icant aspects of the Act is the creation of a social and

ethics committee,

2

as we live in a world of greater globalisation and

sensitivity to social and ethical concerns.

3

There is a growing recognition

of the need for higher standards of corporate governance and ethics in

South Africa, and an increased interdependence between companies and

the societies in which they operate.

4

The King IV Report on Governance

for South Africa 2016 (‘the King IV Report’) adopts a ‘triple context’ or

integrated approach, which acknowledges that companies should act

with economic, social and environmental responsibility.

5

This approach

is further substantiated by s 7(d) of the Act, which aff‌irms the concept of

a company as a means of achieving both economic and social benef‌its.

The social and ethics committee is a key committee in achieving these

social benef‌its, and in ensuring that companies attain higher standards

of ethics.

6

This combined mission is particularly important at a time

when corruption in South African companies has reached distressing

proportions.

7

Improving the social and ethics performance of a com-

pany would arguably not only enhance the ethical leadership and

corporate social responsibility of a company, but might also benef‌it

the company’s reputation, enhance its sustainability, and improve the

management of its risk and legal compliance.

8

As stated by the

1

Section 72(4) of the Act.

2

Rossouw, ‘Business ethics in South Africa’ in Jondle & Ardichvili (eds), Ethical Business

Cultures in Emerging Markets (Cambridge University Press 2017) 123.

3

Department of Trade and Industry, ‘South African Company Law for the 21st Century:

Guidelines for Corporate Law Reform’ 27 GN 1183 GG 26493 of 23 June 2004 (‘DTI

Guidelines for Corporate Law Reform’) 13.

4

DTI Guidelines for Corporate Law Reform 13.

5

See the King IV Report 24.

6

RCassim, ‘Governance and the Board of Directors’ in FHI Cassim et al, Contemporary

Company Law 2 ed (Juta 2012) 462.

7

Corruption Watch, ‘Annual Report 2020: From Crisis to Action’ at 9, available at

https://www.corruptionwatch.org.za/wp-content/uploads/2021/05/Corruption-Watch-AR-

2020-DBL-PG-20210324.pdf, accessed on 24 June 2021; Muvunyi, ‘South Africa’s double

blow: Corruption and the coronavirus’, available at https://www.dw.com/en/south-africas-

double-blow-corruption-and-the-coronavirus/a-54423065, accessed on 24 June 2021.

8

Havenga, ‘The social and ethics committee in South African company law’ (2015) 78

THRHR 285 at 290. For a detailed discussion of the potential contribution of the social and

ethics committee, see Havenga, (2015) 78 THRHR 285 at 288–291 and Rossouw, The Social

and Ethics Committee Handbook: A Guidebook for South African Companies 2 ed (The Ethics

Institute (TEI) 2018) 49.

https://doi.org/10.47348/SAMLJ/v33/i2a1

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© Juta and Company (Pty) Ltd