The protection of stakeholders : the South African social and ethics committee and the United Kingdom’s enlightened shareholder value approach : part 2

• Author: Irene-marié Esser,Piet Delport
• Pages: 221-241
• Date: 01 December 2017
• DOI: 10.10520/EJC-c8e936560
• Record Number: dejure_v50_n2_a3
• Published date: 01 December 2017

221

The protection of stakeholders: the South

African social and ethics committee and

the United Kingdom’s enlightened

shareholder value approach: Part 2*

Irene-marié Esser

LLM, LLD

Senior Lecturer in Commercial law: University of Glasgow

Professor Extraordinarius: University of South Africa

Visiting Professor: The Open University, United Kingdom

Piet Delport

LLD, H DipTax Law

Professor of Mercantile Law: University of Pretoria

OPSOMMING

Die beskerming van belanghebbendes: die Suid-Afrikaanse sosiaal en etiek

komitee en die Verenigde Koninkryk se ingeligte aandeelhouer waarde

benadering: Deel II

In hierdie tweede deel van die artikel word die toepassing van CSR in

praktyk nagegaan, met die sosiaal en etiese komitee as Suid-Afrikaanse

model en die statutêre sosiaal en etiese komitee wat gebruik word in die

Verenigde Koninkryk. Ondersoek word ingestel of sodanige komitee, of ’n

statutêre benadering, soos vervat in artikel 172 van die VK

Maatskappyewet, verkieslik is.

* Continued from 2017 De Jure 17(1).

1 The Social and Ethics Committee

Sections 72(4), (8), (9) and (10) of the 2008 Companies Act provide as

follows:

72. Board committees. –

(4) The Minister, by regulation, may prescribe –

(a) a category of companies that must each have a social and ethics

committee, if it is desirable in the public interest, having regard to –

(i) annual turnover;

(ii) workforce size; or

(iii) the nature and extent of the activities of such companies;

(b) the functions to be performed by social and ethics committees required

by this subsection; and

(c) rules governing the composition and conduct of social and ethics

committees.

(8) A social and ethics committee of a company is entitled to –

How to cite: Esser & Delport ‘The protection of stakeholders: The South African social and ethics committee and the

United Kingdom’s enlightened shareholder value approach: Part 2’ 2017 De Jure 221-241

http://dx.doi.org/10.17159/2225-7160/2017/v50n2a2

222 2017 De Jure

(a) require from any director or prescribed officer of the company any

information or explanation necessary for the performance of the

committee’s functions;

(b) request from any employee of the company any information or

explanation necessary for the performance of the committee’s functions;

(c) attend any general shareholders meeting;

(d) receive all notices of and other communications relating to any general

shareholders meeting; and

(e) be heard at any general shareholders meeting contemplated in this

paragraph on any part of the business of the meeting that concerns the

committee’s functions.

(9) A company must pay all the expenses reasonably incurred by its social

and ethics committee, including, if the social and ethics committee

considers it appropriate, the costs or the fees of any consultant or

specialist engaged by the social and ethics committee in the performance

of its functions.

(10) Section 84(6) and (7), read with the changes required by the context,

apply with respect to a company that fails to appoint a social and ethics

committee, as required by this section and the regulations.

1 1 Composition and Appointment

Regulation 431 deals with the social and ethics committee as referred to

in section 72 of the Act.2

This regulation applies to all state-owned companies, public

companies that are listed3 or any other company that complies with

1 In terms of section 223 and Item 14 of Schedule 5 of the 2008 Companies

Act the Minister of Trade and Industry publishes regulations relating to the

functions of the Companies and Intellectual Property Commission, the

Takeover Regulation Panel and the Companies Tribunal, and other matters

relating to the regulation of companies.

2 This requirement is in line with King III recommendations. Principle 1.1 of

King III states that the board should provide effective leadership with an

ethical foundation, which includes the responsibility to promote the

stakeholder-inclusive model of corporate governance. Principle 8 of King IV

concerns committees of the governing body and Recommended Practices

68-70 deal with the social and ethics committee. Paragraph 50 deals with

disclosure in relation to this committee. King IV especially expands on the

ethics role of this committee. It recommends that this committee should

expand beyond mere compliance to contribute to the creation of value

(page 29).

3 Reg 43(1). The fact that state-owned companies and public companies that

are listed must, automatically, have social and ethics committees seems to

imply that it is accepted that these companies comply with the criteria in s

72(4)(a)-(c). While this may be true in respect of listed public companies, it

does not follow logically in respect of state-owned companies. Section 72(4)

requires expressly that the three criteria (or one of them) must be present

and the type of company is irrelevant. To apply the section, by way of

regulations, automatically to certain types of companies does not seem to

comply with the powers to make those regulations as in s 72(4): See

Henochsberg 277 but also De Lange ‘The social and ethics committee in

terms of the 2008 Companies Act: Some observations regarding the

exemptions and the role of the Companies Tribunal’ 2015 SA MercL J 507-

539.