20 March 2013 by Cliffe Dekker Hofmeyr

SABC - effective corporate governance framework for State Owned Enterprises is key

The en-masse resignation of the board members of the SABC this week once again highlights concerns over the effective corporate governance of state owned enterprises (SoEs). This is according to Thina Siwendu, Director in the Corporate and Commercial practice at Cliffe Dekker Hofmeyr business law firm.

“Typically,” says Siwendu, “most SoE’s are governed by, and are creatures of, founding legislation, and  in the case of the SABC, the Broadcasting Act. The SABC is also subject to the provisions of the Companies Act. As with Section 11 of the Broadcasting Act, which grants the control of the corporation to the Board, Section 66 of the Companies Act clearly stipulates that the business and affairs of the SABC must be managed by or under the direction of the Board,” she notes.

Siwendu explains that typically, the founding legislation has imbedded in it multiple reporting and accountability lines.

“This arrangement makes a reconciliation with other standards of good corporate governance practice  challenging. In this case, the Minister of Communications has functional and financial responsibility over the SABC in terms of Section 18 of the  Broadcasting Act but no corresponding and direct accountability over the appointment of the Board.

“As the shareholding and functional ministry, she is nevertheless expected to exercise all the rights afforded to shareholders in terms of the Companies Act as well as exercise oversight over the performance of the corporation. Board members including full-time directors in the position of the Chief Executive, Chief Operating Officer and Chief Financial Officer who constitute the 12 member board and are charged with the direction and or management of the corporation are appointed by the President on the advice of parliament in terms of section 13 of the Broadcasting Act. Only the “appointing body” may remove a member of the Board from office.

“These  multiple reporting lines, accountabilities as well as  overlapping roles and responsibilities can result in a diffusion of roles and responsibilities, conflicting bureaucratic aims and interests – a fertile ground for accusations of meddling, incompetence and inefficiencies,” says Siwendu.

“Good corporate governance hinges on foresight and leadership in resolving some of the conflicts for the benefit of the institution, but, in cases of recurring problems like those at the SABC, short of amending and reconciling the relevant pieces of legislation, only a well negotiated and clearly articulated corporate governance framework will work. This framework would clearly articulate the terms of which the respective rights and roles, as well as the principles upon which the line minster will exercise the oversight role. Shareholder compacts while providing for Key Performance Areas unfortunately do not provide for this fundamental governance aspect. Good fences make good neighbours,” she adds.

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