Adapted from: ENF Corporate Governance Advisory Services

1. Corporate Governance and South Africa Adapted from: ENF Corporate Governance Advisory Services

2. International Perspective “Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals…… The aim is to align as nearly as possible the interests of individuals, corporations and society” Sir Adrian Cadbury Corporate Governance Overview, 1999 [World Bank Report]

3. Convergence of Interests • International Investors • General Public and Shareholders • Public Sector Reform • Multilateral Agencies • Ethical Interest Groups • Regulators • Media

4. Leadership Accountability Empowerment Balance Effective & efficient management of Risks Fairness Liability Constructive relationship building Transparency Ethics What is Corporate Governance?

5. “Corporate Governance seeks to promote • Effective, efficient and sustainable corporations • Responsiveness and accountable corporations • Legitimate corporations that are managed with integrity, probity and transparency • Recognition of stakeholders rights • An inclusive approach based on demographic ideals, legitimate representation and participation” S Fakie, Auditor-General

6. Governance Framework STATUTORY ACCOUNTABILITY EXTERNAL REPORTING COMMUNICATION BOARD COMMITTEES ROLES AND RESPONSIBILITIES INTERNAL CONTROLS ACCOUNTABILITY FOR RESOURCES

7. Basis of South African Review • Review commenced in 2000 • Guiding Principles • International Developments • SEAAR and SHE • Compliance and Enforcement • Task Team Priorities • Progress to Date • Release for Public Comment : July 2001 • Finalise : +/- October 2001 • Implementation : 1 January 2002?

8. Good Governance = More than Rules! “ … the substance of good corporate governance is more important than its form; adoption of a set of rules or principles or of any particular practice or policy is not a substitute for, and does not itself assure, good corporate governance” The Business Roundtable, USA

9. Governance Levers in US & UK • US Model • Highly regulatory, eg. SEC • Powerful institutional investors • Litigation prominent • Boards predominantly NEDs • UK Model • Statutory intervention • London Stock Exchange • Ethical pressure groups • “City Code” = Reputation paramount

10. Governance in Emerging Markets • Statutory Intervention, eg. India • Government Policy, eg. Malaysia • Banking Supervision, eg. Commonwealth • Limited Global Investor Participation • Shareholder Activism Muted, eg. Australia • Regulatory Enforcement Generally Weak • Little Correlation between Stocks / Markets

11. Prevailing Issues in South Africa • Lack of Enforcement of Companies Act • Undue onus placed on JSE to regulate • “Name and Shame” approach of FSB • More effective supervision in financial sector • Director delinquency largely unchallenged • SAPS - Lack of commercial crime skills • Judiciary - Main priority on criminal cases • Emphasis on Form rather than Substance! • International perceptions

12. Issues to Consider • Delineate Law and Governance • Application of Existing Remedies • Statutory • Regulatory • What “new” measures are necessary? • Balance – Performance v. Conformance

13. Quo Vadis South Africa? • Firstly, How serious are we? • Utilise existing, available Remedies • Enhance enforcement agencies • Better enforcement of existing sanctions • Class actions • Contingency fees • Increased Levels of Disclosure • Individual directors remuneration • Delinquent directors • Focus on director “education” • Legal backing for accounting standards

14. Quo Vadis South Africa? cont. • Role of Media • Institutional and Shareholder Intervention • Understand global investor imperatives, eg. McKinsey, Russell Reynolds, Credit Lyonnais • NAPF model • Myners recommendations • Rating agencies, eg. S&P, Dow Jones • Role of Organised Professions and Business • Role of State Enterprises and Agencies? • Electronic Technology, eg. proxy voting, etc.

15. Quo Vadis South Africa? cont. • Impact of New Legislation • International Developments • Triple bottom line reporting • Global Reporting Initiative • Transnational Corporations • Pan-African Forum part of International Agenda • Earth Summit 2002 • International Conventions, eg. Human Rights, etc. • Performance with Integrity!

16. Strategic consultants and other independent advisorsIncluding external board advisory panels Other market influencesCustomers, consumer groups Board of Directors Non-executive directors Board sub-committees Shareholders/financial marketsAnalysts, fund managers, investment consultants, pension trustees, independent financial advisers, ultimate beneficiaries, stock exchanges Auditors • GovernmentRegulatory framework: • company law • competition law • labour law • environment law • human rights law,etc. plus international conventions Creditors Media CEO Pressure groups/activists Executive Directors Voluntary codes of conduct and industry standards Senior management team Business partnersCEOs of joint ventures, suppliers, contractors etc. Business unit heads, functional heads Trade Unions Employees

17. Dynamic Participative Approach External Stakeholders Consultants and advisors Government Internal Stakeholders Lenders of money Trade unions Employees Stock exchange Board Directors Management Share-holders Corporate Governance Media Business Partners Customers Suppliers Auditors Environ-mentalists Competitors Trade associations Local communities

18. Balancing “Conflicting Demands” • Shareowner Value v. Triple Bottom Line • Investors v. Stakeholders • Short-term Profits v. Long-term Sustainability • Commercial Confidentiality v. Transparency • Increasing Legal Liability and Reputational Risk • “.. some of society’s conflicting expectations of business have become unrealistic, so Boards have to make choices!” – Sir Adrian Cadbury

19. Concluding Remarks “There are few words more reassuring to investors than accountability” “The average company today is a complex enterprise engulfed by rapid technological change and fierce global competition. You have to assess exposure to risk on an ever changing landscape”Arthur Levitt, former SEC Chairman

20. “Thank You!”