Good governance is at the heart of fighting poverty and inequality

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The King Code on good governance is now on its fourth instalment and it is not the last.

As the business environment changes – new challenges will emerge. Human-made or natural disasters will occur and organisations, both for-profit as well as not for profit, will be tested.

Before President John F Kennedy’s father-Ambassador Joseph Kennedy was appointed chairman of the Securities and Exchange Commission (SEC) in the United State of America, insider trading was a common and “acceptable” practice.

In fact, it has been argued that Ambassador Kennedy himself made his
fortune from insider trading.

Today, not only do ethical organisations frown upon insider trading, in many jurisdictions it has been outlawed.

In more recent times, corporate social responsibility has evolved from being merely an instrument through which an organisation supports a cause that is strategic to its business development tactics to generate even higher profits.

Today progressive organisations treat corporate social responsibility as part of being a forward-thinking organisation that accepts that social responsibility has more to do with identifying a pressing need in society.

The next move would be to marshal the organisation’s resources to respond to that need, regardless of whether the organisation will individually and directly benefit financially in the long run.

Because organisations do not operate in a vacuum, they have to monitor the direction and rate of change in their environment and work towards anticipating the future operating environment so that they can stay
relevant.

Businesses that offer various services have met their demise precisely because they did not see the change coming, and by the time they realised that the world had changed, it was too late for them to
adapt.

Look at what Netflix did to blockbuster movie rental stores, what online publishers and social media companies are doing to our magazine and newspaper businesses.

Change is the only thing you can count on, in business or any other sphere of life.

Governance and our view of it are also evolving.

At some point during the governance evolutionary process, compliance was good enough, if you could not comply – all you had to do was to explain.

We lived with that reality for a while, and yet organisations continued to falter, and fingers were pointed at their governance regimes.

So the governance framework had to be improved. Today, not only do you have to comply you also have to explain.

In South Africa, the most recent version of our Companies Act has placed an even greater burden on directors where they are held jointly and severally liable for lapses of judgement under their watch, where
they fail to exercise due care and skill in their role to perform oversight responsibilities.

We continue to move the needle forward in our quest to have organisations that are governed by individuals who are qualified, experienced, and competent to discharge such duties.

But there has been a tendency to look at good governance as something that only companies set up to make a profit should be worried about. I would argue the reverse is true.

When you are given the responsibility to lead an organisation where corporate social responsibility is the core business of the organisation – you are supposed to hold yourself to an even higher standard than those
that go into business primarily to make a profit.

In South Africa, in excess of R35 billion rand is poured into Foundations and NGOs annually to carry out the work that government and the private sector are neither well equipped nor competent to do.

This is work that enhances our social cohesion, improves education, and levels the playing field for many people from disadvantaged communities.

The organisations that carry out this work have to convince their donors each year that the work they are doing is worthwhile, that they are making a difference, and having a sustainable long-term impact in
communities.

There is a much greater burden on these organisations to raise the bar in so far as good governance is concerned.

It should, therefore, be mandatory for all NPOs to have a board of directors where they exercise oversight on the activities of management.

It has become common practice for people to set-up NPOs with the intention of creating an income.

Such NPOs are laws unto themselves and for as long as they convince a donor organisation to a share of their budget, they continue to operate without any level of supervision.

I would even go further and argue that those NPOs that derive funds from state-owned or state-regulated institutions such as the National Lotteries Board, should include a board of directors which comprises mainly of independent directors.

Organisations speak of Kaizen (Continuous and never-ending improvement) in as far as their operations are concerned.

We need to bring the principle of Kaizen in the boardroom where we are equally obsessed with improving governance processes year in and year out.

While we strive to create an inclusive society that embraces social justice, we need to ensure that we are not wasteful.

Good governance guards against fruitless and wasteful practices.

You can even argue that good governance is yet another pillar of fighting poverty and inequality in society because, with good governance, we can direct scarce resources to where they are needed most.

Nicholas Maweni is the chairman of SAMRO, Valued Citizens Initiative and also sit on the Advisory Board of Amnesty International South Africa.