Corporate Governance

Question 1

What does Corporate Governance concern and what are its sources?

Answer 1

Concerns how decisions are made in a company, and who makes them. There are several sources such as the Companies Act, the common law, the King IV Code on Corporate Governance, the company’s MOI, as well as the JSE listing requirements.

Question 2

Who are the role players in a corporation?

Answer 2

a) the board of directors
b) shareholders
c) board committees
d) management
e) employees
f) other stakeholders (creditors/suppliers)

Question 3

Elaborate more on the powers afforded to a) the board of directors

Answer 3

1. Confers an original power to manage the company’s business and affairs on the board.
2. Imposes a positive duty on the board to actually manage.
3. The management power and authority is conferred on the board as a whole.
4. The management power and authority relate to the company’s ‘business’ as defined in its MOI.
5. The board also has the implied incidental and ancillary powers to do anything necessary for the exercise of its express powers.
6. Allows the board to delegate all or any of it management powers and authority to some other person / persons.
7. The provisions of s66(1) are subject to anything to the contrary in the Act or in the company’s MOI & are therefore an alterable provision.

Question 4

Elaborate more on the powers afforded to b) the shareholders

Answer 4

1. Make decisions on certain matters.
2. Veto certain actions by the board
3. Exercises its powers by passing resolutions

See section 61 of Act. Act (ss 62-65) sets out procedure and legal aspects of shareholders’ meetings. Section 57 creates exceptions for companies with only one shareholder – do not have to comply with all the formal and procedural requirement.

Shareholders have no general power to supervise the board or to direct the board in how it performs its functions [Automatic Self-Cleansing Filter Syndicate; Gramaphone & Typewriter Ltd]. However, they still have ‘ultimate’ control in sense that can remove board members by ordinary resolution.

Question 5

Who owns the company or is in effective control of it?

Answer 5

The shareholders own the company, because they appoint the board to make strategic decisions about the company, and the board then appoints the management who run the company. The Company’s organs act as the company (i.e the shareholders at a general meeting, or the board of directors as a collective unit), whereas the company’s agents act on behalf of the company.