We all know that the generic management and EE codes are more concerned with the levels of managers as opposed to employing black people. The QSE EE code does award points for employing black people - the generic code is very sorely lacking in that department.
It's the management code I want to go through today (sounds like a classroom lecture). Code 200 is concerned about the number of executive managers and directors, both and executive and non-executive.
PwC has just released a report "PwC Non-Executive Directors Best Practice and Fees Report", which doesn't seem to be available online. It makes some interesting observations, I got these from reports in the Business Day and the PwC website.
- The responsibilities of non-executive directors were increasing to the point where there was great reluctance to take on these roles. The rapid development in corporate governance standards, the increased risk inherent in these positions and the additional time commitment brings significant responsibilities.
- SA’s oil and gas industry paid its non-executive directors the highest rates, at R500,000 a year, followed closely by basic resources and insurance. Financial services and banks pay about R430,000 and the lowest-paid non-executives are found in the health-care sector, at just more than R100,000 a year.
- Companies were also starting to deduct fees if directors failed to attend meetings. For instance, Murray & Roberts, in its 2006 annual report, said there would be a R10,000 deduction per meeting missed.
The report also talks about share options and shares for non-executive directors. Logic would suggest that this must impact on an independent non-executive director's status (for the bonus point under management). The King II report is of a different opinion, it defines independence as
Independent director – is a non-executive director who:
- is not a representative of a shareowner who has the ability to control or significantly influence management;
- has not been employed by the company or the group of which it currently forms part, in any executive capacity for the preceding three financial years;
- is not a member of the immediate family of an individual who is, or has been in any of the past three financial years, employed by the company or the group in an executive capacity;
- is not a professional advisor to the company or the group, other than in a director capacity;
- is not a significant supplier to, or customer of the company or group;
- has no significant contractual relationship with the company or group; and
- is free from any business or other relationship which could be seen to materially interfere with the individual’s capacity to act in an independent manner.
Point number 7 might have a problem with share-options.
And on the subject of of King II, the King III report can be expected in the next few months. The FM had a cover story on Mervyn King and King III in July last year - if you want an idea of what to expect. The codes will therefore have to modified to incorporate King III as well.
What about those serial sitters?
I remember reading something about certain non-executive directors who
sat on something like 50 boards, I can't find the article unfortunately but the annual EmpowerDex director's survey will tell you who sits on what boards and you will see one or two people who must be close to serious bum boils because of the number of boards they sit on. This report would suggest that this is becoming less prevalent.
I think that Danisa Baloyi's removal from ABSA's board after the Fidentia collapse must have caused one or two people to rethink their director status. Sean Temlett once told me that it is better to be a shareholder than a director, a breach of the oft misunderstood fiduciary duties can have serious criminal repercussions.
And the QSE scorecard.
Code 802 (QSE) just deals with executive managers (top management) with a bonus point for black female executive managers. It seems pretty clear that non-executive directors do not count for that scorecard.
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