IoDSA and King Committee welcome proposed amendments relating to social and ethics committees

The Institute of Directors in South Africa (IoDSA) and the King Committee have broadly welcomed the amendments relating to social and ethics committees (SECs) in the Companies Amendment Bills.

Prof Parmi Natesan, CEO of the IoDSA, expressed support of the new clause (6A) proposed for section 72, which allows the minister to prescribe the minimum qualifications, skills and requirements for the SEC. “The IoDSA has consistently advocated for all board members to have the necessary knowledge, skills and experience to discharge their duties adequately,” she says. “Our Director Competency Framework will assist directors to acquire the skills they need on the board and the SEC.”

The Chair of the King Committee, Ansie Ramalho, highlights three significant changes. One is the requirement for public companies and state-owned enterprises to appoint SEC members at their AGMs. The second proposed change requires the representation of non-executive directors on the SEC and the other involves the tabling of an SEC report at the AGM. Ramalho agrees with giving SECs more prominence. ”The requirements introduced by the Bill for the election and qualifications of members of SECs are likely to elevate its authority and effectiveness which is critical for a committee which exercises oversight of matters as important as the social and environmental impact of companies’ output and operations.”

Ramalho suggests, however, that there be a rewrite of the regulations that address the responsibilities of the committee. “Currently the regulations do not deal with oversight of company ethics as an area for oversight by the SEC, despite – judging by the given name of the committee – it clearly being the intention. Also, other areas for monitoring and oversight as stated in the regulations are not sufficiently focused for meaningful reporting against which the SEC could be held accountable,” she says.

Deon Rossouw, a member of the King Committee and Chair of the IoDSAs Social and Ethics Committee Forum, says that the intention to exempt certain companies, such as subsidiaries of a company that has an SEC, will contribute to the ease of doing business and eliminate duplicate administration. Rossouw also lauds the inclusion of a clause requiring an SEC report to be tabled at the AGM. “In line with modern thinking, it is important that shareholders are informed not only about the company’s financial performance but also about how it does business and its impact on society,” he says.

However, he sounds a note of caution: while the new Bill requires the SEC report to be made “in the prescribed manner and form”, it does not provide guidance as to either.

“We were very thankful that the drafters dropped the requirement for the SEC report to be passed by a resolution at the AGM as was previously tabled in the 2021 bill, which we argued was a bad idea since the report would contain historic information, thus a fait accompli which the vote cannot change,” he says.