Corporate Governance Under the South African Companies Act: A Critique

Abstract

Corporate governance in South Africa has traditionally been based on the shareholder value approach. In terms of this approach, directors are expected to manage a company in the best interests of the shareholders collectively. This approach is however, increasingly being questioned. With the surge of interest in the recognition of not only shareholder interests, but also the interests of other stakeholders, the corporate governance approach in South Africa merits a deeper analysis. This paper critiques the corporate governance approach under the Companies Act 71 of 2008. The main concern is whether the Companies Act protects the interests of different stakeholders and whether or not it reflects the enlightened shareholder value approach. The findings of this paper reveal two shortcomings of the Companies Act with regard to the protection of stakeholder interests in corporate governance. Firstly, that the scope of the Companies Act is very narrow as focus is more on employees to the exclusion of other stakeholders. Secondly, that the Act is not clear on its preferred corporate governance approach. The paper concludes with recommendations which address these shortcomings.