Abstract

Globally, states use state-owned companies (SOCs) or public corporations to provide public goods, limit private and foreign control of the domestic economy, generate public funds for the fiscus, increase service delivery and encourage economic development and industrialisation. Particularly given its unique socio-political and economic dynamics, a country such as South Africa clearly needs this type of strategic enterprise. Yet, that does not mean that everything at our SOCs is as it should be. The beleaguered South African Broadcasting Corporation (SABC) has recently seen the resignation of board members, shareholder interference in its operational affairs, and a high turnover of chief accounting officers and other executive management members. Due to non-performance, it has also received several cash injections from its shareholder to enable it to continue to deliver its services. In addition, the shareholder minister took it upon herself to amend the SABC's memorandum of incorporation, conferring upon herself the authority to appoint, suspend or even dismiss key executive members. South African Airways (SAA), in turn, has had seven CEOs in less than four years, has had to be bailed out at a cost of R550 million, and has in addition been granted a R5 billion guarantee by the shareholder for a restructuring exercise. Other SOCs such as Eskom, the Post Office and Telkom have also experienced high board and executive management turnover, perennial underperformance necessitating regular bailouts, and challenges regarding the division of power between their boards and the various shareholder ministers. Another issue that seems to plague South Africa's SOCs is the appointment of board members and executive officials with questionable qualifications. By critically examining the corporate governance challenges besetting the SABC, SAA and Eskom in particular, this article seeks to explore the root causes of the corporate governance deficiencies of SOCs, and how their corporate governance can be enhanced. It is concluded that the challenges faced by the country's SOCs are twofold: firstly, the SOCs boards' lack of appreciation of the cardinal corporate governance rules, and secondly, the role of government as a single or dominant shareholder, which results in substantial political interference in the running of the SOCs. This dual problem requires a dual solution. To arrest the problem of poor corporate governance in SOCs, government as the shareholder should firstly appoint fit and proper directors, having followed a sound due-diligence process. Once it has established such properly skilled and competent boards, however, government should adopt an arm's-length approach to the affairs of the SOCs as a way of insulating these corporations from political interference

Highlights

  • In 2014, the office of the South African Public Protector in a published report found developments at the South African Broadcasting Corporation (SABC), a state-owned company, to be "symptomatic of pathological corporate governance deficiencies".1 In addition, the Public Protector found that the SABC board had failed "to provide strategic oversight to the national broadcaster as provided for in the SABC Board Charter and King III Report".2failure of corporate governance is in no way unique to the SABC

  • Other state-owned companies (SOCs) such as Eskom, the Post Office and Telkom have experienced high board and executive management turnover, perennial underperformance necessitating regular bailouts, and challenges regarding the division of power between their boards and the various shareholder ministers

  • SOCs play a significant part in the growth, development and stability of the South African economy, with key SOCs being the Development Bank of Southern Africa, South African Airways (SAA), Eskom, Telkom and Transnet.[4]

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Summary

Introduction

In 2014, the office of the South African Public Protector in a published report found developments at the South African Broadcasting Corporation (SABC), a state-owned company, to be "symptomatic of pathological corporate governance deficiencies".1 In addition, the Public Protector found that the SABC board had failed "to provide strategic oversight to the national broadcaster as provided for in the SABC Board Charter and King III Report".2. In 2014, the office of the South African Public Protector in a published report found developments at the South African Broadcasting Corporation (SABC), a state-owned company, to be "symptomatic of pathological corporate governance deficiencies".1. SOCs play a significant part in the growth, development and stability of the South African economy, with key SOCs being the Development Bank of Southern Africa, South African Airways (SAA), Eskom, Telkom and Transnet.[4] Secondly, good corporate governance in SOCs serves to incentivise other companies to embrace corporate governance principles, which may see an improvement in the country's global market power and ability to attract foreign investment.[5] Thirdly, SOCs generally provide basic services to society, which means that in most instances the. These conflicting opinions even culminated in a study commissioned by the president to investigate the role of SOCs in a developmental state.[9]

Defining corporate governance in the SOC setting
Setting the scene
Theoretical framework
Stewardship theory
Legislative framework
The 2008 Companies Act
The Public Finance Management Act
Founding legislation of SOCs
King III
Protocol on Corporate Governance in the Public Sector
South African Airways
South African Broadcasting Corporation
83 Standard
Conclusion
Findings
Literature
Full Text
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