In today’s corporate landscape, the importance of ethical governance cannot be overstated. Companies are increasingly held accountable not just for their financial performance but also for their ethical conduct. Amid this scrutiny, the company secretary emerges as a vital player in fostering and maintaining an ethical environment within an organisation.
Legal Framework
The Companies Act 71 of 2008 (as amended) (“The Companies Act”) and the principles outlined in the King IV Report on Corporate Governance, 2016 (“King IV”) emphasize that the responsibilities of a company secretary are not limited to administrative tasks but encompass a broader range of governance functions.
Companies Act Provisions
- Role and Responsibilities of Company Secretary
Section 88 of the Companies Act imposes several responsibilities on the company secretary, each with an ethical component. For instance, section 88(2)(c) requires the company secretary to report any non-compliance with the Memorandum of Incorporation (MOI), or the Companies Act by the company or its directors, emphasizing transparency and accountability.
- Committees for Ethical Governance
Social and Ethics Committee
Under Section 72(4), certain companies, particularly public and state-owned entities, must establish a social and ethics committee to oversee their social and ethical performance. This committee focuses on corporate citizenship, environmental sustainability, labour relations, and consumer rights.
The company secretary plays a crucial role in facilitating the establishment of this committee, ensuring compliance with legal obligations, coordinating meetings, and preparing reports. By promoting good governance practices and ethical standards, the company secretary helps this committee to fulfil its statutory mandate.
Audit and Risk Committee
Section 94 of the Companies Act mandates that public companies and state-owned enterprises establish an audit committee to ensure the integrity of financial reporting and the effectiveness of internal controls and external audits. This committee usually comprises independent non-executive directors and is responsible for monitoring compliance with laws and regulations and reviewing the internal audit function.
The company secretary is instrumental in the operations of the audit committee, ensuring it meets legal requirements, coordinating its activities, and assisting in report preparation. This support enhances corporate governance and accountability, reinforcing the committee’s role in maintaining the company’s financial integrity.
- Statements Upon Removal from Office
According to Section 89 (2) of the Companies Act, when a company secretary is removed from office by the board, they may require the company to include a statement in its annual financial statements relating to that financial year, setting out the company secretary’s contention as to the circumstances that led to the removal. This transparency is vital for ensuring that any ethical concerns or governance issues are addressed promptly.
King IV Principles
King IV emphasizes the crucial role of the company secretary in promoting an ethical culture within the organisation:
The Governance of Ethics
Principle 2 outlines that the governing body must actively manage ethics to support an ethical culture.
Reporting on Ethics
Principle 5 highlights the importance of ensuring stakeholders receive comprehensive reports that enable informed assessments of the organisation’s ethical practices.
Whistleblowing
Additionally, the report advocates for mechanisms that facilitate safe and anonymous reporting of unethical behaviour, thereby encouraging a culture of transparency and accountability.
Key Responsibilities
The company secretary plays a crucial role in developing and embedding an ethical culture. Some of their key responsibilities include the following (not an exhaustive list):
- Embedding an Ethical Environment – the company secretary develops a code of conduct for the board which usually provides clear guidelines on acceptable conduct and the consequences of unethical behaviour.
- Training and Awareness – the company secretary organises training sessions and workshops to educate employees about ethical standards and policies.
- Monitoring Ethical Standards and Collaboration – the company secretary conducts audits to ensure adherence to ethical standards. They usually collaborate with other departments within the organisation to ensure compliance, fostering a unified approach to governance.
- Ensuring Compliance of Statutory Committees – the company secretary ensures statutory committees, like the social and ethics committee, comply with legal requirements by coordinating meetings and maintaining records.
- Supporting the Board and Management – the company secretary serves as a key advisor to the board and management regarding ethical governance. This includes advising the board and management on conflicts of interests and standing firm on ethical issues.
- Monitoring Compliance with Ethical Policies – the company secretary employs various strategies to monitor adherence to the company’s ethics policies and code of conduct:
a. Regular Audits and Assessments: Conducting regular audits of ethical practices within the organisation allows the company secretary to identify areas of non-compliance and recommend corrective actions.
b. Reporting Mechanisms: Establishing clear reporting mechanisms enables employees to report unethical behaviour or concerns confidentially. The company secretary ensures that these reports are taken seriously and addressed appropriately.
c. Feedback and Evaluation: The company secretary collects feedback from employees and stakeholders regarding the effectiveness of ethical policies and practices. This input is crucial for continuous improvement and alignment with best practices.
Conclusion
The company secretary’s role in ethics management is multifaceted, extending beyond administrative duties to encompass strategic oversight and ethical leadership. The company secretary ensures that ethical governance remains at the forefront of corporate strategy by embedding ethical policies, managing conflicts of interest, and fostering collaboration across departments.
At Rasiluma TD Attorneys Inc., we provide expert support to company secretaries, ensuring compliance with the Companies Act, King IV, and other relevant laws and regulations. Contact us to learn how we can support your company’s journey toward ethical success.
