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Where are we in the course?

Governance of Conceptual
Ethics, assurance Environmental and framework for
and responsible social control systems assurance
corporate citizenship engagements

The assurance
Governance of Risk Integrated reporting
engagement

Purchases and
Cash and bank
Payables business
business process
process

Revenue and
Inventory business
Receivables business
process
process

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Objectives
Discuss, describe or explain the role of governance ethics in accounting and auditing
professions;

Discuss, describe or explain the process of identifying ethical risk analysis and various
codes of ethics;

Formulate an argument that explains the benefits of sound corporate governance to a

company's stakeholders, the company itself and regulators in a specific context;

Discuss, describe or explain the relationship between ethics and corporate governance;

a)Discuss, describe or explain the agency problem in the modern corporation and how
a company's board of directors is supposed to guide management;
Objectives
Discuss, describe or explain how a stakeholder model of corporate governance can be
implemented, taking into consideration the socio-political context of South Africa;

Discuss, describe or explain the importance of corporate governance disclosures in

promoting sound corporate governance;

Discuss, describe or explain the composition and functions of the board of directors;

Discuss, describe or explain different committees which should be constituted according to

the King code, specifically the audit, remuneration and risk committees and

Identify, discuss or explain any concerns you may have with compliance with corporate
governance codes and make appropriate recommendations to address these concerns.
 Resources
Refer to Auditing Notes Chapter

• Study Unit 4

• https://www.iodsa.co.za/?page=KingIVReport

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 Defining Corporate Governance

Development of corporate governance in South Africa

Application and operalisation of King IV

How will
this be Ethical leadership

covered? • Ethical Culture and Legitimacy (Principles 1 – 3)

• Theoretical and empirical considerations

Effective leadership

• Effective control and leadership (Principle 4)

• Governance structures and delegation (Principles 6 – 10)
• Governance of functional areas (Principles 11 & 13)

Stakeholder relationship (Principle 16)

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What is Corporate
Governance?

7
 Resources
https://www.youtube.com/watch?v=zpxBeq6W2i8&list=PPS
V

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History of Corporate
Governance in South
Africa

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 History of corporate governance in South Africa

Pre-1994 1994 - 2002 2009

Political transition period Large corporate scandals in SA and Corporate reforms take place in SA
First democratic elections set for Internationally New Companies Act, incorporating
1994 Importance of corporate governance requirements of King I and II
Economy starts opening up to all acknowledged King III issued to align with new
South Africans Increased focus on economic, social Companies Act
King Committee set up and environment reporting (triple- Apply and Explain approach adopted
bottom line reporting)

King II released Political, social, economic and

New Government in SA and dawn of Increased focus on following environmental uncertainty
democracy stakeholder approach King IV in 2016
Cadbury report issued in UK Focus is placed on director Shift to Ethical and effective
King I Report issued in SA to promote committees, remuneration, internal leadership
inclusivity of stakeholders and to control and risk management Apply and explain approach
protect investor interests Comply or explain approach continued

1994 2002 Current state

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 A growing
Global societal Climate change
inequality
Realities
severely Over-
Geological
consumption of
testing natural resources
tensions

leadership of
companies Stakeholder
expectations and
Rapid
advancements in
and other transparency technology

organisations Less stable Increased

(King IV) financial systems corruption

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Class Example

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 Good Corporate Stories

• Status of their corporate governance i.e. what is the general

perception about these entities' corporate citizenship status?
• What is the shareholder composition?
• What is their oversight body composition? i.e. Executive vs
Non-executive directorship; depth & knowledge of board;
diversity of oversight structure

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 Good Corporate Stories
Corporate Citizenship Status
• Johnson & Johnson - They have focused on reducing their impact on the planet for three decades.
• Their initiatives range from leveraging the power of the wind to providing safe water to communities around the world.
• Their purchase of a privately-owned energy supplier in the Texas Panhandle allowed the company to reduce pollution
while providing a renewable, economical alternative to electricity. The company continues to seek out renewable
energy options with the goal of having 100% of its energy needs from renewable sources by 2025.
Shareholding
• asset manager giant Vanguard, which owns a 9.4% share,
• asset manager giant BlackRock (7.6%)
• asset manager State Street (5.5%).
• No other shareholder owns more than 5% of the company.

Board Composition
Microsoft Word
Document

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 Good Corporate Stories
Corporate Citizenship Status
• Google is trusted not only for its environmentally friendly initiatives but also due to its outspoken CEO, Sundar Pichai.
He stands up regularly against social issues.
• Google also funds initiatives to drive inclusion both in the company and society in the areas of Racial equity; Disability
inclusion; Gender equality ; LGBTQ+ inclusion; Veteran inclusion
• The company also builds tools to help minority-owned businesses and communities and factors in accessibility.
Shareholding

Microsoft Word
Alphabet inc structure.jpg
Document

Board Composition

Microsoft Word
Document

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 Good Corporate Stories
Corporate Citizenship Status
• Anglo American has unveiled what it describes as 'the world's lightest 510-tonne truck' which runs on hydrogen and battery
power vs the diesel trucks used in the past.
• They built a hydrogen production, storage, and refuelling complex at Mogalakwena that incorporates the largest electrolyser in
Africa and a solar plant to support the operation of the haul truck.
• The impact of our nuGen project goes far beyond their operations. The emerging hydrogen sector has the potential to
dramatically improve the growth and development of many economies by creating new industrial value chains and economic
generation opportunities. Growing the hydrogen economy will revolutionise not just Anglo American’s operations, but all mining
and many other industries – and ultimately shape a better, cleaner world.
Shareholding
• Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions
• Public Investment Corporation Limited is currently the largest shareholder, with 7.3% of shares outstanding.
• BlackRock, Inc. is the second largest shareholder owning 7.1% of common stock
• Genesis Asset Managers, LLP holds about 4.5% of the company stock.
• Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 18 shareholders, meaning
that no single shareholder has a majority interest in the ownership.

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 Good Corporate Stories
Board Composition
• The Board currently comprises the Chairman, two executive directors and seven independent non-executive directors.

• https://www.angloamerican.com/about-us/leadership-team

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 Lack of Corporate Governance

• Status of their corporate governance i.e. what is the general

perception about these entities' corporate social citizenship
status?
• What is the shareholder composition?
• What is their oversight body composition? i.e. Executive vs
Non-executive directorship; depth & knowledge of board;
diversity of oversight structure

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 Good Corporate Stories
Corporate Citizenship Status

A Delaware judge recently voided the $56 billion pay package of Tesla CEO Elon Musk. The ruling came after the company’s board of directors failed to prove that
the compensation plan was fair12. The pay package, granted to Musk in 2018, was the largest compensation plan in public corporate history. It made him a centi-
billionaire and the richest person on the planet. The plan offered Musk the chance to secure 12 tranches of Tesla stock options, which would vest if the company’s
market capitalization increased by $50 billion and Tesla achieved a revenue target. However, the judge found that the process leading to the board’s approval of his
compensation was “deeply flawed” and that Musk had “extensive ties with the persons tasked with negotiating on Tesla’s behalf”2. Ultimately, the judge ruled in
favor of the shareholder who claimed that Musk was overpaid, and the compensation package was invalidated3. Quite an unfathomable sum indeed!

Shareholding

Tesla shareholding.png

Board Composition

Screenshot 2024-02-13 145736.png

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 Netflix

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End of Week 1

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