Corporate governance in selected South African state-owned entities
Nkemele, Sylvester Moeketsi
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This study has been undertaken against the backdrop of allegations of state capture in South Africa and public concern of failing Corporate Governance in the country’s state-owned entities. Specifically, this study pays attention to eight South African stateowned entities. The purpose of this study was to identify possible gaps in the application of Corporate Governance practices by the eight state-owned entities selected for the study. The study sought to identify these gaps by analysing their disclosures of the application of these practices and provides possible ways in which the weaknesses may be addressed. The literature review in this study focused on Corporate Governance Theories. The Corporate Governance Theories addressed in this study are: 1) the Agency Theory; 2) the Stewardship Theory; 3) the Stakeholder Theory; 4) the Enlightened Shareholder Theory; 5) the Resource Dependency Theory; 6) the Network Theory; and 7) the Class Hegemony Theory. The literature review also included a discussion on Corporate Governance in the United States of America, the United Kingdom, Germany and South Africa. The discussion in these different countries sought to establish the different approaches to the enforcement of Corporate Governance. These approaches were addressed in the study, and are: 1) the comply or explain approach 2) the comply and explain approach 3) the apply or explain and 4) the apply and explain approach. The literature review was followed by a detailed analysis of the annual integrated reports of the eight state-owned entities. The analysis was done following a qualitative research approach, with document analysis as the research method used. The analysis of the annual integrated reports was done for eight financial years, starting from the 2010/2011 financial year to the 2017/2018 financial year. The levels of disclosure of Corporate Governance principles were analysed and the application of recommended principles seemed to be a struggle for all state-owned entities identified. A further analysis was made to determine whether, on average, the application of the Corporate Governance principles seemed to be deteriorating or improving over the period of analysis. In order to do this analysis, two basic scorecard systems were developed. The first scorecard system was used to establish whether the application of Corporate Governance practices was disclosed or not. The second scorecard system was used to identify the level of application of the practices, whether the practices were fully disclosed, partially disclosed or not disclosed at all. The results of the empirical study revealed that while the disclosure of the application of Corporate Governance practices seemed to improve over the financial years under analysis, there still remained challenges with the application of certain practices. The analysis revealed that the recommendations contained under themes 2, 7, 10 and 14 remained a challenge to all the state-owned entities selected for the study. The principles relate to the ethical and effective leadership, the governing body, the Chief Executive Officer and the remuneration of directors and senior executives respectively. Based on the findings from the empirical study, the study proceeded to make basic recommendations for the improvement in the application of Corporate Governance practices. This study contributes towards the debate on the causes for concern in the Corporate Governance of South African state-owned entities. It further contributes towards possibly similar conditions in the other South African state-owned entities which have not been included in this study. This is because those state-owned entities may benefit from the weaknesses identified and recommendations suggested in this study to improve their own Corporate Governance disclosures.