The Legal Imperatives for Ethics

The 19th century can be seen as the century of the entrepreneur, laying the foundations of modern corporations. The 20th century was the century of management with phenomenal growth in management theories, management consultants and management teachings. The 21st century promises to be the century of governance; hence the developments of several international governance codes laying the framework for legislators and corporations to follow.

The South African Constitution should be seen as the basis of all ethical conduct in companies. The two main references in the Constitution impacting on ethics are:

• The Bill of Rights detailing the individual rights of citizens (by implication also those associated with companies).
• The Basic Values and Principles governing Public Administration.

In South Africa, the King Commission has published the first King Report of Corporate Governance in 1994, the second King Report in 2002 and the third King Report in 2009 (to be implemented in 2010). Legislation which has been developed subsequent to the first King Report, and which touches on the aspect of governance, some directly and others indirectly include:

• Labour Relations Act (No. 66 of 1995) regulates the collective relationship between employer and employee.
• Basic Conditions of Employment Act (No. 75 of 1997) regulates the individual contractual relationship between the employer and the employee.
• Employment Equity Act (no. 55 of 1995) regulates affirmative action measures to be taken by employers in appointment of employees in order to redress the imbalances of the past.
• National Environmental Management Act (No. 107 of 1998) provides for co-operative environmental governance by establishing principles for decision-making on matters affecting the environment, institutions that will promote co-operative governance and procedures for co-ordinating environmental functions exercised by organs of state; to provide for certain aspects of the administration and enforcement of other environmental management laws; and to provide for matters connected therewith.
• Companies Act (no. 61 of 1973): Amendments to this act promulgated as a result of King 1 permitted companies to obtain liability insurance cover indemnifying their directors and officers, compelling disclosure of the identity of beneficial owners of shares held by nominees, and making the appointment of a company secretary mandatory for public companies with share capital.
• Insider Trading Act (No. 135 of 1998) To prohibit individuals who have inside information relating to securities or financial instruments from dealing in such securities or financial instruments; to provide for criminal and civil law penalties for such dealing; to empower the Financial Services Board to investigate matters relating to such dealing, to institute proceedings in relation thereto and to administer the proof of claims and distribution of payments received as a result of any such proceedings; to establish the Directorate as a committee of the Financial Services Board for exercising the power to institute proceedings; to repeal a section of the Companies Act, 1973; and to provide for matters connected therewith.
• Public Finance Management Act (No. 1 of 1999) to regulate financial management in the national government and provincial governments; to ensure that all revenue, expenditure, assets and liabilities of those governments are managed efficiently and effectively; to provide for the responsibilities of persons entrusted with financial management in those governments; and to provide for matters connected therewith.
• Banks Act (no. 94 of 1990) regulating the governance of banks in South Africa.