SHAREHOLDERS’ INTERESTS VERSUS SOCIAL DEMANDS: INCONGRUOUS AGENDAS

Abstract

In this note the chasm between shareholder and stakeholder interests in the running of the corporation in an emerging economy in general, and the third world country in particular, is considered. A study of two corporate governance models is undertaken with the intention to demonstrate that inclusive corporate governance which does not relegate stakeholder interests to the periphery is more efficient under the Two-Tier Board than the Anglo-Saxon model which is followed in South Africa. The reality of an entrenched corporate governance model which is supported in the South African Companies Act 61 of 1973 (the Anglo-Saxon model) is appreciated; hence it is argued that it is unlikely that South Africa might, in future, change to the Two-Tier board. The answer to the international revolution of realising societal expectations lies either in the King Report on Corporate Governance in South Africa (2002) (hereinafter King II) or modified corporate mindset, or both. It is also argued that the proposals in the Policy document of the
Department of Trade and Industry (DTI) (South Africa Company Law for the 21st Century: Guidelines for Corporate Law Reform, May 2004, GN 1183 GG 26493 23-06-2004 May 2004, also available at http://www.dti.gov.za/ccrdlawreview/companylaw.htm) for optional representation of stakeholders on boards and the proposed inclusion of the statement recognising stakeholder interests in the Companies Act constitute a good start to changing the corporate mindset towards being stakeholder-sensitive. It is argued that the focus of King II on the triple-bottom line approach is negated by its ambivalence on enforcement and the status of stakeholders
in the South African corporation. The article then concludes that in a country which emerged from a history of entrenched overt racism, a significant recognition of stakeholder interests is critical to the socio-economic need for transformation to create a stable civil society. Globalisation has given rise to remarkable increase in the power of the global corporation. Events in the corporate sector can have negative repercussions not only for the shareholders of that particular corporation but also for society at large, either in that particular country or internationally. The emergence of powerful multinational corporations has led to a demise of state authority. The spate of corporate failures, however, has precipitated a move towards strengthening corporate governance rules to ensure that
companies are well governed. Indeed it has been opined that companies contribute enormously to the economic and social wellbeing of our societies (Worthington “Corporate Governance: Remedying and Ratifying Directors Breaches” October 2000 (116) LQR 638).