Tuesday, 21 December 2010

Can good corporate governance coexist with venality in government?

The Institute of Directors in South Africa published its King Code of Governance Principles in 2009, to widespread praise. The code seems to have been heavily influenced by ideas discussed by Tomorrow’s Company and seems to combine common sense, liberalism and social responsibility. However, I was struck by the contrast with an article in the Sunday Times, which reported (28 Nov 2010) a study of South Africa’s 535 MP’s that showed; 7 have been arrested for fraud and 3 served jail sentences, 19 have been accused of bouncing cheques, 71 can’t obtain a credit card, and 117 have been directly or indirectly involved in at least two businesses that have gone bankrupt.

The report refers to “political feelings of entitlement” and a “culture of impunity”. The paper gives an example of one MP who served only five months of a four year sentence for fraud in 2003 and has been found to hold six directorships despite being banned from being a company director. He is quoted as saying “What has the High Court got to do with my life?...I don’t have to ask permission from them”

We have here an impressive voluntary code of governance in a society whose leaders present an appalling example of venality. There is a similar disparity in Kenya too, where impressive governance ideas coexist with the country’s MP’s being accused of ‘plundering state coffers’ as a result of paying themselves 50% more than MP’s in (much richer) western Europe and on top of generous expenses.

Now I am not picking on African countries. Transparency International’s ‘Corruption Perception Index’ shows South Africa at a significantly better level than the likes of Russia which, in turn, is at a similar level to Kenya. So Kenya and South Africa are also very different. But what is interesting is that in these African countries such venality in some of their institutions seems to coexist with the highest principles in others. I have no idea whether that can and does work or whether the contagion will inevitably seep into the realm of major corporations too. Comments and ideas would be welcome.

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