I am just as quick as the next person to criticise the government, so I feel it’s only fair to praise them when praise is due. I read an article in the Business Report of the Cape Times this morning about the Companies Bill which is currently under discussion. The bill obviously deals with many issues relating to companies, but the one which I feel is very important and a good step in the right direction, involves accountability of directors.
If you are a regular reader of Relax with Dax, you will probably be aware that corporate malfeasance is a pet topic of mine. I believe that a lot of the problems we have in the world today are as a result of corporate malfeasance. The problem is that there is no accountability. Directors can make decisions and then hide behind the company when cost of their decision needs to be paid. To give you current examples: We have recently had several cases of anti-competitive behaviour by large companies in South Africa. Price fixing in the bread industry and the milk industry and the steel industry. Bread and milk are staples of the poor, to inflate prices of staples causes people to starve. Steel is a basic input of the economy, to inflate prices stalls the growth of the entire economy. These are very serious actions, taken directly as a result of the decisions of directors of large companies. These are intelligent people who are paid a lot of money, they know better than anyone else what the impact of their decisions will be.
A lot of the time they get away with it, which is very sad. But sometimes they get caught and the companies get fined. The fine is a small percentage of the extra profit they made by engaging in these anti competitive behaviours. So basically, it’s cheaper for them to break the law than to obey it, even if they get caught. In addition, the company pays the fine, but the directors who made these decisions get off scott free. How can that be right? How can someone who knowingly takes the food from poor people’s mouths get off scott free?
The Companies Bill wants directors of companies to be responsible for the decisions they make, so that when they are caught, they are punished in their personal capacity. I personally believe it needs to happen. That is the only way you will get people to think twice about the decisions they make.
So I say bravo to the government for including this in the Companies Bill.