The King Report on Governance for South Africa 2009 (King III), which was released on 1 September 2009, provides a list of best practice principles to assist and guide directors in Corporate Governance.
King III applies to all corporate entities regardless of the manner incorporation, whether in the public, private sectors or non-profit sectors.
It is expected that the new Companies’ Act will become operative on 1 July 2010. The King III report will be effective from 1 March 2010.
Key aspects of the Report:
There are 4 concepts that are absolutely brand new being:
- King III recommendations apply to all corporate entities on an “apply or explain” basis
- Information Technology Governance (Workshops on compliance and governance to be held by Shoden Academy)
- Business Rescue (Rescue recommendations for economically viable companies in financial difficulties)
- Fundamental and Affected transactions (mergers acquisitions amalgamations)
Emerging trends in the King III report:
- ADR or Alternative Dispute Resolution (mediation, conciliation arbitration)
- Risk-based internal audit
- Shareholder approval for Non-Exec remuneration
- Evaluation of directors and Board performance
- Integrated Reports
- Sustainability and Integration of People, Planet Profit or put another way, Social, Environmental and Economic principles
- The Inclusive Stakeholder approach (not just serving shareholders)
Of interest are that these and other recommendations are applicable to all companies and not only listed companies. Other corporate entities will now also have to consider applying the Codes in areas like:
- Composition of the Board (majority independent non-executive directors)
- Duties of Chairperson and CEO clarified
- Audit Committees
- Governance of Risk
Some new issues in the report:
- Information technology governance
- Composition of the board,
- Duties of the chairperson and the CEO
- Remuneration of directors
- Performance assessment of directors
- Alternative dispute resolution and stakeholder relationships
- Integrated reporting and disclosure
- Audit committees
- The governance of risk
- Compliance with laws, rules, codes and standards
Case Number: D 412/07
Judgment Date: 09 June 2009
Jurisdiction: Labour Court, Durban
Judge: Van Niekerk J
Subject: Review
CCMA Arbitration
Issue: Certificate of outcome did not constitute a jurisdictional ruling.
Summary of Facts: The employee was employed by Kishara CC t/a Mugg and Bean Suncoast as a general manager and was also a member of the CC. After a disagreement between the members of the CC, the business (Mugg and Bean Suncoast) was sold as a going concern to Silver Meadows Trading 99 (first Respondent), the new Employer. The employee referred a dispute to the CCMA alleging he had been constructively dismissed, because the new employer had declined to offer him employment as before. The employee never resigned. At conciliation the dispute remained unresolved, and the commissioner indicated the nature of the dispute as ‘unfair dismissal’ – section 197 and section 187(1)(g) of the LRA and indicated that the dispute should be referred to the LC. The employee contended that his dismissal was not an automatically unfair dismissal and the matter was set down for arbitration. The arbitrating commissioner ruled that the CCMA was functus officio. It did not have jurisdiction to arbitrate and the matter could only be referred to the LC.
Summary of Judgment: The court held that applicable principle in this case was that a referring party was not bound by a commissioner’s classification of a dispute or any directive as to its destiny. If this were not so and if some legal significance were to be attached to a commissioner’s categorisation of a dispute in a certificate of outcome, then by electing the forum in which the dispute is to be determined, the commissioner could deny the referring party the freedom to pursue her rights as she deemed fit. Certificates of outcome are issued without evidence regarding nature of the dispute. The court was of the view that the conciliating commissioner is not always well-placed to make judgments, based only on the say-so of parties during conciliation. Consequently the certificate of outcome should not be binding on the referring party. In light of the above the court held the certificate of outcome did not amount to a jurisdictional ruling. The ruling that the parties were bound by the certificate of outcome was grossly irregular and not a conclusion a reasonable decision maker could come to. The commissioner’s ruling that the CCMA was functus officio was reviewed and set aside and the matter was remitted to the CCMA for an arbitration hearing de novo.
Case No. JR 1456/06
Judgement Date: 05 December 2008
Jurisdiction: Labour Court, Johannesburg
Judge: Ngalwana J
Subject: Unfair Dismissal :Procedural fairness of dismissal: Jurisdiction
Issue: Application to review and set aside decision of commissioner in arbitration. Commissioner had held dismissal of employee to be substantially and procedurally unfair.
Facts: Employee’s employment was terminated for operational reasons after ten years of service. Employee referred dismissal to CCMA claiming that it was procedurally unfair, as he had not been consulted with regarding alternative employment to avoid retrenchment. The commissioner held the dismissal to be procedurally as well as substantially unfair. The Employer contended in the Labour Court that the Commissioner lacked jurisdiction to arbitrate the matter based on the judgement in Rand Water v Bracks NO and Others where it was held that only the Labour Court had jurisdiction in respect of procedural fairness in dismissals based on operational requirements.
Judgement: The court held that the Rand Water Judgement was clearly wrong in law. This Judgement was based on a statutory interpretation driven by a desire to spare CCMA Commissioners the headache or challenge of dealing with complexities arising from procedural issues. However, there was nothing in LRA which suggested that the determination of procedural fairness in s 189 dismissals was more complex than substantive fairness issues. The court held that an employee who was dismissed for operational reasons was free to refer the dispute whether founded on procedural or substantive fairness either to CCMA or Labour Court. It is for the legislature, and not the courts to decide where individual employees dismissed on operational requirements should refer disputes. The LRA gives employees a choice. The LRA has as it’s purpose to ensure that employment related disputes should be conciliated and arbitrated by CCMA with minimum legal formalities. Such disputes must be resolved expeditiously, equitably and with minimum fuss Consequently the court held that the Commissioner had jurisdiction to arbitrate the dispute. The court held that, in this case, the Employer had not consulted with the employee regarding alternative positions. The employee had not waived her right to an alternative position because she had never been made aware that there was one. The employee might have accepted alternative position if it had been presented to her. Therefore the retrenchment was procedurally unfair. The application was dismissed with costs.
Case Number: J 2543 / 08
Judgment Date: 23 March 2009
Jurisdiction: Labour Court, Braamfontein
Judge: Van Niekerk J
Subject: Suspension without Pay
Issue: Urgent application to declare employee’s continued unpaid suspension unfair and to order the Employer to pay his remuneration.
Summary of Facts: The employee was a Technical Director at a salary of R40 000.00 per month. He had purchased 30 shares in the company from existing shareholders in the company for R1.8 million. On signature the employee was to pay R500 000 in part payment of the shares. This agreement contained a clause to the effect that, should the employment of any shareholder be terminated on a count of misconduct, that party would be obliged to dispense his shareholding to other shareholders for no purchase consideration. On 24 July 2008 the employee was advised by the auditor of the company that the Employer demanded his immediate resignation. The Employer also offered to purchase his shares at this time for an amount of R300 000, which was to include R120 000 in arrears salaries. The Employee refused to resign and on 30 July 2008 he was suspended pending an investigation. On 1 August 2008 the Employer advised creditors that the Employee was no longer employed by the company. A disciplinary enquiry was convened on 26 August 2008 and postponed to 08 September 2008 and eventually started on 22 September 2008. On 29 September 2008 the employee was found guilty on three of the seventeen charges of misconduct brought against him. On 07 October 2008 the employee filed an application in LC (this court) for an order declaring the employer to be in breach of its contractual obligations and failing to pay him the remuneration that he had not received for 2 months. He also claimed that his suspension was unfair. The day after application to declare the suspension unfair was lodged, the employer dismissed the employee with immediate effect.
Summary of Judgment: The employer argued that financial hardship and loss of income can never be grounds for urgency. The court held that each case must be assessed on it own merits, and that an application should not be refused only on this basis. The court has a wide discretion to determine the urgency with which application should be treated. Regarding the non-payment of remuneration, the court held that it was not persuaded that the employee did not have the right to receive monthly remuneration of R40 000.00. The court further held that that, where suspension was effected as a measure pending a disciplinary hearing, suspension without pay was a material breach of contract. In the absence of any apparent apprehension that the employee’s continued presence in the workplace prejudiced a legitimate business interest, the suspension was also held to be unfair. It was clear that the dismissal had been a direct response to employee launching his application in the Labour Court and, far from being academic, it smacked of an act of victimisation. The court was satisfied that the employee had made out a case for the relief he sought and made an order declaring the suspension to be unlawful. It also ordered the Employer to pay the employee his remuneration for the months of his suspension as well as costs.