An object lesson in why the boring bits matter

Give yourself a Noddy badge for each of the following that you have read cover to cover: The constitution. No? How about the National Development Plan? Not that either. King IV? Surely you have internalised the minutiae of a code of corporate governance so revered that is used as an example worldwide?

We South Africans have been gifted with some of the finest statements of good intent penned in the past 30 years, but few of us have actually bothered to pay attention to them.

Would Jacob Zuma still be president if we really understood the constitution? He had yet another volume of it thrown at him this week by Gauteng Judge President Dunstan Mlambo as he sought to duck out of the responsibilities put upon him by the former public protector’s State of Capture report.

Would we have better growth if we had applied the principles of the National Development Plan when it was drafted by some of the sharpest minds in the country more than five years ago?

Would as many investors have been screwed over by Steinhoff had investors taken the King codes on corporate governance more seriously?

There is very little thrilling contained in any of these documents, save for the fact that they hold us to be better versions of ourselves and offer extraordinary protections if we invoke them on time.

A long-retired business leader and early drafter of the King codes once told me how he’d been feted in London by Messrs Sarbanes and Oxley, drafters of the UK governance standards, and had spent an evening seated between the pair in acknowledgement of his efforts at improving South African standards — “the most boring night of my life”.

Now that more than 80% of the value of Steinhoff shares has been wiped off, and the company is restating its 2016 financials, investors are wondering how it all went so terribly wrong.

The Public Investment Corporation and the Government Employees Pension Fund this week drew attention to the issue of N-shares, non-voting stock that gives shareholders an economic stake in a business but no voting rights. Few companies use these as they are frowned on in King, but Steinhoff and Naspers, recently in the news for its generous contributions to supporters of its version of broadcast regulation, do.

The composition of the Steinhoff board has also been challenged, as has chairman Christo Wiese’s independence. The GEPF has demanded board seats and, critically, a seat on the committee investigating what went wrong at the firm. Forgive the tortured metaphor, but that barn door has rusted away, long after it was shut. The horse that bolted has died of old age.

There were enough warnings in the market for investors to be circumspect, so why did they blindly invest money in Steinhoff? Fomo. Fear of Missing Out. Wiese had the Midas touch. Many operate on the premise that investing in companies of successful business leaders means that as long as they make money, you make money. By and large, that is true, but if Steinhoff has taught us nothing else it is that rules and governance standards, so often dismissed by those who have made it, are there to guard the rest of us who haven’t.