Evolution of Corporate Governance: How is Botswana faring? Part 12

Inthe last article, we discussed and concluded the evolution of corporate governance in Germany. We discussed how Germany was also affected by the heavy winds of the evolution. We learned that there was a commission formed to steer the publication of the new code comprising: investors, academics, members of the legal profession as well as company representatives and auditors. It was amazing how a research organisation ECGI is so resourced with human capital of sixteen professors and one Doctorate degree holder from various disciplines including law. Before we move further, we would like to apologise for repeating the last article number as ‘ Part 10 instead of Par 11. This week, we will be discussing corporate governance evolution in the United States of America ( USA). Our readers will recall that we discussed the US corporate governance before, but from different perspectives. This time, the US has become important again because of corporate governance reforms taking place in that country. One will recall that many countries that were so called the forerunners on corporate governance evolution commonly used the tagline “comply with the trending corporate governance code or explain”.

Certainly, there were variations in this tagline but not many of them, though. Momentarily, we can only remember the King IV Report on corporate governance whose tagline is “apply the trending corporate governance code and explain the extent of applying its principles and practices for the achievement of the four outcomes of the code of: ethical culture, good performance, effective control, and legitimacy; the four outcomes being directly appended to the definition of corporate governance in the context of King IV Report ( King IV Report, 2016). King IV Report tagline is within the spectrum of divergent extremity of two points of no corporate governance completely and the country with a code on corporate governance with a tagline “comply with the trending code on corporate governance or else, you are financially fined or sent to prison”.

According to research, the foregoing code, the US code one, and it is the only one in the world. The US has a code on corporate governance called Sarbanes- Oxley Act which is a legislated code. It is the code that says “Apply or else!). We will revert to this code, momentarily. However, the beauty thing is that the US system of governance has brought a lot of reforms to anticipate the multiplicity of factors that are threatening mankind or human life.

We do not know how these economic or corporate sustainability reforms will fare or gain perpetual steam of sustenance. However, we can only congratulate the US for responding to the corporate call this time around and say keep it up America and pave the way without heeding the iniquitous, intransigent, or belligerent enemies to the environmental eco- system.

During that period of winds of corporate scandals in 2002, Sarbanes- Oxley Act was promulgated as a legislated code on corporate Governance. At that time, the Americans were jubilating hoping that their government could instill ethical behaviour through handcuffs and prison.

The team that was involved in the promulgation of the Act was led by two politicians from the two main political parties in the US comprising: Senator Paul Sarbanes, a Maryland Democrat, and a Republican Michael Oxley, from Ohio.

Following the world corporate scandals worldwide, the US was taking the lead on corporate collapses due to corporate maladministration. By way of reminding ourselves, we may just mention a few of the US corpora

tions as the notorious Enron, Worldcom, Tyco, Xerox, Merch, Qwest, Adelphi ( Salcas, 2005, cited in Kedisitse, 2007). During that period corporate America was on fire. The entire business attention was focused on questions such as: “what next”, “what will be the impact”? “Will we salvage anything following the collapse of our business”? Chief Executives of corporations were tried and sent to prison while the victims were reduced to poverty below the poverty datum line. There was a monstrous section 404 on internal controls of the Sarbanes- Oxley Act which ravaged many organisations confining them to their offices for the purposes of compliance with the Act. It was estimated that the implementation of section 404 at the time cost corporate America 25 000 hours of work for companies with annual turnover in the 5 to 20 billion dollars and 100 000 hours of work for companies with annual turnover greater than 20 billion dollars ( King 2006: 81).

When officiating at the signing of the Act for public companies based in the US on July 30, 2002, President George W Bush proudly described the Act as “the most far- reaching reforms of the American business practices since the time of Franklin Delamo Roosevelt when the Securities Exchange Commission ( SEC) was constituted in 1930” ( Kumar, 2005, cited in Kedisitse, 2007.

In the next article, we will be continuing the US corporate reforms; as always, we are grateful for the feedback we are receiving from our readership.