Corporate Governance and Social Responsibility: input from Johannesburg Securities Exchange (JSE) and Aids Law Project

JOINT AD HOC COMMITTEE ON CORPORATE GOVERNANCE
1 December 2005
CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY: INPUT FROM JOHANNESBURG SECURITIES EXCHANGE AND AIDS LAW PROJECT

Chairperson: Ms B Hogan (ANC)

Documents handed out:
Corporate Governance focus: African Peer Review by Nicky Newton-King (JSE)
HIV/AIDS and Corporations: Meeting human rights and social responsibility by Fatima Hassan (Aids Law Project)

SUMMARY
The Johannesburg Securities Exchange (JSE) briefed the Committee on the progress made by JSE on corporate governance matters. The Aids Law Project stated that the business sector had a duty to respond effectively to the challenges of the 5.2 million people in South Africa who were living with HIV/AIDS in 2005. It was emphasised that there was still a lot of work ahead. There was evidence of progress in developing HIV/AIDS policies.

MINUTES
Johannesburg Securities Exchange (JSE) submission
Ms N Newton-King, JSE Deputy CEO, noted that the Second King Report on Corporate Governance of 2002 had urged companies to embrace the triple bottom line (environmental, economic and social sustainability), as a method of doing business. This had led to the JSE developing a Socially Responsible Investment Index which had been launched in May 2004 to measure sustainable business practices. The SRI Index measures companies' policies, performance and reporting in relation to the three pillars of the triple bottom line (environmental, economic and social sustainability), as well corporate governance practice. There had been 74 listed companies which had participate in the process which lead to the SRI Index - the first index of this nature in an emerging market.

The agreed criteria were a focus on sustainability practices, a developmental approach and on reflecting principles common to a range of international and local documents.

Ms Newton-King said the SRI index demonstrated commitment to the achievement and maintenance of internationally recognised corporate governance standards. A total of 58 companies had participated in the 2005 review. She discussed environmental, economic and social sustainability. She then looked at lessons learned and challenges, saying that companies in SA were doing a lot and needed be commended on their great work. There had been an increase in non-public information disclosure and the social reporting was excellent although the environmental reporting was still somewhat lacking. Finally she looked at the challenges and future focus points such as ensuring shareholder activism.

Discussion
The Chair wanted to know what was the ethical and the economic culture involved in attaining corporate governance. The Chair also questioned the manner in which trends were set and whose definition was used to measure those trends considering that there were international countries involved as well.

Ms Newton-King responded that there were different entities involved both locally and internationally and as such the criteria set varied according to countries and the influential people who decided on the agenda.

The Chair was concerned about the implications for procurement and specifically the manner in which it was perceived. Was this an issue internationally as well?

Ms Newton-King clarified that indeed there were a lot of things that were involved in procurement. However the it took serious measures to ensure that contracts were disclosed as well as donations especially those that involved political parties to ensure transparency. She emphasised that disclosing donations and contracts increased the efficiency of detecting favours when they became an issue. Transparency ensured that democratic processes took place.

The Chair asked Ms Newton-King what she thought about the remuneration of executive staff especially when looking at issues of sustainability.

Ms Newton-King answered that salaries were an important part of sustainability and still needed to be worked on. However it was imperative that companies that intended to retain senior staff members discussed the salaries with the shareholders for their approval.

Mr L Labuschagne (DA) wanted to know what policy JSE followed when a board member had an interest in a company that was being discussed.

Ms Newton-King responded that the JSE took the matter very seriously and, as such, members were excused from meetings where companies in which they had an interest were being discussed.

Mr I Mfundisi (UCDP) asked about the criteria JSE used in relation to people donating huge amounts of money to a particular political party.

Ms Newton-King replied that such donations needed to be communicated to the shareholders and a motivation should be provided.

AIDS Law Project (ALP) submission
Ms Fatima Hassan (ALP Law & Treatment Access Unit) began by saying that she was proud of the efforts shown by the business sector compared to the exclusion in previous years.

Ms Hassan noted that about 5.2 million people lived with HIV/AIDS in 2005. There were 530 000 new HIV infections between mid 2004 to mid 2005 and in the same period there were 340 0000 AIDS related deaths. She provided statistics for untreated people. These statistics proved that there was a lot of work that still needed to be done (see document).

Ms Hassan indicated that a lot of companies had started to change their HIV/AID policy. She was pleased with the increased progress as bigger companies helped smaller companies to develop HIV/AIDS policies. In the mining sector, Anglo Platinum and De Beers were embarking on external initiatives to support the local communities.

The challenge remained with most companies that were unaware of the internal and external impact of HIV on their companies. Specifically the building and construction, retail and wholesale sector responses had been poor.

Ms Hassan outlined that in meeting legal obligations and social responsibility, there were still problems with testing, discrimination and disclosure. With regards to testing, there was still confusion created around voluntary and compulsory testing.

On the matter of discrimination, there were still high levels of stigma attached to HIV/AIDS and as such people did not disclose their status.

Ms Hassan also spoke on the role played by multinationals, pharmaceutical companies in particular where there was competition for claims, patent protection versus patient protection.

Another problem identified was access to benefits such as housing, pension and death benefits. Migrant workers were particularly affected by the problem. Ms Hassan also discussed the problems associated with accessing private care.

Discussion
Ms S Seaton (IFP) asked if it was important not to allow migrant labourers with diseases to come to South Africa especially when they would require medical treatment such as ARVs which were still inadequate for South Africans.

Ms Seaton questioned the fairness, if there was, of the waiting period by people who wanted to access medical aid schemes. She felt that the waiting period was unfair to the people who were already members of such Medical Schemes because as the number of people who required treatment increased, rates would increase as well.

Ms Hassan emphasised that indeed there were countries that screened immigrants as they came into their countries and they were perceived to be violating human rights. However using that approach in SA. would be difficult because SA relied on migrant workers from countries like Botswana, Mozambique and Lesotho for a number of years for the mining sector. What needed to happen was strengthening the already existing systems in the SADC jointly with the NGOs in the public sector that provided treatment to ensure that people continued to access treatment both in SA and in their home countries.

With regards to the waiting period, Ms Hassan agreed with Ms Seaton that to expect members to wait that long was unfair and was another form of discrimination and it confused and punished people. The system was improperly applied. Ms Hassan concluded that one needed to know the law and procedures regarding Medical Aid Schemes to enable one to challenge the system.

Mr V Gore (ID) commented that he felt that companies especially in the mining sector were not doing much to assist and improve their policies to cater for people with disabilities. He added that the insurance companies needed to start re-looking at their policies.

Ms Hassan agreed with Mr Gore indicating that they had been battling with the insurance sector for many years. They were impossible to make sound decisions with and they exercised policies of exclusion regarding HIV/ AIDS and funeral plans. She concluded that did not ring true to the principle of social responsibility.

The Chair asked how companies dealt with the issue of confidentiality and treatment in the workplace. What implications did Voluntary Testing and Counselling (VCT) have on the issue of stigma.

Ms Hassan indicated that there was flexibility around VCT because some people preferred treatment programmes in the work place while others opted for off-site treatment outside the workplace. Moreover companies needed to be flexible and have testing facilities outside the work place to afford people better and different options because stigma was still a problem.

The Chair thanked Ms Hassan for her informative presentation and requested her to provide strategic points that would be incorporated in the report to Parliament about the most pertinent issues that required immediate attention.

The meeting was adjourned.