A comparative and critical analysis of the corporate governance structure of South Africa

Master Thesis


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University of Cape Town

The King Reports, as well as legislative developments culminating from these reports, are aimed at enhancing corporate governance standards in South Africa and aligning them with international best practice. Notwithstanding these measures, a number of significant failures in corporate governance rocked South African business during this period, severely denting the perception of the quality and standard of corporate governance. Given the importance of international investors' confidence, a continuous review of the South African corporate governance structure is imperative. This dissertation aims at performing a comparative and critical analysis of the corporate governance structures in South Africa. The objective is to seek alternative or improved corporate governance mechanisms that will enhance the current dispensation. For this purpose, various international corporate governance models are analysed and their monitoring mechanisms identified. The possibility of utilising some of these mechanisms to enhance corporate governance in South Africa is examined. The institutional environment in South Africa (I.e. the controlled shareholder environment, inactive and illiquid markets) prevents the market model mechanisms of the US and UK from playing a greater monitoring role. Further market model mechanisms aimed at promoting the independent monitoring of management have to a large extent been incorporated into the South African corporate governance framework. However, the ongoing failures of large listed and unlisted companies, including smaller banks in South Africa, that appear to indicate poor levels of, or ineffective, corporate governance, calls for the enforcement and acceptance of the monitoring guidelines set out in the King Reports. The German and Japanese bank governance model has a limited application in South Africa. The level of bank debt financing is generally lower than equity financing, thereby restricting banks' ability to become monitors through their debt control rights.

Bibliography: leaves 77-81.