LML4806 May/June 2022 Portfolio Guidelines
QUESTION 1 [25]
1.1 Discuss how the social and ethics committee enhances corporate social
responsibility in South African companies. (10)
In terms of the Companies Act,1 companies that are state-owned, listed public
companies or companies that have in any two of the previous five years scored above
500 points in terms of regulation 26(2) must appoint a social and ethics committee
consisting of not less than three directors or prescribed officers of the company. At
least one of these directors or prescribed officers must be a director not involved in
the day-to-day management of the company and who has not been so involved in the
preceding three financial years. This requirement might in future develop to the point
where it is required that a board member should be responsible for the CSR portfolio
and be held responsible at board level for all matters related to CSR. This step would
contribute to embedding CSR in corporate governance in a significant manner and
drive CSR throughout this section of the corporate sector.
The requirement that at least one of the members of the committee should be a non-
executive director (someone not involved in the day-to-day management of the
company) represents an attempt by the legislature to enhance transparency in the
functioning of the committee and to act as a counterbalance to corporate
greenwash. Although the regulation does not require the committee to include external
CSR experts or stakeholder representatives, it should be noted that the committee will
add further value to its functioning if it could demonstrate that it is actively engaging
with its stakeholders.
It is further suggested that the committee should consist of key personnel within the
company, who are directly involved in the company's CSR management and who will
1 Companies Act 71 of 2008 (hereinafter Companies Act).
QUESTION 1 [25]
1.1 Discuss how the social and ethics committee enhances corporate social
responsibility in South African companies. (10)
In terms of the Companies Act,1 companies that are state-owned, listed public
companies or companies that have in any two of the previous five years scored above
500 points in terms of regulation 26(2) must appoint a social and ethics committee
consisting of not less than three directors or prescribed officers of the company. At
least one of these directors or prescribed officers must be a director not involved in
the day-to-day management of the company and who has not been so involved in the
preceding three financial years. This requirement might in future develop to the point
where it is required that a board member should be responsible for the CSR portfolio
and be held responsible at board level for all matters related to CSR. This step would
contribute to embedding CSR in corporate governance in a significant manner and
drive CSR throughout this section of the corporate sector.
The requirement that at least one of the members of the committee should be a non-
executive director (someone not involved in the day-to-day management of the
company) represents an attempt by the legislature to enhance transparency in the
functioning of the committee and to act as a counterbalance to corporate
greenwash. Although the regulation does not require the committee to include external
CSR experts or stakeholder representatives, it should be noted that the committee will
add further value to its functioning if it could demonstrate that it is actively engaging
with its stakeholders.
It is further suggested that the committee should consist of key personnel within the
company, who are directly involved in the company's CSR management and who will
1 Companies Act 71 of 2008 (hereinafter Companies Act).
