King III, the good for proper corporate governance, was published on the 1st of September 2009 and the codes apply to all entities. This is very different to the old King I and King II reports that was only applicable to public or listed entities. The question I however want to ask today is whether the property syndication industry are working along these ethical guidelines.
I firmly believe that they are probably not. This, to me, is evident from the constitution and guidelines of the Public Property Syndication Association (PPSA) that does not mention compliance to any of these codes. Two of the syndication companies I have had dealings with namely Blue Everest Investments and City Capital (Capital Investments), both of which are now defunct never conformed to King I or King II and it did directly apply to them as public companies. Further the Financial Services Board (FSB) also does not mention it at all as one of the 1.8 licence requirements.
Now the next question we have to ask is why? Is it ignorance or just ignoring it. Is it because the cost of compliance is excessive? Well before you answer that question for yourself, let’s look at why compliance to these codes are, at least in my opinion, important.
The King reports are all about conducting an ethical and transparent business. It is about disclosing all the facts to all stakeholders, giving access to required information, it is about accountability of company directors, it is about thinking of others. The codes also places strong emphasis on independent directorship and active shareholder participation. In conclusion it is about playing open transparent cards and honest commentary to everyone involved and respected writers like Bruce Cameron and Deon Basson has been claiming that is the last thing that they are doing.
Now that you have some information to make up your own mind on why the property syndication industry may not be applying these codes let’s focus on being active in demanding the application of the codes. Financial Advisors, Regulators and the public in general should demand the application of King III in all syndicated companies and fractional ownership schemes so that we insure that it is not avoided by ignorance. This will then make it extremely clear which promoters is ignoring ethical, transparent and honest business practices.
If you want to find out more about King III, the New Companies Act or the Consumer Protection Act visit http://www.sinkorswim.co.za/ or contact john@sinkorswim.co.za
Friday, October 16, 2009
Monday, October 5, 2009
People, Planet & Profit
The new King III report puts a much larger emphasis on so called Triple Bottom Line reporting for businesses. Business is not just about making money anymore as it is about how you make the money and whether you take from the people and planet or give to the people and planet.
Obviously as King III applies to all entities it is placing a bigger burden on smaller business to also comply to these codes and therefore we are seeing a bit of resistance to King III. That said King III has an apply or explain approach and therefore I am off the opinion that this approach makes it accessible to most businesses. But what does apply or explain mean? This basically means that you need to apply your mind on how you can comply, do the best you can do to comply and explain why you can’t do more. So basically it is a soft and positive approach rather than the traditional comply or else like in the US system. With the recent global meltdown I am sure we can debate for hours on the success of the more aggressive approach taken by the US government in governance.
I do however believe we need to ask ourselves a more prudent question. Is it good business to comply to King III? Well let’s not debate the legal issues around it but the pure advantage that it will offer you, if any. I think the answer is a resounding YES. Most of us as directors spend 110% of our time working IN our businesses focussing on our functional role within the company and we don’t spent any time working ON our businesses focussing on strategic and long term visions. When complying and applying King III into your business you will force yourself to spent at least some time ON your business and just in that the advantage of compliance is massive.
In conclusion, every change brings opportunity and risk and compliance to King and THINKING about Poeple, Planet and Profit will give more opportunity to you to manage your business effectively. Non compliance only brings risk. So my opinion is: Lets apply King III.
To find out more about King III, the New Companies Act or the Consumer Protection Act please visit http://www.sinkorswim.co.za/
Obviously as King III applies to all entities it is placing a bigger burden on smaller business to also comply to these codes and therefore we are seeing a bit of resistance to King III. That said King III has an apply or explain approach and therefore I am off the opinion that this approach makes it accessible to most businesses. But what does apply or explain mean? This basically means that you need to apply your mind on how you can comply, do the best you can do to comply and explain why you can’t do more. So basically it is a soft and positive approach rather than the traditional comply or else like in the US system. With the recent global meltdown I am sure we can debate for hours on the success of the more aggressive approach taken by the US government in governance.
I do however believe we need to ask ourselves a more prudent question. Is it good business to comply to King III? Well let’s not debate the legal issues around it but the pure advantage that it will offer you, if any. I think the answer is a resounding YES. Most of us as directors spend 110% of our time working IN our businesses focussing on our functional role within the company and we don’t spent any time working ON our businesses focussing on strategic and long term visions. When complying and applying King III into your business you will force yourself to spent at least some time ON your business and just in that the advantage of compliance is massive.
In conclusion, every change brings opportunity and risk and compliance to King and THINKING about Poeple, Planet and Profit will give more opportunity to you to manage your business effectively. Non compliance only brings risk. So my opinion is: Lets apply King III.
To find out more about King III, the New Companies Act or the Consumer Protection Act please visit http://www.sinkorswim.co.za/
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