Thu, 02 Jul 2020

Government gets an F for ethics in new report

22 Nov 2019, 04:13 GMT+10

Within national government just 14% of chief audit executives say ethics is an important part of their organisational culture, compared to 41% last year, the latest Corporate Governance Index has found.

The report, which is released annually by the Institute of Internal Auditors South Africa (IIA) and the University of Pretoria, is currently in its seventh edition. It was released in Sandton on Thursday.

It measures elements such as ethics, leadership, compliance, risk, performance and internal audit within governance. It is based on the King IV outcomes and principles of governance.

In terms of compliance, 54% across all sectors said there was adequate adherence to legislation and regulation. The highest was in the SMME sector, which recorded a figure of 83%, while the lowest was at local municipality level, which recorded a figure of 30%.

Although the IIA has a membership of some 8 000 internal auditors in Southern Africa and is the third largest affiliate of IIA Inc in the world, the GCI report offers an overview of South African organisations' governance ratings from the perspective of chief audit executives (CAEs). Around 600 CAEs were surveyed, and 235 responded, a spokesperson for the CGI told Fin24.

An even split from the public and private sector participated.

According to the authors, there were "slight improvements" in the way public and private sectors conduct business in South Africa "after an 18-month period punctuated by revelations of state capture, corruption and corporate malfeasance".

However, the IIA added in a statement, "some statistics remain dire".

'Slight improvement'

This year reveals a 3.5% improvement in both the areas of corporate governance and ethics, the IIA said.

IIA SA acting CEO Charles Nel said ethics across all sectors had suffered in the past seven years.

He said of the 2019 figures: "The decline of ethics is ultimately costing the country with regards to slow economic growth, negative outlook on trust and a lack of leadership capability, which impacts negatively on the poor and vulnerable in society as well as human capital sustainability."

He added: "Whereas ethics enjoyed a rating of 3.4 (out of a maximum rating of 4 in the quantitative study) in 2013 and 2015, it dropped to 2.8 in 2018 and improved to 2.9 in 2019. It indicates that ethical behaviour and practices must be instilled at a leadership level.

"Leaders in organisations must reflect honesty, accountability, integrity, fair justice and good conduct, which is then in turn reflected throughout the organisation among key stakeholders including employees, customers and suppliers."

Nel said there had also been a "significant drop or decline" in governance as well as within internal audits.

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