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This chapter sets out to provide a concise overview on two inter-related questions, namely, what is corporate governance and why is it important.

Laws and Regulations Matter

Academic research suggests that there is a systematic difference between countries in terms of the legal protection accorded to minority shareholders with two distinct trends emerging. First, the least protection for investors is provided in countries in which companies have the highest ownership concentration.1 Secondly, expropriation of outside shareholders arises most significantly where a company is affiliated to a group of companies, all of which are controlled by the same shareholder.2

This evidence suggests that the common law system provides more protection for investors as the transfer of assets and profits out of firms for the benefit of their controlling shareholders is more prevalent in civil law jurisdictions 3 and is significant for two reasons, namely, (a) the importance of the centrality of legal protection for minority shareholders and (b) the assertion that legal regulation can outperform private contracting. In short, strong legal regulation and effective enforcement are critical to sound and effective corporate governance.

Does It Matter in Practice?

These findings have significant policy implications as good corporate governance practices contribute towards the overall well-being of a financial system as witnessed from both the Asian Financial Crisis in 1997 as well as the Global Financial Crisis in 2008. The former brought to the foreground the common occurrence of weak corporate governance that allowed companies to engage in excessive over-leverage, some of which were aided by implicit state guarantees; while the latter exposed significant shortcomings with the laissez-faire attitude towards deregulation in the financial services industry in the United States of America. A common thread through these crises was that the concepts of transparency, disclosure and accountability were largely ignored as investors assumed short-term outlooks to derive increasing profits from the steadily rising financial markets.

In the lead up to the Asian financial crisis, companies across the region were guilty of neglecting the principles of good corporate governance, the difference being perhaps in the degree of neglect. This is evident from instances of corporate abuse through related party transactions, incidence of capricious decision-making, shifting of assets within the corporate group, undertaking of transactions without proper disclosure and poor financial management by directors.

The repeal of the Glass-Steagall Act of 1933 – which separated the commercial and investment banking activities of financial institutions – by the Gramm-Leach-Bliley Act in the United States of America in 1999 is often viewed as a key contributor towards the Global Financial Crisis. With the support of the then Federal Reserve Chairman Alan Greenspan as well as the then Treasury Secretary Professor Lawrence Summers, this reform allowed banks to use their deposits to invest in derivatives. By doing so, it allowed the larger banks to deploy their resources towards the creation of increasingly sophisticated and complex derivatives which coincide with the growth of subprime mortgages as financial institutions sought to increase their rates of returns. When the housing bubble burst, it precipitated the banking crisis in 2007 which subsequently spread to Wall Street as by 2008 a number of the major banks – with their over-reaching tentacles into the financial markets – had become ‘too big to fail’.

Defining Corporate Governance

The term ‘corporate governance’ was succinctly defined in The Cadbury Report as ‘the system by which companies are directed and controlled,’4 which was explained as follows:

Boards of directors are responsible for the governance of their companies. The shareholders’ role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place.5

Although somewhat simplistic, it highlights the importance of processes that companies should institute and implement to ensure that effective practices transcend the various levels of the organization. These were viewed as necessary responses to what was then seen as the lack of managerial oversight which led to the spectacular corporate collapses of the Bank of Credit and Commerce International, Coloroll, the Polly Peck Group and Maxwell Communication Corporation in the late 1980s and early 1990s. These collapses did not only result in substantial financial losses to shareholders, employees, creditors, investors as well as the government – they were also seen as posing considerable challenges to the integrity and reputation of the City of London as an international financial centre. Significantly, the Cadbury Report recommended that compliance should be based on a voluntary Code of Best Practice – designed to achieve the necessary high standards of corporate behavior – supplemented by appropriate levels of disclosure as this would:

… prove more effective than a statutory code. It is directed at establishing best practice, at encouraging pressure from shareholders to hasten its widespread adoption, and at allowing some flexibility in implementation. We recognise, however, that if companies do not back our recommendations, it is probable that legislation and external regulation will be sought to deal with some of the underlying problems which the report identifies. Statutory measures would impose a minimum standard and there would be a greater risk of boards complying with the letter, rather than with the spirit, of their requirements.6

It must be noted that the scope of the Cadbury Report was specifically to address issues arising from the financial aspects of corporate governance,7 and in the circumstances the committee opined that it would be most appropriate to adopt a principles-based ‘comply or explain’ approach. In a nutshell, companies were expected to comply with the core corporate governance principles identified in the voluntary Corporate Governance Code and if they do not comply, they needed to explain why not. The underlying aims of this approach was to ensure transparency as it was hoped that market forces and pressure from investors would ensure compliance rather than explaining non-compliance.

This principles-based self-regulatory approach rapidly gained favour across global capital markets. The idea of a voluntary Code on Corporate Governance that focuses on structures, processes and practices has been actively promoted since the publication of the Cadbury Report in 1992 and the present UK Corporate Governance Code, which was published in September 2014, now sits at the forefront having being followed in almost every sophisticated corporate law system in the world.8

Different Models for Corporate Governance

The evolution of the ‘comply or explain model’ has continued over the years, assisted by the publication of the Principles of Corporate Governance by the Organisation for Economic Co-operation and Development (‘the OECD Principles’) in 1999, providing a sound template upon which the various Codes of Corporate Governance across jurisdictions could be harmonised. Recognising that good corporate governance is not an end in itself and in response to various developments in the financial markets as well as with the global economy, the OECD Principles were updated and revised in 2004 and 2015 respectively.9

While most countries have adopted the principles-based approach, it is not the only model as some jurisdictions such as the United States of America practices a rules-based approach. The latter has enshrined its applicable standards of corporate governance in the Sarbanes-Oxley Act thereby making compliance mandatory.10 A key objective of passing this legislation was to restore public confidence in the markets following the scandals which surfaced from the collapse and subsequent bankruptcies of Enron, WorldCom, Adelphia, Tyco and Global Crossing in the preceding two years which resulted in billions of dollars in financial losses as well as the loss of thousands of jobs.

However, the irony is that it was with this almost draconian legislation firmly in place when its shortcomings were glaringly exposed with the collapse of Lehman Brothers in the United States of America, triggering the Global Financial Crisis of 2008 with its well-known impact on the American and world economies. Another knee-jerk reaction followed with more draconian legislation passed in the form of the Dodd-Frank Act of 201011 as the black letter law approach, with its severe sanctions for contraventions of the rules, was perpetuated.

Did the self-regulatory and principles-based approach on the other side of the Atlantic fare any better? That is very hard to conclude as was crudely illustrated by the collapse of the Royal Bank of Scotland which necessitated the biggest bank bail-out ever by the British government. So, what are the choices if any? Despite the differences in approach, both the principles-based as well as the rules-based models share a common objective, namely, to enhance the quality of the processes that support the practice of good corporate governance through lessons learnt from the corporate collapses from the late 1980s through to early 2002. However, is one model to be preferred over the other?

In his speech at the 2003 Washington Economic Policy Conference, Mr William Donaldson the then Chairman of the Securities and Exchange Commission noted that ‘corporate scandals have exacerbated the roughly US$7 trillion collapse in the aggregate market value of American corporations over the past few years’ and opined that:

… a “check the box” approach to good corporate governance will not inspire a true sense of ethical obligation. It could merely lead to an array of inhibiting, “politically correct” dictates. If this was the case, ultimately corporations would not strive to meet higher standards, they would only strain under new costs associated with fulfilling a mandated process that could produce little of the desired effect. They would lose the freedom to make innovative decisions that an ethically sound entrepreneurial culture requires.

As the board properly exercises its power, representing all stakeholders, I would suggest that the board members define the culture of ethics that they expect all aspects of the company to embrace. The philosophy that they articulate must pertain not only the board’s selection of a chief executive officer, but also the spirit and very DNA of the corporate body itself – from top to bottom and from bottom to top. Only after the board meets this fundamental obligation to define the culture and ethics of the corporation – and for that matter of the board itself – can it go on and make its own decisions about the implementation of this culture.

This definition of culture – of what kind of company they want to be – will influence all their decisions, including what criteria they use when selecting a CEO, what criteria the CEO will use to select other management, how the board will function, what characteristics new directors should demonstrate, what the committees or instruments of the board should be, and what kind of leadership structure should be installed. This is, in my view, not a one-size-fits-all exercise.12

Just simply checking the box is not enough and it is trite that the foundations of good corporate governance must rest upon an effective system of checks and balances as highlighted succinctly by Monks and Minow:

In essence, corporate governance is the structure that is intended (1) to make sure that the right questions get asked and (2) that checks and balances are in place to make sure that the answers reflect what is best for the creation of long-term, sustainable, renewable value.13

With moral hazard appearing to increase on the part of investors, especially with government intervention following the global financial crisis, how do we effectively respond to the cultural and structural challenges that are raised above? How do we get corporate boards to move away from the ‘shareholder primacy’ model – where only profits matter as charity has no seat at the board – to one that encompasses a more diverse range of interests which include shareholders, employees, consumers, the community and the environment? Should we – and would it be too onerous – to impose upon boards of directors a duty to consider, and to implement, robust standards for good corporate social responsibility as a safeguard against reputational risks?

While voluntary compliance with good corporate governance practices based on the principle of ‘comply or explain’ has gained wide recognition as possibly one of the best and most comprehensive examples of ‘self-regulation’, questions have nonetheless arisen with respect to whether it is the most effective way of ensuring that corporations act responsibly. ‘Soft’ law is beneficial only where there is active compliance by business elites, diligent monitoring by capital market actors, and effective control by regulatory elites. On a critical analysis, have these Codes contributed significantly to improved corporate governance practices? If they have not, is it time – at least in certain areas – to rethink and re-evaluate the case for enhanced reliance on ‘hard law’ so as to provide clearer expectations to ensure compliance? In short, should corporate governance be by rule or by principle or indeed by some hybrid of the two?

What’s Next?

Amongst the key causes of the global financial crisis are the failures of ethical and effective leadership of corporations, characteristics of which make them difficult to regulate let alone ponder over the impossibility of legislating on such issues. Principles of corporate governance need to be more carefully contextualised and diversified, especially in the transnational domain. Simultaneously, the status of and relations between citizenship, states, transnational corporations and non-governmental organisations in a transnational regulatory domain needs much closer consideration. Only with these issues addressed can there be a more balanced and fruitful discussion of corporate governance mechanisms take place, especially when it comes to assessing the merits of ‘soft’ versus ‘hard’ law in a given political economy.

In the circumstances, despite the complexities, the appeal of the flexibility of Codes which encompasses both soft and hard law becomes increasingly evident. Guidance on this vexed issue may be obtained from the recently released King IV Report which as highlighted by Mervyn E King SC, the Chair of the King IV Committee:

King IV has moved from “apply or explain” to “apply and explain”, but has reduced the 75 principles in King III to 17 basic principles in King IV, one of which applies to institutional investors only. 16 of these principles can be applied by any organization, and all are required to substantiate a claim that good governance is being practiced. The required explanation allows stakeholders to make an informed decision as to whether or not the organization is achieving the four good governance outcomes required by King IV. Explanation also helps to encourage organisations to see corporate governance not as an act of mindless compliance, but something that will yield results only it is approached mindfully, with due consideration to the organisation’s circumstances.14

The four good governance outcomes is defined in King IV to be the exercise of ethical and effective leadership by the governing body towards the achievement of an ethical culture, good performance, effective control and legitimacy.15 Taking cognizance of the paradigm shifts in the corporate world, the foundation stones upon which King IV are built include ‘ethical leadership, the organization in society, corporate citizenship, sustainable development, stakeholder inclusivity, integrated thinking and integrated reporting.’16

The appeal of King IV lies substantially in its universal applicability stating as it does that ‘good leadership, which is underpinned by the principles of good governance, is equally valuable in all types of organisations … it talks of organisations and governing bodies, rather than simply companies and boards of directors.’17

Misgovernance in South Africa – A Trilogy of Case Studies

The recent scandals in South Africa surrounding three different entities with significant international repute, namely, Bell Pottinger; McKinsey and KPMG South Africa, has highlighted the importance of good corporate governance and of the potentially devastating repercussions that follow the failure to recognize evolving community expectations of good corporate citizenship as well as to meet exacting standards.

Bell Pottinger was once one of the most dominant British public relations firm but filed for administration following revelations that it had run a racially divisive social media campaign for, and also targeted wealthy white South African business rivals of, the Gupta family in South Africa,18 which resulted in it being expelled from the Public Relations and Communications Association on 5 September 201719 and losing major clients including HSBC plc.20

With offices across the world, McKinsey prides itself on operating as ‘One Firm’ although local rules in different jurisdictions often meant that the international firm had to have a local partner. It did highly lucrative work for Eskom Holdings, a state-owned electricity monopoly which is presently at the centre of several ‘state capture’ allegations in South Africa.21 An interim report, commissioned by Eskom and produced by G9 Forensic, detailed how Eskom’s own legal advisers warned it not to enter into an agreement with McKinsey because the proposed revenue model might be illegal.22 The quantum involved is substantial with some US$121 million in fees already paid to McKinsey and Trillian Capital Partners Limited, a company linked to the Guptas, and a further US$590 million due under the contract. Significantly, it was reported that McKinsey does not appear to be contesting this allegation unequivocally, merely stating that it would repay the consultancy fees if the High Court ruled that Eskom officials had acted unlawfully.23 This was subsequently affirmed by a media statement which stated that:

To provide reassurance to the citizens of South Africa, we will support a review by the High Court of the validity of the Turnaround Programme contract. McKinsey will pay back the fee in full if the Court determines Eskom acted unlawfully. We invite Eskom and Trillian to submit themselves to this process too. In the expectation it will be repaid, we have already set aside the full fee McKinsey earned on the Turnaround Programme in a ring-fenced account ready to comply with the Court’s decision24 (emphasis added).

McKinsey stated that its internal investigations confirmed that it never had a formal contract with Trillian, although they had worked together for a few months at Eskom, and that the latter withheld information about its connections to a Gupta family associate. Nonetheless, McKinsey publicly recognized a number of grave oversights and apologized for ‘several errors of judgment’ as well as ‘violations of our professional standards’; and admitted that ‘we should not have started working alongside Trillian in December 2015 before we had completed our due diligence and had answers to our questions.’ In addition, it announced the departure of Mr Vikas Sagar – a partner who was suspended since July 2017 when news of the potential scandal initially surfaced – and that it would not begin any work for any South Africa state-owned company (‘SOC’) unless this was thoroughly reviewed and formally approved by a newly formed and independent South Africa SOC Risk Committee.25

The case of KPMG South Africa (‘KPMG SA’) raises many unanswered questions and highlights the importance of good corporate governance.26 It also raises an important policy issue, namely, whether global auditing firms have becomes ‘too big to fail’ thereby created a real risk of systemic contagion. In a nutshell, it is alleged that KPMG SA – in breach of its professional obligations and proclaimed values – were complicit in the facilitation of corruption and attempts at state capture in South Africa. Of particular concerns were KPMG SA’s involvement in facilitating tax evasion and corruption by the Gupta family over an extended period of time; the handling of conflicts of interest and independence as well as a perceived lack of integrity when dealing with Gupta entities; the attendance of four of its partners at a Gupta family wedding; the concession that it ignored both due process and the integrity test as well as paid scant attention to the institutional and systemic damage that its report for the South African Revenue Service would entail; and the delays in supplying the Independent Regulatory Board of Auditors (‘IRBA’) with answers and documents which the IRBA had asked for to facilitate its assessment of whether there was a major error in the audit process by the firm.

Although a number of the senior leadership team of KMPG SA – including its Chairman, Chief Executive Officer and Chief Operating Officer – resigned and were replaced, it was subsequently confirmed before the Parliament’s Standing Committee of Public Accountants that these ousted partners were all provided with substantial ‘golden handshakes’. Taken together, this further enhanced the lack of trust and confidence in KPMG SA leading to the loss of a number of prominent companies, including some that are listed on the Johannesburg Stock Exchange, as clients.27 Despite this, worse may yet be to come as complicity in illicit financial flows – if proven – attracts significant financial and non-monetary penalties across all OECD jurisdictions which could in turn threaten the viability of KPMG as a ‘Big Four’ global accountancy firm.28

State Owned Enterprises or Government Linked Corporations

The implementation and upholding of good corporate governance practices extend equally to state-owned enterprises (‘SOEs’) and government-linked corporations (‘GLCs’) – perhaps moreso as any oversights and/or failures at such entities could result in financial losses which will eventually be borne by the public. The most egregious case within this sphere is possibly that of 1 Malaysia Development Berhad – or ‘1MDB’ – a state owned investment fund that was established in 2009 by Najib Razak, the then prime minister cum finance minister of Malaysia as a vehicle to attract foreign investments, who went on to lead its advisory board and who had to be informed of all major matters pursuant to its articles of association.29

However, this has been described as ‘kleptocracy at its worst’ by Jeff Sessions the Attorney General of the United States of America.30 The United States Department of Justice – under its Kleptocracy Asset Recovery Initiative – had announced on 15 June 2017 that:

According to the complaints, from 2009 through 2015, more than US$4.5 billion in funds belonging to 1Malaysia Development Berhad (1MDB) was allegedly misappropriated by high-level officials of 1MDB and their associates. 1MDB was created by the government of Malaysia to promote economic development in Malaysia through global partnerships and foreign direct investment, and its funds were intended to be used for improving the well-being of the Malaysian people.

The Criminal Division is steadfast in our efforts to protect the security, safety, and integrity of the American financial system from all manner of abuse, including by kleptocrats seeking to hide their ill-gotten or stolen wealth,” said Acting Assistant Attorney General Blanco. “Today’s complaints reveal another chapter of this multi-year, multi-billion-dollar fraud scheme, bringing the total identified stolen proceeds to US$4.5 billion. This money financed the lavish lifestyles of the alleged co-conspirators at the expense and detriment of the Malaysian people. We are unwavering in our commitment to ensure the United States is not a safe haven for corrupt individuals and kleptocrats to hide their ill-gotten wealth or money, and that recovered assets be returned to the victims from which they were taken.”

“These cases involve billions of dollars that should have been used to help the people of Malaysia, but instead was used by a small number of individuals to fuel their astonishing greed,” said Acting U.S. Attorney Brown. “The misappropriation of 1MDB funds was accomplished with an extravagant web of lies and bogus transactions that were brought to light by the dedicated attorneys and law enforcement agents who continue to work on this matter. We simply will not allow the United States to be a place where corrupt individuals can expect to hide assets and lavishly spend money that should be used for the benefit of citizens of other nations.”

“Today’s filing serves as a reminder of the important role that the FBI plays in rooting out international corruption. When corrupt foreign officials launder funds through the United States in furtherance of their criminal activity, the FBI works tirelessly to help hold those officials accountable, and recover the misappropriated funds,” said Assistant Director Richardson. “I applaud all my colleagues and our international partners who have worked to help recover an immense amount of funds taken from the Malaysian people, who are the victims of this abhorrent case of kleptocracy.”31

As various investigations were initiated in the United States of America, Hong Kong, Singapore, Switzerland and Abu Dhabi, the Wall Street Journal reported that more than US$1 billion had been deposited into the personal bank account of Najib Razak 32 Significantly, Mohamed Apandi Ali, the then Attorney-General, absolved the Prime Minister cum Minister of Finance of any wrong-doing for the receipt of a transfer of US$681 million in his personal bank account holding in 2013 that it was a ‘gift’ from an unnamed member of the Saudi royal family and that he was “satisfied with the findings that the funds were not a form of graft or bribery.”33 Even though the quantum was large, the then Attorney-General nonetheless – rather inexplicably – thought it unnecessary to further investigate into the reason(s) for the ‘gift’ holding that there “was no reason given as to why the donation was made to PM Najib – that is between him and the Saudi family.”34

Despite the various assurances by its then CEO Arul Kanda that “1MDB was fully able to service its debt obligations” through a “successful rationalization exercise”35, these turned out to be untrue as the government of Malaysia had been bailing out 1MBD since April 2017. On 22 May 2018, the Honourable Lim Guan Eng, Finance Minister of Malaysia, announced that the Ministry of Finance had made a total of MYR6.975 billion in various payments on behalf of 1MDB with a further MYR954 million of interest payments due by November 2018.36 Although the full extent of the liabilities of 1MBD have yet to be announced, it is obvious that ultimately these losses would have to be borne by the citizens of Malaysia – a clear illustration of the costs when the practices of good governance and of strong institutions are ignored to the extent that it facilitates kleptocracy on an unprecedented scale which is being investigated in a number of jurisdictions.

Conclusion

Codes of corporate governance have come a long way since the publication of the Cadbury Report about a quarter of a century ago. It must be remembered that the committee chaired by Sir Adrian Cadbury was tasked simply to deal with the financial aspects of corporate governance and that we have in the intervening period since then expanded considerably on the scope of such codes. On the other hand, the United States of America adopts a ‘black letter law’ approach with a legislative framework setting out the requirements and resulting penalties for non-compliance. It is trite that there is no ‘One Size Fits All’ as regards ‘soft’ or ‘hard’ law since market development and maturity may differ across jurisdictions compounded by cultural and/or socio-economic considerations. Accordingly what may work well in one country may not necessarily produce similar results in another.

That said, what is clear is that there must be adherence to some basic common sensical practices which transcends national boundaries especially since there is a common denominator in the corporate governance debate namely that companies always involve the use of ‘other people’s money’ for which there is a legitimate right to expect that this will be applied responsibly by those empowered to do so.37 The same principles apply regardless of the type of company – be these publicly owned or state-owned or government linked. As the tentacles of the modern corporation reach further outwards so too must there be a commensurate level of corporate behavior that meets the expectations of the various stakeholders which continue to evolve.

The practice of corporate governance – together with its associated Codes as well as legislation – have evolved over the past 25 years during which time numerous corporate excesses have been witnessed, leading to the Asian financial crisis in 1997 as well as the global financial crisis in 2008. Although a number of fora has been set up to raise and discuss some of the issues, as well as to propose changes, it must be expressly recognized that despite all best intentions we must recognize the fragilities of humans which have invariably been the dominant or root cause of the crises that we have experienced to date.

References

See for example La Porta F., Lopez-de-Silanes F., Shleifer A., & Vishny R.W., ‘Law and Finance’, (1998) Vol 106 No 6 Journal of Political Economy 1113; and Shleifer A. & Vishny R.W., ‘A Survey of Corporate Governance’, (1997) Vol 52 No 2 Journal of Finance 737.
See for example Faccio M., Lang L., & Young L., ‘Dividends and Expropriation’, (2001) Vol 90 No 1 American Economic Review 54; and Fan J., Classens S., Djankov S., & Lang L., ‘Expropriation of Minority Shareholders: Evidence from East Asia’, World Bank Policy Research Working Paper No 2088 (1999).
See for example La Porta F., Lopez-de-Silanes F., Shleifer A., & Vishny R.W., (2002) ‘Investor Protection and Corporate Valuation’, (2002) Vol 57 No 3 Journal of Finance 1147; Johnson S., La Porta R., Lopez-de-Silanes F., and Shleifer A., ‘Tunnelling’, (2001) Vol 90 No 2 American Economic Review 22; and Johnson S., Boone P., Breach A., and Friedman E., (2000) ‘Corporate Governance in the Asian Financial Crisis’, (2000) Vol 58 No 1 Journal of Financial Economics 141.
See Report of the Committee on The Financial Aspects of Corporate Governance also commonly known as The Cadbury Report (1 December 1992) at paragraph 2.5 available at http://cadbury.cjbs.archios.info/report (accessed 15 October 2017).
Ibid at paragraph 2.5.
Ibid at paragraph 1.10
Ibid at paragraph 2.8 which states that ‘The Committee’s objective is to help to raise the standards of corporate governance and the level of confidence in financial reporting and auditing by setting out clearly what it sees as the respective responsibilities of those involved and what it believes is expected of them.’
See e.g. European Corporate Governance Institute – Index of Codes available at http://www.ecgi.org/codes/all_codes.php (accessed 15 October 2017)
The OECD Principles provide an indispensable and globally recognised benchmark for assessing and improving corporate governance and have been adopted as one of the Financial Stability Board’s key standards for sound financial systems. They have been used by the World Bank Group in more than 60 country reviews worldwide and they also serve as the basis for the guidelines on corporate governance of banks issued by the Basel Committee on Banking Supervision: see G20/OECD Principles of Corporate Governance available at https://www.oecd.org/corporate/principles-corporate-governance.htm (accessed 15 October 2017).
The full title for the Sarbanes-Oxley Act which was enacted in July 2002 and commonly known by its acronym ‘SOX’ is Public Company Accounting Reform and Investor Protection Act. The full text of SOX is available at https://www.sec.gov/about/laws/soa2002.pdf (accessed 15 October 2017).
The Dodd-Frank Wall Street Reform and Consumer Protection Act which was enacted in January 2010 is available at https://www.sec.gov/about/laws/wallstreetreform-cpa.pdf (accessed 15 October 2017).
Available at https://www.sec.gov/news/speech/spch032403whd.htm (accessed 15 October 2017).
See Monks R.A.G, & Minow N., Corporate Governance, John Wiley & Sons (2011) at page xxii.
See The Institute of Directors in South Africa NPC, ‘King IV: Report on Corporate Governance for South Africa 2016’ at page 7 available at http://c.ymcdn.com/sites/www.iodsa.co.za/resource/resmgr/king_iv/King_IV_Report/IoDSA_King_IV_Report_- _WebVe.pdf (accessed 15 October 2017).
Ibid at page 11. ‘Corporate’ refers to organisations that are incorporated to form legal entities separate from their founders and therefore applies to all forms of incorporation whether as company, voluntary association, retirement fund, trust, legislated entity or others.
Ibid at page 4.
Ibid at page 6.
See Withers I., ‘Bell Pottinger succumbs to South Africa scandal as agency falls into administration ’, THE ECONOMIST 12 September 2017.
See PRCA, PRC announces expulsion of Bell Pottinger, available at http://news.prca.org.uk/prca-announces- expulsion-of-bell-pottinger (accessed 16 October 2017).
For a succinct review of the issues and the events leading to its collapse see e.g. Segal D., ‘How Bell Pottinger, P.R. Firm for Despots and Rogues, Met its End in South Africa’ THE NEW YORK TIMES 4 February 2018 available at https://www.nytimes.com/2018/02/04/business/bell-pottinger-guptas-zuma-south-africa.html (accessed 29 May 2018).
The term ‘state capture’ refers to a type of systemic political corruption in which private interests significantly influence the decision-making processes of the state to their own advantage.
See Legalbrief Forensic, How McKinsey, Trillian planned for Eskom’s billions, available at http://legalbrief.co.za/diary/legalbrief-forensic/story/how-mckinsey-trillian-planned-for-eskom-billions/print (accessed 16 October 2017).
See ‘Why McKinsey is under attack in South Africa’, THE ECONOMIST 12 October 2017.
See McKinsey & Company South Africa, McKinsey & Company statement on Eskom (17 October 2017), available at https://www.mckinsey.com/south-africa/our-work/mckinsey-investigation-statement?cid=sas-pse-gaw- mkf-mck-oth-1710-lka (accessed 18 October 2017).
McKinsey has also been accused – together with KPMG South Africa and SAP of Germany – of criminal breaches of company law by the Companies and Intellectual Property Commission: see e.g. Cotterrill J., ‘McKinsey, KPMG Accused of Criminal Breaches over South Africa Gupta Scandal’ FINANCIAL TIMES 17 January 2018 available at https://www.ft.com/content/71c6f115-0c5c-33ed-bc00-812263f39d2f (accessed 29 May 2018).
See KPMG International Media Statement, KPMG South Africa leadership changes and key findings arising from KPMG International’s Investigation dated 15 September 2017 available at https://home.kpmg.com/za/en/home/media/press-releases/2017/09/kpmg-international-media-statement.html and KPMG International, Statement on South Africa Investigation dated 23 September 201 available at https://home.kpmg.com/za/en/home/home/press-releases/2017/09/kpmg-international–statement-on-south-africa- investigation.html (accessed 15 October 2017).
These include the Foshini Group which has two ex-KPMG SA partners on its board of directors; Sasfin Holdings Ltd; Sygnia Ltd and Hulisani Ltd. The Auditor-General of South Africa has since announced his decision to terminate all auditing contracts with KPMG SA thereby preventing the Firm access to any work for the government: see e.g. Crotty A., ‘KPMG Lost the ‘Most Valuable Client’ in SA’ SUNDAY TIMES 18April 2018 available at https://www.timeslive.co.za/sunday-times/business/2018-04-18-kpmg-lost-the-most-valuable-client-in-sa (accessed 29 May 2018). This was followed soon thereafter by Barclays Africa one of the continent’s largest banks announcing that it would not reappoint KPMG as its auditor: see Cotterill J., ‘Barclays Africa Fires KPMG Over Gupta Connections’ FINANCIAL TIMES 4 May 2018 available at https://www.ft.com/content/3c5de30a-4eea- 11e8-9471-a083af05aea7 (accessed 29 May 2018).
For an update see e.g. Haffajee F., ‘KPMG’s Gupta Auditors Could be Stripped of Licences Soon’ HUFFPOST 9 March 2018 available at https://www.huffingtonpost.co.za/2018/03/08/kpmg-s-gupta-auditors-could-lose-their- licences_a_23380555; Thamm M., ‘Can KPMG Recover from the Gupta Curse? Assessing the State Capture Mess’ BIZNEWS 22 March 2018 available at https://www.biznews.com/thought-leaders/2018/03/22/kpmg-recover-from- state-capture-mess (accessed 29 May 2018); and Jika T., ‘Three Strikes Against KPMG – Now What? MAIL&GUARDIAN 21 April 2018 available at https://mg.co.za/article/2018-04-21-three-strikes-against-kpmg- now-what (accessed 29 May 2018).
For an overview of the issues see e.g. ‘Understanding Cross Border Corruption and Money Laundering: The 1MDB Chronicles Exposed’ available at https://c4center.org/sites/default/files/1MDB%20Report%20- %20FINAL.pdf (accessed 29 May 2018). See also Adam S., & Arnold L., ‘A Guide to the Worldwide Probe of Malaysia’s 1MDB Fund’ available at https://www.bloomberg.com/news/articles/2018-03-07/malaysia-s-1mdb-fund- spawns-worldwide-probes-quicktake (accessed 29 May 2018).
See speech by Sessions J. at the Global Forum on Asset Recovery, 4 December 2017, available at https://www.youtube.com/watch?v=ipySWOpAd88 (accessed 29 May 2018).
See US Department of Justice Office of Public Affairs, ‘U.S. Seeks to Recover Approximately $540 Million Obtained from Corruption Involving Malaysian Sovereign Wealth Fund’, 15 June 2017 available at https://www.justice.gov/opa/pr/us-seeks-recover-approximately-540-million-obtained-corruption-involving- malaysian-sovereign (accessed 29 May 2018).
See Hope B., & Wright T., ‘1MDB Scandal: Deposits in Malaysian Leader Najib’s Account Said to Top $1 Billion’ THE WALL STREET JOURNAL 1 March 2016 available at https://www.wsj.com/articles/deposits-in- malaysian-leaders-accounts-said-to-top-1-billion-1456790588 (accessed 2 June 2018).
See Holmes O., ‘Malaysian Prime Minister Cleared of Corruption over $681 million Saudi Gift’ THE GUARDIAN 26 January 2016 available at https://www.theguardian.com/world/2016/jan/26/malaysian-pm-najib- razak-cleared-corruption-gift-saudi-royals (accessed 2 June 2018).
Ibid.
See Media Release Ministry of Finance Malaysia, ‘Payment of Interest for 1MDB’ 22 May 2018 available at http://www.treasury.gov.my/index.php/en/gallery-activities/press-release/item/3808-press-release-payment-of- interest-for-1mdb.html (accessed 2 June 2018).
Ibid. The total quantum of some MYR7.929 billion is equivalent to almost USD1.993 billion as at 4 June 2018. The terms MYR and USD refer to the official currency of Malaysia and of the United States of America respectively namely the Malaysian Ringgit and the United States Dollar: see e.g. FXConvert.net available at https://fxconvert.net/converter/myr-usd (accessed 4 June 2018).
See e.g. Commonsense Corporate Governance Principles available at http://www.governanceprinciples.org (accessed 15 October 2017).

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