Author: Lauren Strauss | UC Berkeley School of Law | J.D. Candidate 2021| Posted: November 20, 2020 | Download PDF.
The COVID-19 crisis, while devastating for people and businesses across the globe, presents a unique opportunity to test companies’ stated commitment to stakeholder governance. Vodacom Group, a South African communications company with a market cap of $227.537 billion,[i] is certainly putting its money where its mouth is. Not only does Vodacom continue to adopt initiatives and policies that support a broad range of stakeholders, but it also does so amidst a growing financial crisis left in COVID-19’s wake.
In Q1 of 2020, the South African smartphone market took a sharp decline as smartphone shipments decreased by 22.9%.[ii] Notwithstanding this disruption in its supply chain and a large drop in its stock price,[iii] Vodacom remains committed to protecting and advancing the interests of its stakeholders. In April 2020, Vodacom did just that and partnered with Discovery Group, a financial and insurance services company,[iv] to create a health platform where individuals can, free of charge, (1) screen their symptoms and (2) virtually connect with healthcare professionals for immediate consultation.[v] In addition to this community-oriented initiative, Vodacom recently announced a new gender-neutral 16-week paid parental leave policy that applies to birthing and non-birthing new parents.[vi]
While Vodacom’s recent stakeholder-friendly corporate actions could very well be in the interests of shareholders in the long run, their emergence during the COVID-19 crisis suggests that South Africa’s corporate governance regime effectively protects the interests of stakeholders. Since the 1990s, there has been a growing shift in South Africa’s corporate governance regime.[vii] The Institute of Directors in Southern Africa is responsible for releasing the King Code, a voluntary code on corporate governance.[viii] King IV, published in 2016, is the most recent report in the Code and advocates for stakeholder inclusivity, which allows corporate boards to prioritize many sources of “value creation” including “social and relationship capital as embodied by stakeholders.”[ix] King IV’s definition of stakeholder includes: (1) individuals reasonably expected “to be significantly affected by an organization’s business activities” and (2) individuals that may affect the organization’s long term value creation.[x] While compliance with King IV is generally voluntary, the Johannesburg Stock Exchange (“JSE”) requires that all listed companies apply and disclose their application of the King IV principles.[xi] Notably, Principle 16 requires companies to adopt a stakeholder inclusive approach to corporate governance and disclose their application annually.[xii] Accordingly, because Vodacom is a JSE listed company,[xiii] it is required to comply with Principle 16.
Notwithstanding the fact that JSE listed companies must apply and annually disclose their application of the King IV principles, South Africa’s Companies Act 71 of 2008 does not expressly advocate for stakeholder inclusivity.[xiv] Nevertheless, Vodacom’s website states its board’s role is to act in the best interest of all Vodacom’s stakeholders.[xv] While it is not clear whether or not Vodacom’s stakeholder-friendly actions contravene the interests of its shareholders, their existence suggests that the JSE listing requirements effectively push listed companies to do more than merely state their commitment to stakeholders – they pressure companies to identify their stakeholders and adopt initiatives that benefit them. Thus, for JSE listed companies, South Africa’s corporate governance regime goes further than the 2019 Business Roundtable statement advocating for a stakeholder approach to corporate governance.[xvi] Perhaps this indicates that voluntary statements alone are insufficient to significantly alter corporate behavior.
[i] Bloomberg, VOD:SJ, Bloomberg, https://www.bloomberg.com/quote/VOD:SJ (last visited Oct. 25, 2020).
[ii] IDC, COVID-19 Causes Severe Slowdown in South Africa’s Smartphone Market, IDC (June 15, 2020), https://www.idc.com/getdoc.jsp?containerId=prMETA46500720.
[iii] Business Insider, Vodacom Group Limited, Business Insider: Markets Insider, https://markets.businessinsider.com/stocks/vodacom_group-stock (last visited Sept. 23, 2020).
[iv] Discovery, About Us, Discovery, https://www.discovery.co.za/corporate/our-business (last visited Sept. 23, 2020).
[v] Vodacom Group, Free Online COVID-19 Screening and Consultations Available to All South Africans through Vodacom and Discovery Partnership, Vodacom: Press Releases (Apr. 1, 2020), https://www.vodacom.com/news-article.php?articleID=7470.
[vi] Vodacom Group, Vodacom Group Becomes the First Telco in SA to Introduce New Gender-Neutral Leave Policy, Vodacom: Press Releases (Sept. 1, 2020), https://www.vodacom.com/news-article.php?articleID=7545.
[vii] Richard Croucher & Lilian Miles, Corporate Governance and Employees in South Africa, 10 J. Corp. L. Stud. 367, 369-377 (2010).
[viii] Institute of Directors Southern Africa, King Report on Corporate Governance SA, Institute of Directors Southern Africa, https://www.iodsa.co.za/page/kingIII (last visited Sept. 23, 2020); Michael Judin, et al., Corporate Governance . . . Innovative Thinking in South Africa’s Latest Code (June 20, 2017), ABA, https://www.americanbar.org/groups/business_law/publications/blt/2017/07/01_judin/.
[ix] Institute of Directors Southern Africa, King IV Report on Corporate Governance for South Africa, Institute of Directors South Africa (Nov.1, 2016), https://cdn.ymaws.com/www.iodsa.co.za/resource/resmgr/king_iv/King_IV_Report/IoDSA_King_IV_Report_-_WebVe.pdf.
[x] Id.
[xi] JSE, JSE Listing Requirements, JSE, https://www.jse.co.za/content/JSERulesPoliciesandRegulationItems/JSE%20Listings%20Requirements.pdf (last visited Oct. 25, 2020).
[xii] Institute of Directors Southern Africa, King IV Report on Corporate Governance for South Africa, Institute of Directors Southern Africa (Nov.1, 2016), https://cdn.ymaws.com/www.iodsa.co.za/resource/resmgr/king_iv/King_IV_Report/IoDSA_King_IV_Report_-_WebVe.pdf.
[xiii] Bloomberg, VOD:SJ, Bloomberg, https://www.bloomberg.com/quote/VOD:SJ (last visited Oct. 25, 2020).
[xiv] See Companies Act of 2008 (S. Afr.).
[xv] Vodacom Group, Our Approach, Vodacom: Governance, https://www.vodacom.com/company-structure.php (last visited Sept. 23, 2020).
[xvi] Business Roundtable, Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy That Serves All Americans’, Business Roundtable: Corporate Governance (Aug. 19, 2019), https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans.