Governance tool lands in SA
In order for organisations to benchmark and track their governance performance against industry standards, the Institute of Directors in Southern Africa (IODSA) has introduced the Governance Assessment Instrument (GAI).
IODSA says paid-for governance tool can help measure, enable, and report on corporate governance in all types of organisations. “You can also combine it with a full corporate responsibility assessment - or just the section on business ethics - or with a fraud and corruption resistance assessment, to give you a fuller view of your risk management capabilities,” the organisation says.
According to the supervisor at the IODSA Centre for Corporate Governance, Natasha Bouwman, GAI is set to become a nationally accepted benchmark for measuring how various organisations perform against IODSA's King Report on corporate governance. The King Report, together with relevant legislation, sets the standard and principles for corporate governance in SA.
She says the tool, which has been in the making for three years, is a Web-based instrument with different modules catering for all business sectors. Using the GAI tool is much like completing a regular Web-based survey, she adds.
All information submitted on the tool is hosted by MWeb, with a guarantee of complete confidentiality, according to Bouwman. “In fact, the firewall in place is so secure it's really only a user's username and password that become the weakest link,” she assures.
How it works
“Depending on the organisation, the assessment phase takes the form of approximately 300 questions relating to structures, practices and processes,” explains Bouwman. Each question refers to the applicable King III principle, graph and JSE listing rule. The King III practice notes on the King Report that provide guidance as to implementation can also be accessed via the tool,” she adds.
GAI has a flag feature which enables users to mark questions for later review, Bouwman says. “The search function allows one to deal with all questions surrounding, say, 'internal audit', and a 'comments' function enables one to explain an organisation's individual practices. This comment is incorporated in the reporting that is generated.”
According to Bouwman, the results are then provided in a dashboard format giving the user an overview of the state of corporate governance in the organisation per category and sub-category. “This tool has traffic light indicators (red, orange, yellow, green), in addition to rating symbols, to provide an indication of the measures of risk, relating to the individual categories and sub-categories of governance. There is also an overall rating symbol provided,” she adds.
The results indicate the quantitative state of corporate governance, and confirm to what extent the organisation is structured for good governance, Bouwman explains.
With this tool, reports cannot be manually adjusted, except that they allow for the user to enter comments to explain various ratings or decisions that deviate from the King Code's recommendations, she points out. “Also, a variety of reports from summaries to fully detailed reports are instantly integrated by the software.”
“A quick review of a comprehensive GAI report gives a concise, punchy overview of the structures, practices and processes that are in place to promote good corporate governance within and organisation,” says Ansie Ramahlo, executive director, Centre for Corporate Governance.
“Although the report does not indicate the quality of governance, it gives the stakeholders an idea of how well-positioned an organisation is for good governance - a question of crucial concern in era of corporate scandals.”
“Given the enormous emphasis placed today on a company's reputation, it is of vital importance that companies demonstrate their efforts in ensuring good corporate governance,” says Ramahlo, referring to a McKinsey report which found people are prepared to pay up to a third more for shares in well-governed companies.
“With this in mind, the GAI helps organisations prove their diligence in running their organisations responsibly - a key factor in winning favour with citizens, prospective customers, shareholders, donors and others,” Ramahlo states.
“An exciting prospect is that once a critical mass of organisations within a given sector is reached, the IODSA will be able to establish a benchmark for corporate governance in a particular sector,” explains Ramahlo. However, this will involve organisations that have consented to their information to be shared.
A governance assessment in an organisation provides an effective way to communicate its compliance and integrity to investors, creditors, regulators, business partners, and other stakeholders, IODSA says.