Corporate governance solutions offered

23rd May 2003 By: Joanne Delaurentis

Deloitte & Touche Human Capital Corporation (HCC) has launched a suite of consulting solutions designed to support and equip executive and board directors for effective corporate governance.

“The suite, to be known as the Forefront Executive Advantage, will provide expertise from Deloitte & Touche’s performance and reward, change and development, recruitment solutions and benchmarking, as well as its legal and enterprise risk services divisions,” reports partner of enterprise risk services Roy Shough. Its services will cover areas relating to the appointment, development, evaluation and remuneration of directors, in line with corporate governance best practice.

The development of this new business unit within Deloitte & Touche HCC comes in the aftermath of a recent spate of global corporate failures, largely attributable to poor corporate governance, coupled with the consequent growth in shareholder activism, promulgation of legislation and publication of codes of practice. Deloitte & Touche HCC has gained a large store of knowledge and expertise from the human capital survey on corporate governance and the compensation of nonexecutive directors, which it published recently, says Shough.

“The survey highlighted the swing to stress the calibre, integrity and credibility of nonexecutive directors in South African businesses,” stresses HCC chief operating officer Arie van der Zwan.

“Nonexecutive directors are also now required to play a much greater role in the strategic direction of the business, and their strategic skills therefore weigh heavily in the equation.

“Performance standards and requirements are now included in contracts, and a third of organisations participating in the survey link remuneration to the achievement of these criteria,” says Van der Zwan.

The survey also found that candidates are more commonly nominated by shareowners and the nomination committee.

The predominance of white male chartered accountants, in their 50s, is a reflection not only of a historical situation, but also of the fact that 64% of organisations have recourse to the services of foreign-based nonexecutive directors.

Pointing to the greater responsibilities now expected of nonexecutive directors, Van der Zwan remarks that 89% of directors do not merely attend the board or board committee meetings, as was common in the past, but are now intimately involved in other activities.

Of these 29% are remunerated for these activities.

This greater involvement means that there is a corresponding decrease in the number of directorships help by non- executive chairpersons and directors.

Some 35% of companies specify a limit on the number of other boards on which nonexecutive directors may serve – generally four or five.

As their accountability and responsibilities have increased, so too has their remuneration.

Half the respondents indicated that they have implemented substantial increases for nonexecutive directors, 82% of which review that remuneration annually.