IIA SA 2018 Corporate Governance Index reveals a drop in corporate ethics

Claudelle von Eck hopes the 2018 Index will serve as a wake-up call to leaders.

The 2018 Corporate Governance Index Report, released 1 November, has shown that South African organisational cultures are losing ground in terms of  ethics and ethical behaviour, which has been proved by recent corporate and government scandals like Steinhoff, VBS Bank, and state-owned entities related to state capture.

The annual survey is undertaken by the Institute of Internal Auditors SA (IIA SA), which represents over 8,000 members, in partnership with the University of SA (Unisa) and casts an eye over the country’s attitudes towards good corporate governance.

The report revealed a drop in 18 percent to only 48 percent that agree that ethics plays an integral part in the culture of their organisations. It also showed a widening gap between the ethical tone at the top and the reality on the ground. 

The overall Index dropped 6.6 percent from an overall score of 3 out of a maximum 4 in 2017 to 2.8 in 2018. Two of the key areas of concern for the public, Ethics and Assurance, showed the biggest drop of 9.6 percent each. 

IIA SA CEO Dr Claudelle von Eck admits that the audit profession has come under greater scrutiny as a result of recent controversies and laments the fact that the CGI shows that internal audit is often not equipped with enough resources.

She says: 

“It is my hope that the 2018 Index will serve as a wake-up call to leaders and will result in more introspection. It is clear from this Index that there is much work to be done in moving South African organisations to better governed organisations. The low percentage of chief audit executives (19%) who strongly agree that the output of their organisations in relation to their resources is alarming and points a finger at leadership across the board.”

The Index looked at seven governance dimensions, Ethics, Compliance, Leadership, Operational Risks, External Risks, Performance and Assurance, and revealed a number of concerning areas, of which Performance and External showed the lowest overall scores of 2.6 each, which is a significant red flag that speaks directly to the competitiveness of the country. 

Claudelle encouraged the leadership of South Africa to use the index as a vital benchmarking tool: 

“South Africa’s overall score is the culmination of our collective efforts. I encourage all to resolve within themselves to not be the weak link in the collective and to ensure that they correct their mindset and behaviour in their own spaces of influence.”

Other results include: 

* 41% strongly agreed that their leaders displayed a good understanding of the varying roles of assurance providers;

* 35% of CAEs strongly agree that they have adequate resources to enable them to do their jobs properly; and,

* Just 24% strongly agree that their leaders are familiar with, and use the Integrated Reporting principles in the organisations value creation process.