Declaration of personal interest is key area that requires careful attention within organisations. Indeed, the general declaration of personal financial interests’ provision stipulated in s75(4) of the Companies Act 71 of 2008, as amended (“the Companies Act”), reads:
“At any time, a director may disclose any personal financial interest in advance, by delivering to the board, or shareholders in the case of a company contemplated in subsection (3), a notice in writing setting out the nature and extent of that interest, to be used generally for the purposes of this section until changed or withdrawn by further written notice from that director.”
Similarly, Part 5.3, Principle 7, Practice 25 of the King IV Report on Corporate Governance™ for South Africa 2016 (“King IV™”) recommends that:
“Subject to legal provisions, each member of the governing body should submit to the governing body a declaration of all financial, economic and other interests held by the member and related parties at least annually or whenever there are significant changes.”
The recommendation to make a general disclosure of relevant interests as alluded to above is in addition to the recommendation for a specific declaration to be made at the beginning of each meeting of the governing body or its committees of any conflict of interest that a member of the governing body may have in respect of a matter on the agenda.
Conflicts of Interest
Conflicts of interest may arise where an individual’s personal or family interests and/or loyalties conflict with those of the organisation. As a general rule, no conflict between the personal interests of members of a governing body and the interests of the organisation which they serve should be allowed.
Where a potential conflict of interest cannot be avoided, it has to be managed in such a manner as to ensure that the interests of the organisation are at all times protected. It is for this reason that the law in certain instances as well as best practice recommendations call for disclosure of interest in any matter on the agenda of the governing body or any of its committees.
Specific vs General Declarations
However, considering that a matter may not necessarily find its way onto the agenda of the governing body and/or its committees, it is recommended that each member of a governing body submits a general declaration of interests that could assist the organisation in identifying potential conflicts between its interests and that of the members of its governing body or parties related to such members.
Sidebar: It's not just about compliance
It is worthwhile to also note that correctly managing a conflict of interest could be of value and assistance to a member of the governing body wishing to rely on the business judgement rule as part of his defense in the event of legal action being taken against him in his capacity as a member of the governing body.
The difficulty with General Declarations
The maintenance of a register of general declarations by each member of the governing body and, in fact, every employee in an organisation who may operate in the chain of command, can be an onerous and sometimes difficult task.
Making a once-off declaration can be a relatively easy exercise – assuming that the systems and reporting mechanisms are in place - but peoples’ situations change requiring regular updates to be made.
Many of the processes and tools used for evaluating and controlling general declarations in existence today only operate well at one particular phase of the declarations cycle, often requiring administrative intensive campaigns to have information updated. In some organisations this process is unstructured with no tools in place, whilst in others, some formality has been introduced but the data is still maintained in unstructured formats such as spreadsheets.
In an environment that lacks appropriate tools and processes to manage the declarations process, it is difficult for the compliance team to assure the governing body that all potential conflicts are known and are being actively managed and monitored.
Moving toward a solution
The deployment of an integrated solution that leverages the best of digital technologies presents organisations with the opportunity to not only more effectively manage risks related to conflicts of interests but also to radically transform the risk culture and employee attitude toward risk and independence.
In order to achieve such a transformation requires the deployment of a system that makes it easy for employees to record general declarations and to regularly update these as their circumstances change. The compliance team needs access to this information through structured and unstructured reports in order to identify potential issues and take appropriate action.
Indeed, where proposals are often made to public sector organisations where independence declarations are mandatory and, more specifically, where tan organisation needs to ensure that its employees comply with a Code of Conduct requiring ongoing independence, the need for a system that provides efficient, clear and transparent management of the process is even greater.
What is needed, is a system that successfully digitises the entire declarations process, exposes necessary information to stakeholders and accountable people and drives transparent and effective communication at all times to all affected parties. All of this is to be achieved without affecting the productivity of employees or imposing onerous administration and reporting responsibility on stakeholders.
Are there any solutions?
As mentioned above, tools available in the market are fairly disjointed and either don't always cover the entire process of capturing, managing and reporting on declarations. On the other extreme, some tools are so rigid that they cannot meet the specific demands of an organisation's already defined processes - requiring a lot of rework and re-education to get the process to work.
We believe that Declarations on readyplatform presents a fresh approach to digitally driving the declarations process, involving all affected stakeholders at the appropriate time and reducing the administrative burden of identifying and managing potential conflicts.
- It is affordable: costs are calculated on a (very low) per user rate
- It covers a wide variety of declaration types: Declarations helps organisations to track and report on perceived and actual Conflicts of Interest by evaluating employee general declarations covering a variety of configurable areas such as gifting, personal relationships, ownership interests, investment, and much more ....
- It is flexible: The highly configurable nature of Declarations means that your administrators can configure the solution to meet your specific requirements.
Take a look at Declarations. It's the right solution for you business.