UCT Council reports demonstrate the importance of following good governance practices—IoDSA

Reports of the unfolding developments at the University of Cape Town suggest deviations from governance best practice, says the Institute of Directors in South Africa (IoDSA). These include that the UCT Council “was split down the middle about the need for an independent judicial commission of enquiry into allegations of mismanagement and poor corporate governance”,[1] and that potentially implicated members of the Council were allowed to cast a vote in the matter.

A key principle of good governance is that individuals on governing bodies need to be aware of conflicts of interest, and declare them upfront. Conflicted governing-body members should then recuse themselves from any business or decisions that relate to their conflict.

King IV makes this very clear. Principle 1 of King IV is that “The governing body should lead ethically and effectively”, with Recommended Practice 1 (a)(ii) reading: “Members of the governing body should avoid conflicts of interest. In cases where a conflict cannot be avoided, it should be disclosed to the governing body in full at the earliest opportunity, and then proactively managed as determined by the governing body and subject to legal provisions.”

An IoDSA guidance note goes on to advise that “A key function of a chair is to manage conflicts of interest. It is not sufficient merely to table a register of interests. All internal and external legal requirements must be met. The chair must ask affected directors to recuse themselves from discussions and decisions in which they have a conflict unless they are requested to provide specific input, in which event they should not be party to the decision.”

In this instance, if the reports of potentially implicated Council members being allowed to vote on a matter that concerned them intimately are true, this would constitute a departure from governance best practice.

Certainly, a large section of the Council seems to believe that such an unethical decision was taken, and has gone public with its disagreement. This in turn is attracting unfavourable media attention, and may imperil the ability of the governing body to function effectively in the future.

Whatever the rights and wrongs, the very existence of such a profound split in a governing body on such an important matter is also a concern.

“In serious and high-risk deliberations by governing bodies, it is critical that all members are fully informed, and that discussions are debated thoroughly and ultimately culminate in a decision that has the backing of the entirety, or at least the vast majority, of the governing body which is collectively responsible,” concludes Ms Natesan.

[1] Andriaan Basson and Marvin Charles, “UCT crisis deepens as 13 top council members slam ‘irregular, flawed’ meeting”, News 24 (7 October 2022), available at https://www.news24.com/news24/southafrica/news/breaking-uct-crisis-deepens-as-13-top-council-members-slam-irregular-flawed-meeting-20221007.