Responsibilities of Companies Towards Employees

Central to company law is the promotion of corporate governance. An important question in company law still today is in whose interest the company should be managed. Corporate governance needs to address the entire span of responsibilities to stakeholders of the company such as customers, employees, shareholders, suppliers and the community at large. The promotion of human rights in the application of company law must also take place. This is extremely important given the significant role of enterprises within the social and economic life of the nation. The interests of various stakeholder groups in the context of the corporation as a "social institution" should be enhanced and protected. Because corporations are part of society and the community, like all of us, it is required of them to be socially responsible and have greater accountability to all stakeholders of the company. Although directors must act in the best interests of shareholders collectively they must also consider the interests of other stakeholders. Sustainable relationships with all the relevant stakeholders are thus important. The advancement of social justice is thus important to corporations in that they should take note of the Constitution, labour legislation and company law legislation when social justice issues are dealt with. Employees have become very important stakeholders of companies and their needs should be taken into account in the bigger corporate governance and social responsibility framework.


General
The 19 th century saw the foundations being laid down for modern corporations: this was the century of the entrepreneur. The 20 th century became the century of management: the phenomenal growth of management theories, management consultants and management teaching (and management gurus) all reflected this pre-occupation. As the focus swings to the legitimacy and the effectiveness of the wielding of power over corporate entities worldwide, the 21 st century promises to be the century of governance. 1 The trajectory outlined in the above quotation indicates a shift in focus: 2 The nineteenth-century entrepreneur owned his business which, in comparison to the twentieth-century corporation, was smaller, and as it had fewer employees, the relationship between employer and employee was more personal. 3 In the 20 th century, the era of Fordism, economies of scale became the requirement for the enterprise to survive with numerous employees. Post Second World War Keynesian economic policy saw employees arranged in a hierarchy: 4 unskilled labour at the bottom, a number of levels of supervisors, followed by managers. Management was divided into different levels: lower, middle and top management. This was a structure typical of hierarchies such as armies. 5 In large enterprises the relationship between the employer (now a company and no longer an individual) and the employee was no longer personal. In industrialised economies employees' interests were generally protected by trade unions and a process of collective bargaining regulated employer-employee relations: will also not look in detail at the duties of directors and how or if these duties have changed with the introduction of the Companies Act. Finally, this contribution won't consider the different board structures and the possibilities of the participation of employees in these structures, and will also not address the issue of workplace forums and the collective bargaining framework in detail. These matters will be addressed in subsequent contributions.
In this article the focus is on employees as an important category of stakeholders of the company. The new focus in corporate law and the corporate governance regime on employees' legitimate interests and expectations, prima facie, promises to allow the employee voice to be heard in the workplace. The question under investigation is whether the Companies Act goes far enough to protect employees as stakeholders?
This article investigates this question by looking at corporate governance and corporate responsibility principles, as well as at the duties of directors and the regulation of employee interests in the realm of corporate law and governance, and provides suggestions as to how the interests of employees could better have been protected in the Companies Act.
not simply for their directors and shareholders, but for the wider communities they serve. 23 An important question in company law today is still in whose interest the company should be managed. 24 In one view a company is best described as "a series of contracts concluded by self-interested economic actors": 25 equity investors (shareholders), managers, employees 26 and creditors. These contracts taken together make up the structure of the company and in the evaluation of the contracts the shareholders "hold sway" and the company ultimately operates to serve their interests. 27 The shareholders expect the company to be profitable and the company's directors and managers are tasked primarily with a duty of creating a corporate governance structure "which ensures that the company conducts its business so as to maximise the returns of these investors". 28 In contrast it can be said that a corporation "cannot be reduced to the sum of a series of contracts": 29 it is vital to take into account a wide range of stakeholders whose interests may overlap or be in conflict with each other. 30 The board and management of corporations should strike a balance between the interests of various stakeholders in their application of corporate governance principles. 31 It is necessary for a corporation to determine which groups will be regarded as "stakeholders".
However the concept of "stakeholder" has many definitions. The following is quite useful: The meanings of "stake" and "holder" are important within stakeholder thinking. Simply stated, the word "stake" means a right to do something in response to any act or attachment. Since "rights" are generally attached with liabilities, this word also denotes the liabilities a person possesses for enjoying a particular right. Hence, a stake could be a legal share of something. It could be, for instance, a financial involvement with something. From the organizational stakeholder perspective, Carroll identifies three sources of stakes: ownership at one extreme, interest in between, and legal and moral rights at the other extreme. The word "holder" is comparatively 23 Clarke and Dela Rama "Fundamental Dimensions". 24 Emphasis added. 25 Davis and Le Roux 2012 Acta Juridica 307. 26 Emphasis added. 27 Davis and Le Roux 2012 Acta Juridica 307. 28 Davis and Le Roux 2012 Acta Juridica 307. 29 Davis and Le Roux 2012 Acta Juridica 307. 30 Davis and Le Roux 2012 Acta Juridica 307. 31 Rossouw 2008 Afr J Bus Ethics 29.
MM BOTHA PER / PELJ 2015(18)2 8 easy to understand. It denotes a person or entity that faces some consequences or needs to do something because of an act or to meet a certain need. 32 According to one commentator, stakeholders include "any group or individual who can affect or is affected by the achievement of the organization's objectives". 33 Another states that it "can encompass a wide range of interests: it refers to any individual or group on which the activities of the company have an impact". 34 Whatever the definition, the importance of the notion cannot be over-emphasised. Therefore, corporate governance addresses the entire span of responsibilities to stakeholders of the company such as customers, employees, shareholders, suppliers, and the community at large. 35 Both internal as well as external stakeholders are important to organisations as multiple agreements are entered into between internal stakeholders, such as employees, managers and owners, and the corporation, as well as between the corporation and external stakeholders, such as customers, suppliers and competitors. 36 Additional stakeholders that are of importance include government and local communities who are responsible for setting legal and formal rules within which corporations operate.
If corporate governance "is focused on the interests of shareholders only", 37 internal as well as external corporate governance is regarded as being shareholder orientated. 38 As a result of the separation of ownership and control, the shareholder model increasingly is associated with agency theory, which holds that "managers are the agents of shareholders (or owners) and in their capacity as agents are obligated to act in the best financial interest of the shareholders of the corporation". 39 It is submitted that this view is too narrow and is out-dated, because shareholders are no longer the only primary stakeholders 40 of a corporation, and that the corporation 32 Rahim 2011 MqJBL 306. 33 Freeman Strategic Management 46. 34 Mallin Corporate Governance 49. 35 Hurst 2004 http://goo.gl/GarxST. Also see Clarkson 1995 Ac Man Rev 106. 36 Freeman and Reed 1990 JBE 337. 37 Emphasis added. 38 Rossouw 2008 Afr J Bus Ethics 29. 39 Rossouw 2008 Afr J Bus Ethics 29. 40 Emphasis added.
takes the interests of all stakeholders into consideration, even of constituents such as pressure groups or non-governmental organisations, "public interest bodies that espouse social goals relevant to the activities of the company". 41 In balancing these interests the key to understanding and execution lies in the distinction between corporate law and corporate finance law. Three different groups are formally recognised in terms of corporate law, namely shareholders, directors and officers of a company, arising from which rights and obligations are obtained, imposed and distributed among the different role-players. 42 When money is raised by the company for utilisation in its business operations, corporate finance law is relevant. The law of corporate finance is important, especially in pre-incorporation contracts, the incorporation and commencement of business of the company, financing of shares, and share capital. 43 To make a profit, however, is not the only function of a corporation. Corporations should be active members of the society and community in which they operate and, thus, should act in a socially responsible manner towards society at large: in other words, they should exercise corporate social responsibility.
The notion of "corporate social responsibility" (CSR) has gained prominence in the last decade. It relates to the relationship between organisations and society: as a part of society and the community, corporations are required to be socially responsible and to be more accountable to all stakeholders. 44 Socially responsible behaviour has been described as "action that goes beyond the legal or regulatory minimum standard with the end of some perceived social good rather than the maximisation of profits". 45  distinction between "relational responsibility" and "social activism". 47 "Relational responsibility" deals with the promotion of or assistance to groups such as employees, customers, suppliers or the community who are affected by the business activities of the company. 48 Important factors are the maintenance of the company's image as well as the application of fairness when dealing with these groups of stakeholders.
Social activism, on the other hand, deals with beneficiaries who fall outside the scope of the company. 49 The company addresses social issues that exist independently from the way it conducts its business activities and social activism is an extension of corporate activity into non-commercial spheres: issues such as human rights and noninvolvement in criminal activities. 50 Problems exist with the appropriate taxonomy for CSR, as is explained below: Given the diversity of terms deployed to cover the various ethical issues relating to business, it is impossible to find a meaning that will accommodate even the majority of actual uses of the term, "CSR", let alone its increasingly popular surrogate "corporate responsibility" … CSR is drenched in alternate notions of "meeting societal preconditions for business", "building essential social infrastructure", "giving back to host communities", "managing business drivers and risks", "creating business value", "holding business accountable" and "sharing collective responsibility"… . Classic attempts to define CSR are packed with notions of voluntarism, social altruism and profit-sacrificing, as in its use "to denote the obligations and inclinations, if any, of corporations organized for profit, voluntarily to pursue social ends that conflict with the presumptive shareholder desire to maximize profit". Yet this risks making CSR marginal to core corporate concerns, and framing it in opposition to corporate profitmaking and shareholder wealth-generation. Alternative formulations embrace the full gamut of CSR's profit-enhancing and profit-sacrificing forms. For example, Professor Campbell views CSR as encompassing "those obligations (social or legal) which concern the major actual and possible social impact of the activities of the corporation in question, whether or not these activities are intended or do in fact promote profitability of the particular corporation", in a way that distinguishes between "corporate philanthropy" (ie corporate humanitarianism that is not central to core business), "corporate business responsibility" towards shareholders and free-market competition, and "corporate social responsibility" (ie obligations arising from the consequences of business activity). This account of CSR includes the two limbs of "instrumental CSR" (which is pursued for business profitability) and "intrinsic CSR" (which is pursued regardless of its connection to business profitability ... the responsibility of the company for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that: contributes to sustainable development, including health and the welfare of society; takes into account the legitimate interests and expectations of stakeholders; is in compliance with applicable law and consistent with international norms of behaviour; and is integrated throughout the company and practiced in its relationships. 56 It is submitted that (large) corporations are crucial to sustainable development: they possess considerable financial and political power. The CSR dimension gives rise "to an expectation that they will also participate in sustainable development activities, In conventional corporate theory, a strong connection exists between corporate responsibility and governance according to law (as distinct from corporate amenability to other societal norms), the sets of interests regulated by corporate law (as distinct from other laws), and the social benefits of private interests using capital for private purposes (as distinct from the social benefits served by the pursuit of social goals). In other words, a common thread runs through the orthodox divide between public and private interests, corporate law and non-corporate law, and corporate and social responsibility. Given its overall grounding in underlying strands of political legitimacy, social efficiency and governance workability, this thread points towards a (if not the) major contemporary normative objection to CSR, which is that the pursuit of social goals is better justified by a mandate from the body politic through law than by a self-adopted and "open-minded internal social welfare instruction" for boards and other corporate actors. 66 CSR and corporate governance are interrelated fields: a "growing convergence between corporate governance and corporate responsibility issues can be observed" in that codes and the advocates of corporate governance now include corporate responsibility issues in the domain of the fiduciary responsibility of boards and directors and of good risk management practices as well as recognition of" the fact that "without proper governance and management accountability, corporate responsibility will not be able to be effectively institutionalised within organisations". 67 In the context of corporate governance CSR has been defined as a "system of checks and balances, both internal and external to companies, which ensures that companies discharge their accountability to all of their stakeholders and act in a socially responsible way in all areas of their business activity". 68 CSR is also regarded as "extended corporate governance"; "CSR extends the concept of fiduciary from a mono-stakeholder setting (where the sole stakeholder with fiduciary duties is the owner of a firm), to a multi-stakeholder one in which the firm owes all its stakeholders fiduciary duties (the owners included) which cannot be achieved without corporate transparency and disclosure and is predicated on communication with and fair treatment of all stakeholder groups". 69 Clearly CSR and corporate governance are mutually supportive and interrelated.
Effective and responsible leadership is at the heart of good corporate governance: 66  ... by pushing companies towards institutions of continuous internal inquiry and debate about how well their responsibility inducing processes and outcomes inculcate an "ethic of responsibility" and a '"corporate conscience" within a legal framework that is sensitized by CSR-friendly public policies and interests, as well as providing organs of government with the stimulus and material to become vehicles of public dialogue and action orientated around shaping laws and policies to reflect both of these institutional goals. Companies obtain certain benefits from society, such as the recognition of a separate legal personality as well as the regulatory framework within which it operates. 93 In return companies have obligations, such as to comply with human rights imperatives: the "social contract" requires, in exchange for these benefits, that the company has corresponding obligations towards society. 94 The first of these obligations is "to do no liability for corporate harm); (v) 'soft law' standards influence the evolution of CSR (and vice versa); (vi) law informs whole-of-organization CSR approaches (e.g. corporate inculcation of internationally recognized human rights standards); (vii) international and regional agreements on trade, investment and the environment influence CSR actors towards CSR public policy goals; and Section 7(j) of the Companies Act. Katzew 2011 SALJ 691 points out the following with reference to aspects covered in s 7 of the Companies Act and the effect thereof: these ideals:"impact on the very core of the established understanding of a company as a vehicle to maximise shareholder profits. They express goals that are a departure from the traditional philosophical basis of South African company law, which has been concerned with much narrower interests, such as the advancement of shareholders' interests". 93 Katzew 2011 SALJ 695. 94 Katzew 2011 SALJ 695.
harm", yet it may also be required to take positive steps to improve the society in which it operates by achieving social benefits. 95 Companies do not operate in isolation, they are regarded as being members of a society and this view reinforces "the notion of a mutually beneficial relationship between the company and its community … alluded to in s 7 of the Companies Act". 96 Violations of the company's obligations include human rights abuses, such as abusive labour practices, environmental damage or violations of the fundamental rights to equality, dignity and freedom, and constitute an infringement of the negative duty not to cause harm. 97 The connection between business and human rights (in the context of the economic downturn, but not limited to it, as emphasised and recognised by the UNSRSG 98 in the 2009 report) can be summarised as follows: It is often mused that in every crisis there are opportunities. In operationalising the "protect, respect and remedy" framework, … to identify such opportunities in the business and human rights domain and demonstrate how they can be grasped and acted upon … In the face of what may say be the worst worldwide economic downturn in a century, however, some may be inclined to ask: with so many unprecedented challenges, is this the appropriate time to be addressing business and human rights? This report answers with a resounding "yes". It does so based on three grounds.
First, human rights are most at risk in times of crisis, and economic crises pose a particular risk to economic and social rights … Second, the same types of governance gaps and failures that produces the current economic crisis also constitute … the permissive environment for corporate wrongdoing in relation to human rights …. Third, the "protect, respect and remedy" framework identifies specific ways to achieve these objectives. 99 In order to conduct themselves as corporate citizens companies should prescribe to the following key principles: integrated and sustainable decision-making, stakeholder increases the trust and confidence of stakeholders and the legitimacy of the company's operations. 107 The focus of the Companies Act is the disclosure of the financial aspect, but compliance with the Companies Act as well as King III "will result in South African companies being in the forefront with regard to holistic corporate reporting". 108 The duties of directors in the context of company law and the promotion of corporate governance with specific reference to the importance of a stakeholder inclusive approach will be addressed below.

General
The duties of directors have been a contentious issue in company law jurisprudence.
These duties play a role in ensuring the promotion of corporate governance principles. 109 In this context, the debate in company law around what constitutes "the best interests of the company" 110 must be re-evaluated. A critical issue that follows from it is: Should the directors, particularly of a public company, be required to run the company exclusively for the benefit of shareholders or should they be managed to take into account the interest of other stakeholders, such as employees, creditors, customers, suppliers, the environment and the local community in which the corporation is located? 111 The 1973  Ch 929. This case is a good illustration of this point because the company wanted to pay the balance of the purchase price to employees as remuneration for redundancy after the board decided to sell the newspaper. The court found that the payments were ultra vires because they were not to the benefit of the company as a whole. 118 In Cyberscene Ltd v i-Kiosk Internet and Information (Pty) Ltd 2000 3 SA 806 (C) the court emphasised the fact that a fiduciary duty exists between a company and its directors. The court also stated that even non-executive directors have this fiduciary relationship towards the company. The court confirmed that "the fiduciary duty of directors can be remedied by means of an interdict. This duty has a more far-reaching effect on senior employees and directors than on junior employees because the latter group's duty only extends to confidential confirmation and trade secrets. The fiduciary duty is therefore owed by senior management and this common-law duty extends even after a director's appointment has come to an end" (820f-i). In Howard v Herrigel 1991 2 SA 660 (A) 678 the court held as follows: "In my opinion it is unhelpful and even misleading to classify company directors as 'executive' or 'non executive' for purposes of ascertaining their duties to the company or when any specific or affirmative action is required of them. No such distinction is to be found in statute. At common law, once a person accepts an appointment as director, he becomes fiduciary in relation to the company and is obliged to display the utmost good faith towards the company and in his dealings on its behalf. That is the general rule and its application to any particular incumbent of the office of director must necessarily depend on the facts and circumstances of each case ... However, it is not helpful to say of a particular director that, because he was not an 'executive director', his duties were less onerous than they would have been if he were an executive director. Whether the inquiry be one in relation to negligence, According to Delport New Companies Act Manual 60 the common-law principle is that "all contracts between a director and the company are voidable at the instance of the company, based on the principle that there shall be no conflict of interest and also, flowing from that, that a director cannot make a 'secret profit'". This is called the "no-profit" rule. Delport is also of the view that the summary in Phillips v Fieldstone Africa (Pty) Ltd 2004 1 All SA 150 (SCA) should suffice but it is uncertain whether this rule will still apply because the statutory provisions do not expressly exclude it. In this case the court held that the rule is strict and leaves little room for exceptions. It covers not only actual conflicts but also those that are possible in real terms. A fiduciary will have limited defences to his avail. Only the free consent of the principal after full disclosure will suffice. The court added: "Because the fiduciary who acquires for himself is deemed to have acquired for trust, once proof of a breach of a fiduciary duty is adduced it is of no relevance that (1) the trust has suffered no loss or damage; (2) the trust could not itself have made use of the information, opportunity etc or probably would not have done so; (3) the trust, although it could have used the information, opportunity etc has refused it or would do so; (4) there is no privity between the principal and the party with whom the agent or servant is employed to contract business and the money would not have gone into the principal's hands in the first instance; (5) it was no part of the fiduciary's duty to obtain the benefit for the trust; or (6) the fiduciary acted honestly and reasonably" (160-161).
votes, and use their powers for the purpose conferred and not for a collateral purpose. 120 The duty of care, skill and diligence entails that "directors must manage the business of the company as a reasonably prudent person would manage his own affairs". 121 The Companies Act contains provisions dealing with directors' general duties that are comparable to the common-law duties of directors: 122 the Companies Act's provisions pertaining to the duties of directors are a semi-or quasi-codification of their commonlaw duties. 123 Katz is of the view that this codification "does not in reality alter the common-law position ...
[i]t is merely descriptive of the common law". 124 King III specifically provides for the "apply or explain" principle that must be applied by directors when acting on behalf of the company. According to this principle directors must act in good faith, in that they must be honest, must act in the best interests of the company, must not receive secret profits and must promote the purpose for which the company was established. In an "apply or explain" regime the following issues should be addressed: … the board of directors, in its collective decision-making, could conclude that to follow a recommendation would not, in the particular circumstances, be in the best interests of the company. The board could decide to apply the recommendation differently or apply another practice and still achieve the objective of the overarching corporate governance principles of fairness, accountability, responsibility and transparency. Explaining how the principles and recommendations were applied, or if not applied, the reasons, results in compliance. In reality, the ultimate compliance officer is not the company's compliance officer or a bureaucrat ensuring compliance with statutory provisions, but the stakeholders. 125 Hindsight is a perfect judge whether a board's determination in applying practice was justified as being in the best interests of the company. recommended practice, subject to the fact that some principles and recommended practices have been legislated. Thus, there must be compliance with the letter of the law, which leaves no room for interpretation. 126 The "apply and explain" principle can be seen as a refinement of the "comply and explain" principle that applied in King II. 127 However, it is unclear what should be explained and complied with. Also, it is unclear whether King II suggested or created an expectation. 128 The King III committee found "apply" to be more appropriate than "comply" for the following reasons: 129 The "comply or explain" approach could denote a mindless response to the King Code and its recommendations whereas the "apply or explain" regime shows an appreciation for the fact that it is often not a case of whether to comply or not, but rather to consider how the principles and recommendations can be applied. 130 The standards of directors' conduct are covered by section 76 of the Companies Act.
Section 76 (3), which provides as follows: [A] director of a company, when acting in that capacity, must exercise the powers and perform the functions of director _ (a) in good faith and for a proper purpose; (b) in the best interests of the company; and (c) with the degree of care, skill and diligence that may reasonably be expected of a person; (i) carrying out the same functions in relation to the company as those carried out by that director; and (ii) having the general knowledge, skill and experience of that director.
In dealing with the duty of care, skill and diligence in terms of section 76 (3)  formulating the code of governance for the United Nations, the words "'comply or explain' led to some observers at the United Nations believing that the word 'comply' connoted regulation and consequently that the Code was based on the principle 'adopt or explain'. The Netherlands has gone even further and its Code is based on 'apply or explain'. It has been commented in the United Kingdom that perhaps they 'missed a trick' in continuing with 'comply or explain'. King III had adopted 'apply or explain'".
director acted with the necessary care and skill. 131 The guidelines regarding the duty of care, skill and diligence explain: As far as the body of legislation that applies to a company is concerned, corporate governance mainly involves the establishment of structures and processes, with appropriate checks and balances that enable directors to discharge their legal responsibilities, and oversee compliance with legislation. In addition to compliance with legislation, the criteria of good governance, governance codes and guidelines will be relevant to determine what is regarded as an appropriate standard of conduct for directors. The more established certain governance practices become, the more likely a court would regard conduct that conforms with these practices as meeting the required standard of care. Corporate governance practices, codes and guidelines lift the bar of what are regarded as appropriate standards of conduct. Consequently, any failure to meet a recognised standard of governance, albeit not legislated, may render a board or individual director liable at law. 132 Fisheries Development Corporation of SA Ltd v Jorgensen is an illustration of this duty.

The court stated: 133
A considerable degree of the nature of the company's business and of any particular obligations assumed by or assigned to a director must be taken into account when dealing with a director's duty of care and skill. A distinction must also be drawn between the so-called full-time or executive director, and the non-executive director. An executive director participates in the day-to-day management of the company's affairs or of a portion thereof whereas a non-executive director has not undertaken any special obligation and is not bound to give constant consideration to the affairs of the company. The latter's duties are of an irregular nature in that he can be required to attend periodic board meetings, and any other meetings which may require his attention. He is not, however, bound to attend all such meetings, though he ought to whenever he is reasonably able to do so. He can also call for further meetings if he believes that they are reasonably necessary. 134 The duties and qualifications of a director are not listed as being equal to those of an auditor or accountant nor is he required to have special business acumen or expertise, or ability or intelligence, or experience in the business of the company. He is nevertheless expected to exercise the care, which can reasonably be expected of a person with his knowledge and experience. A director can delegate any duty that may properly be left to some other official. When doing so a director is, in the absence of grounds for suspicion, justified in trusting that official to perform such duties honestly. He is entitled to rely upon and accept the judgment, information and advice of the management, unless he has proper reasons for querying it. He is also not bound to examine entries in the company's books; however, he should not accept information and advice blindly. When he accepts information and advice, he is entitled to rely on it, but he should give due consideration and exercise his own judgment in the light thereof.
The standard of care as set out by section 76 is "precisely descriptive of the common law-position", 135 which is reinforced in the Act in relation to the determination of liability in the event of a breach of a director's duties. If a director is in breach of his duty of care, skill and diligence he is liable to the company in delict 136 for damages and, in addition, if a contract exists between the director and his company, he is also guilty of breach of contract. 137 The duty of care, skill and diligence in section 76 (3) can be regarded as the "statutory equivalent of the common law duty of care and skill, but goes beyond the common law, not only in respect of the content of the duties, but also as to the level of compliance". 138 The common law duties "were determined with a subjective/objective test, but the minimum was always the lower of the two". 139 The standard of care is a "mixed objective and subjective test": it is objective in the standards of "the general knowledge, skill and experience of that director" may overshadow the objective standards and might confuse the courts in the interpretation of the director's duties. 144 The solution to this conundrum is that the objective test is a base-line standard before the subjective elements are considered. 145 The statutory "business judgment rule" can be found in section 76(4) of the Companies Act.
As is illustrated by Fisheries Development Corporation of SA Ltd v Jorgensen, 146 directors cannot be held liable for mere errors in judgment. Directors should act in the best interest of the company and with the required care and skill: they must take reasonably diligent steps to be informed about the matter at hand, and although they are allowed to take risks they cannot do so in a reckless fashion. The directors of a company should promote the interests and success of the company in the collective best interest of stakeholders (the employees, customers and suppliers) as the circumstances require. It should be noted that the common-law "enlightened shareholder value" approach has not been changed by the Companies Act and that the statutory "business judgment rule" caters for the interests of the company. The company as an entity does not consist of stakeholders: however, cognisance is required of the so-called "stakeholder-inclusive approach" in King III, which recognises the various stakeholders of a company as important role players in the promotion of corporate governance principles. In this light it is submitted that the existence of a "new concept of a company" must be acknowledged. This new concept of a company has been expressed in the following terms: There was a time when business success in the interests of shareholders was thought to be in conflict with society's aspirations for people who work in the company or in supply chain companies, for the long-term well-being of the community and for the protection of the environment. held liable in accordance with the common law principles of a breach of a fiduciary duty. This liability is for any loss, damages or costs sustained by the company as a consequence of any breach by the director of a duty by him (i) to disclose a personal financial interest; 148 (ii) to avoid a conflict of interest; 149 and (iii) to act in good and for a proper purpose, or in the best interests of the company. 150 According to Delport 151 the liability of the director "for any benefit irrespective of the damage to the company" is apparently not covered by section 77(2)(a) of the Companies Act and it is "not clear whether the common law will apply in this regard". 152 Section 77(2)(b) further provides that the liability of a director can take place in accordance with the common-law principles relating to delict for any loss, damages or costs sustained by the company as a consequence of any breach by the director of (i) a duty to act with the required degree of care, skill and diligence; 153 (ii) any provision of the Act not otherwise mentioned in that section; or (iii) any provision of the company's

Memorandum of Incorporation. 154
Section 218(2) is important in that it provides that any person who contravenes any provision of the Act is liable to any other person for any loss or damage suffered by that person as a result of that contravention. Although the statutory fiduciary duties apply between the directors and the company and not, for example, with regard to employees, employees can hold directors liable for breaches of their duties provided that they have suffered losses as a result of such breaches. Section 218 (2)  Companies Act does not contain a provision to this effect -section 218 (2) is not applicable. The cause of action in this instance will be sui generis based on a breach of trust in terms of common law. Employees can hold the directors accountable if they act in breach of their duties.

Achieving a balancing act?
The stakeholder debate (as illustrated above) as well as the debate over CSR and corporate citizenship are integral and prominent issues in the field of corporate governance. 157 It has been established that the role that stakeholders play cannot be overemphasised: its importance is summarised below: A key aspect of corporate governance is concerned with ensuring the flow of external capital to companies both in the form of equity and credit. Corporate governance is also concerned with finding ways to encourage various stakeholders in the firm to undertake economically optimal levels of investment in firm-specific human and physical capital. The competitiveness and ultimate success of a corporation is the result of teamwork that embodies contributions from a range of different resource providers including investors, employees, creditors and suppliers. Corporations should recognise that the contributions of stakeholders constitute a valuable resource for building competitive and profitable companies. It is, therefore, in the long-term interest of corporations to foster wealth-creating co-operation among stakeholders. The governance framework should recognise that the interests of the corporation are served by recognising the interest of stakeholders and their contribution to the longterm success of the corporation. 158 The board of directors as the custodians of the company's corporate reputation should accept that stakeholder interests and expectations, even unwarranted or illegitimate ones, must be dealt with and cannot be ignored. 159 The company's reputation is important for long-term growth and stability, so it is important to note stakeholders' overall assessments, which represent its corporate reputation measured by the company's performance against the legitimate interests and expectations of stakeholders. 160 The company's reputation impacts on the economic value of the company, therefore the board should take account of and respond to the legitimate interests and expectations of its stakeholders, including its employees, in its decision-making.
Legitimate interests or expectations are those "a reasonable and informed outsider would conclude it to be valid and justifiable on a legal, moral or ethical basis in the circumstances". 161 The board is not only responsible for the management of stakeholder relationships but is also directed by law to act in the best interests of the company. King III states that "within these confines" the board should strive to "achieve an appropriate balance between the interests of various stakeholders" and, in so doing, "should take account, as far as possible, of the legitimate interests and expectations of its stakeholders in its decision-making". 162 A complicated balancing act can be achieved: Board decisions on how to balance interests of stakeholders should be guided by the aim of ultimately advancing the best interests of the company. This applies equally to the achievement of the "triple context" and the notion of good corporate citizenship … This does not mean that a company should and could always treat all stakeholders fairly. Some may be more significant to the company in particular circumstances and it is not always possible to promote the interests of all stakeholders in all corporate decisions. It is important, however, that stakeholders have confidence that the board will consider their legitimate interests and expectations in an appropriate manner and be guided by what is the best interests of the company. 163 The Companies Act focuses on more than increasing the wealth of shareholders. 164 Directors must act in the best interests of shareholders, but collectively they must also consider the interests of other stakeholders. Because section 76(3)(b) of the Companies Act, in terms of which directors should act "in the best interests of the company" does not define "company", it has been pointed out that "it follows that the common-law meaning attributed to this word must apply". 165 The term "company" is defined in section 1 of the Companies Act as a "juristic person incorporated in terms of the Act", however, the definition is regarded as being of little relevance when

General
The provisions of the Companies Act highlight that employees play an important role in the structures and processes that deal with control by management and decision- no one would argue that in so doing they were not acting bona fide in the interest of the company itself" but it would be a breach of their duty if they discharged "entirely the interests of a company's shareholders in order to confer a benefit on its employees". If the directors "observe a decent respect for other interests lying beyond those of the company's shareholders in the strict sense, that will not in my view, leave directors open to discharge that they have failed in their fiduciary duty to the company". 176 Webster and Macun 1998 LDD 66 draws a distinction between employee involvement and workplace participation as follows: "Employee involvement is a much broader phenomenon than that of workplace representation and incorporates a variety of schemes aimed at enhancing quality, productivity and motivation amongst the workforce. It is a form of direct involvement in the immediate work environment and constitutes an example of what Pateman calls 'pseudo participation', or techniques which persuade employees to accept decisions that have already been made by management. … Workplace representation, on the other hand, involves formal mechanisms of management-worker interaction that seek to 'institutionalise rights of collective worker participation, including rights to information and consultation on the organisation of production and, in some cases formal co-determination in decision-making".
only in a decline in morale but can also cause problems with the recruitment and retention of staff, as well as with productivity, creativity and loyalty. 179  In addition to being stakeholders of the company, employees contribute to a company's prosperity. A company that employs and retains talented and hardworking employees will reap the benefit. Employees are more than valuable "assets" of the company; they play an important role in the sustainability and long-term growth and prosperity of the company. Intellectual capital rather than resources, for example 179 Institute of Directors King Report III 115 para 45. 180 Metcalf 1995 Employee Relations 8. 181 Metcalf 1995 Employee Relations 8. 182 Metcalf 1995 Employee Relations 9. natural resources, machinery and financial capital, have become an indispensable "asset" of corporations. 183 The welfare of employees and customers 184 contributes to the long-term increase of the profits: a social responsibility commitment and attention to the needs of employees and consumers ultimately benefit shareholders. 185 The satisfaction of employees "will lead to greater productivity and thus to increased profits, in this way maximising the interests of both employees and shareholders". 186 Employee interests extend beyond financial well-being and financial reward/participation in companies.
A company typically responds to pressure from employees threatening industrial action by negotiating with trade union representatives. Or, in the event of price increases by suppliers, a company responds by entering into an agreement that the company will buy in bulk to curb price increases or conclude an exclusivity agreement with a specific supplier.
The decisions affect the interests of employees: the role of employees as stakeholders in a corporation is summarised as follows: The employees of a company have an interest in the company as it provides their livelihood in the present day and at some future point, employees would often also be in the receipt of a pension provided by the company's pension scheme. In terms of present day employment, employees will be concerned with their pay and working conditions, and how the company's strategy will impact on these. Of course the longterm growth and prosperity of the company is important for the longer term view of the employees, particularly as concerns pension benefits in the future … Many companies have employee share schemes which give the employees the opportunity to own shares in the company, and feel more part of it; the theory being that the better the company does (through employees' efforts, etc), the more the employees themselves will benefit as their shares increase in price … .
Companies need also consider and comply with employee legislation whether related to equal opportunities, health and safety at work, or any other aspect. Companies should also have in place appropriate whistle-blowing procedures for helping to ensure that if employees feel that there is inappropriate behaviour in the company, 183 Summers and Hyman 2005 http://goo.gl/RKtXpP. para 25, where the court held as follows: "Of course, democratic values and fundamental human rights espoused by our Constitution are foundational. But just as crucial is the commitment to strive for a society based on social justice. In this way, our Constitution heralds not only equal protection of the law and non-discrimination but also the start of a credible and abiding process of reparation for past exclusion, dispossession, and indignity within the discipline of our constitutional framework". they "tend to be regarded as outsiders rather than as insiders within the company and so are forced to rely on labour law protections rather than be integrated into the encompasses the inclusivity of stakeholders, innovation, 210 fairness and collaboration 211 as well as social transformation and redress. 212 The manner in which corporations treat employees is important. Fairness is an underlying principle that is applied in labour law (and also in corporate law). The LRA provides for the protection of employees against unfair labour practices and unfair dismissal. 213 Fairness 214 is a means of addressing social injustice, 215 which is unsustainable and counter-productive.
Fairness plays an important role in that society is not exclusively concerned with the maximisation of aggregate wealth but also with equality in its distribution. 216 Economic justice is largely ignored in mainstream corporate law. When "people use bargained-for exchange to distribute goods, the weaker bargainer will be less able to extract concessions from the other". 217 Although the less-well-off party is marginally better off, the more powerful party to the contract will tend to be much better off; unless there is "some explicit constraint on the ability of corporations to pass along the lion's share of profit to shareholders, the nation's inequality will worsen over time". 218 Nevertheless, it appears that corporate law is well suited and an efficient means to promote fairness and to redistribute wealth and income; more than other areas of regulation. 219 A stakeholder-oriented corporate law "would work at the initial distribution of the corporate surplus and would benefit stakeholders up and down the 210 Innovation will include new ways in which companies are doing things and will include, for example, profitable responses to sustainability (Institute of Directors King Report III 13).

211
Collaboration should not amount to "anti-competitiveness" (Institute of Directors King Report III 13).

212
Social transformation and redress from the policies of "apartheid" are important and should be integrated within the broader transition to sustainability because integrating sustainability and social transformation "in a strategic and coherent manner will give rise to greater opportunities, efficiencies, and benefits, for both the company and society" (Institute of Directors King Report III 13 Although stakeholder theories of corporate governance appear to give the case for worker representation a way of breaking down the supremacy of shareholders, in some ways stakeholder theories go too far from the point of view of employee representation. Stakeholding, at least in the economic form of the argument, suggests that governance protections are needed for all those who make firm specific investments against the expropriation of which by the controllers of the firm contractual protections are ineffective. Employees may be the paradigm example of such a group, but they are not the only example ... Modern stakeholding theories have thus generated a problem for labor lawyers, which, it seems to me, they have 220   not yet squarely addressed. Talk of "the two sides of industry" or of "labour and capital" or, even "the social partners" does not fit well within the pluralism of stakeholding, which embraces all those contracting with the company who cannot specify in advance a complete set of contractual terms to govern their relationship. It may be possible to distinguish workers from other stakeholders, not on the basis that other stakeholders can effectively rely on other bodies of law, insolvency law or commercial law, for example, to protect them. However, it is a matter for further analysis whether insolvency and commercial law contain effective mechanisms, which labor law lacks and cannot develop.

The participation of employees in companies
The legal structure of authority within corporations is important in dealing with the participation of employees in decision making as well as the appropriate level of decision making. Performance-enhancing mechanisms that are conducive to employee participation in corporate governance may, directly as well as indirectly, be beneficial to companies. These benefits obviously will be achieved by means of the readiness of employees to invest in firm-specific skills. Examples of mechanisms for employee participation vary from employee participation on company/supervision boards to governance processes such as work councils, where the viewpoints of employees with regard to key decisions are considered. Employee stock ownership plans or other profit sharing mechanisms serve as examples of performance-enhancing mechanisms. 227 These and other issues in the context of corporate law will be explored below.

The advancement of employee rights in corporate law
The Companies Act brought major changes to governance with regard to employee participation: it "entrenched certain rights of employees to a point which extends their labour rights". 228 Employees are "given significant rights of participation in the governance of companies as a matter of company law, as opposed to industrial or labour relations law". 229 A company assumes a specific role and place in society. "'How,  (2), whereby the MOI requirements regarding proposals for amendments "seem to suggest that a MOI can allow for a trade union or worker representative to propose such an amendment". 236 The Companies Act does not allow employees to vote for such a proposal unless they are also shareholders. 237 The board of directors is also entitled to issue shares subject to authorisation by or in terms of the MOI 238 and, similarly, to obtain the right to increase or decrease the authorised share capital, except to the extent that the MOI provides otherwise. 239 In 231 Du Toit 2009 ILJ 2227.

232
Section 1 of the Companies Act. 233 The Companies Act does not define the concept "trade union" but a representative trade union is defined by s 1 to mean a trade union registered in terms of s 96 of the LRA. However, there are inconsistencies that exist in the Companies Act, as it does not consistently refer to a registered trade union and often refers only to a "trade union representing employees of the company" (Schoeman 2012 PER 238). Schoeman adds that it "is unfortunate that the Companies Amendment Act 3 of 2011 does not rectify the situation despite one of the aims of the Companies Amendment Act being to correct certain errors resulting in inconsistency, disharmony and ambiguity in the principal Act" (Schoeman 2012 PER 238). The LRA affords rights only to registered trade unions, but also distinguishes between majority representative, sufficiently representative as well as minority trade unions. The organisational rights afforded (or not afforded) to different trade unions will depend on their representivity in the workplace of such a company or employer. 234 Wiese 2013 ILJ 2471. 235 Section 16(1)(c) of the Companies Act. 236 Wiese 2013 ILJ 2471. 237 Section 16(1)(c)(ii) of the Companies Act. ILJ 2471 Section 38 of the Companies Act. the board is authorised to provide financial assistance pursuant to an employee share scheme that satisfies the requirements of section 97. Shareholder approval is not required in such an instance.
any other rights exercisable for securities, must be approved by a special resolution of the shareholders of a company, if the shares, securities, options or rights are issued to a-director, future director, prescribed officer, or future prescribed officer of the company; person related or inter-related to the company, or to a director or prescribed officer of the company; or nominee of a person contemplated in paragraph (a) or (b). … (3) An issue of shares, securities convertible into shares, or rights exercisable for shares in a transaction, or a series of integrated transactions, requires approval of the shareholders by special resolution if the voting power of the class of shares that are issued or issuable as a result of the transaction or series of integrated transactions will be equal to or exceed 30% of the voting power of all the shares of that class held by shareholders immediately before the transaction or series of transactions". 240 Broad-Based Black Economic Empowerment Act 53 of 2003. 241 Wiese 2013 ILJ 2478.
The provision in the Companies Act regarding business-rescue proceedings (in chapter 6) is a fundamental change to employee participation. Sections 129 and 131 provide that the business-rescue procedure can be initiated by means of a resolution of the board of directors or by court order applied for by an affected person. An affected person includes any registered trade union representing employees of the company, and if there is no such trade union representing employees, the employees themselves or their representatives. 244 A trade union must be given access to a company's financial statements for the purposes of initiating a business-rescue process. 245 The trade union representing employees or employees who are not represented may apply to a court to place a company under supervision and commence business-rescue proceedings.
The business-rescue provisions in the Companies Act describe business rescue not only as a job-security measure but also acknowledge the fact that employees, as stakeholders, have an interest to be informed and to participate in the formulation of the business-rescue plan. 246 However, employees cannot vote on the approval of the business-rescue plan, except to the extent that they are also creditors, 247 and thus are "treated as lesser stakeholders than creditors". 248 Employees remain employees of the company during the company's business-rescue proceedings on the same terms and conditions unless changes occur in the ordinary course of attrition or the employees and the company, in accordance with the applicable labour laws, agree different terms and conditions. 249 Any retrenchments of employees contemplated in the company's 244 Section 128(1)(a) of the Companies Act. 245 Section 31(3) of the Companies Act. The right to access to information contained in the Companies Act is in addition to the rights in terms of the Constitution and the Promotion to Access to Information Act 2 of 2000 (PAIA) (also see Wiese 2013 ILJ 2472 in this regard). Also see the type of information that a trade union is entitled to in terms of the LRA. S 16 of the LRA provides that only relevant information that will allow a trade union representative to perform his or her functions referred to in s 14(4) of the LRA must be disclosed and not information that is legally privileged or information that the employer is by law or order of court not allowed to disclose or is confidential and, if disclosed, may cause substantial harm to an employee or the employer or is private personal information relating to an employee, unless that employee consents to the disclosure of that information. Wiese points out that when trade unions negotiate with private companies they are at a disadvantage as private companies are not subject to an audit. Wiese points out that the lack of information available to such a trade union will mean that it is likely that it is not even aware that the company is in financial distress ILJ 2472. 246 Wiese 2013 ILJ 2475. Instances covered here include the following: (i) where a director grossly abused the position of director; (ii) where a director took personal advantage of information or an opportunity, contrary to section 76(2)(a); (iii) where a director intentionally, or by gross negligence, inflicted harm upon the company or a subsidiary of the company, contrary to section 76(2)(a); (iv) where a director acted in a manner that amounted to gross negligence, wilful High Court for an appropriate order to restrain the company from doing anything inconsistent with this Act". If the board of a company adopts a resolution in favour of granting financial assistance in terms of section 45, the company must provide written notice of that resolution inter alia to any trade union representing the company's employees "within 10 days after the board adopts the resolution, if the total value of the loans, debts, obligations or assistance contemplated in that resolution, together with any previous resolution during the financial year, exceeds one-tenth of 1% of the company's net worth at the time of the resolution" or "within 30 days after the end of the financial year, in any other case". 254 The Act abolishes the common-law derivative action and substitutes a statutory derivative action. Thus, it empowers a registered trade union that represents the employees of the company or another representative of employees of the company to bring a statutory derivative action. 255  company is an entity distinct alike from its shareholders and its directors. Some of its powers may, according to its articles, be exercised by directors, certain other powers may be reserved for the shareholders in general meeting. If powers of management are vested in the directors, they and they alone can exercise these powers. The only way in which the general body of shareholders can control the exercise of powers vested by the articles in the directors is by altering their articles, or, if opportunity arises under the articles, by refusing to re-elect the directors of whose actions they disapprove. They cannot themselves usurp the powers which by the articles are vested in the and the shareholders in a general meeting. Section 66(1) of the Companies Act provides that: [t]he business and affairs of a company must be managed by or under the direction of its board, which has the authority to exercise all of the powers and perform any of the functions of the company, except to the extent that this Act or the company's Memorandum of Incorporation provides otherwise.
In consequence of which Delport points out that ... the effect is now that the ultimate power in the company is not with the shareholders in meeting but with the directors, "… except to the extent that this Act or the company's Memorandum of Incorporation provides otherwise" 267 and … therefore, where the Act states that "the company can…", the organ that can act for the company will be the Board. 268 It has been argued that the fiduciary duty of directors and management should be changed, that it should be owed to the firm as a whole, and that it should empower stakeholders with some enforcement mechanisms. 269 Such changes could be accompanied, for example, by empowering non-shareholder stakeholders to bring a civil action against a breach of duties of care or by providing for the election of their own representatives to the board: 270 for example, employees could elect a portion of the board. 271 In German co-determination, half of the supervisory board of major companies consists of worker representatives. 272 This type of composition establishes the board as "pluralistic" and could "retard those selfish impulses because any behaviour that benefits one stakeholder at the expense of the firm must be done in the view of the others". 273 The probable effect of such a broadening would be that non-shareholder stakeholders would speak for other stakeholders and, in effect, they would get a "larger share of the pie that they now get". 274 Boards stand to benefit directors any more than the directors can usurp the powers vested by the articles in the general body of shareholders".
from "a greater openness and diversity", as such "openness would not only make for better decision-making but likely fairer decision-making as well". 275

The Social and Ethics Committee
Section 72(1) of the Companies Act provides, except to the extent that the MOI provides otherwise, that the board of a company may appoint any number of committees of directors and delegate to any committee with any of the authority of the board. An example of such a committee provided for by the Companies Act is the social and ethics committee. It has been established earlier that a company's governance structure should encompass CSR matters. There are different ways of achieving this result, and although in the: ... comprehensive changes brought about by the [Companies] Act no express reference is made to the companies' social responsibility … and as long as no legal requirement is set to integrate CSR issues into their decision-making and governance structures businesses will not be obliged to act in a socially responsible manner. The legislature has taken cognisance of the fact that the public is increasingly paying attention to social issues, and has through section 72 of the Act without specifically referring to CSR made an attempt to ensure that CSR becomes infused and embedded in a company's governance structures. 276 Before the enactment of the Companies Act an array of labour and other statutes provided "a much more detailed and specific set of criteria for assessing the impact of CSR codes". 277 The LRA regulates, inter alia, organisational rights, centralised and non-centralised bargaining as well as strikes and lock-outs, dispute resolution,  (2)) 281 in the calculation of its public interest score is required to appoint such a committee. The committee must comprise at least three directors or prescribed officers of the company. At least one of them must be a non-executive director who was not involved during the three previous financial years in the day-to-day management of the company's business. 282 It is not specifically stated that each member of the committee must be a director but merely that at least three must be directors. Thus it seems, in view of the non-director requirement, that employees, for example, can be members of the committee. 283 The committee is not a board committee and is appointed by the company (the shareholders). 284 The committee as such is a separate organ of the Reg 26(2) of the Companies Regulations provides the method to be used to determine a company's "public interest score" for the purposes of reg 43. It requires every company to calculate its public interest score at the end of each financial year. This should be the sum of (i) a number of points equal to the average number of employees of the company during the financial year, and (ii) one point for every R1 million (or portion thereof) in third-party liability of the company, and (iii) one point for every R1 million (or portion thereof) in turnover during the financial year, and (iv) one point for every individual who at the end of the financial year is known by the company to directly or indirectly have a beneficial interest in any of the company's issued securities or in the case of a non-profit company to be a member of the company or a member of an association that is a member of the company. 282 Reg 43 (4)  This includes the company's standing in terms of the 10 principles set out in the United Nations Global Compact Principles; the OECD recommendations regarding corruption; the EEA; and the BBBEE Act. 288 The promotion of equality, the prevention of unfair discrimination, and the reduction of corruption; the extent of its contribution to the development of communities in which its activities are predominantly conducted or within which its products or services are predominantly marketed; and its record of sponsorship, donations and charitable giving are included here. 289 This includes the company's standing in terms of the ILO Protocol on decent work and working conditions, the company's employment relationships, and its contribution toward the educational development of its employees. Also see Reg 43 (5) (3) of the Companies Act, the trade union will be granted access to the financial statements of the company. This financial information is regarded as relevant under these circumstances. The right to information-sharing is similar to that found in the LRA: legally privileged or information that the employer is by law or order of court not allowed to disclose or is confidential and, if disclosed, may cause substantial harm to an employee or the employer or is private personal information relating to an employee, unless that employee consents to the disclosure of that information, is excluded from the information-sharing obligation.
The rights to be consulted and to collective bargaining appear, also, to fall outside the ambit of the Companies Act and are confined to labour law. An ideal opportunity was on offer to extend and enhance socially responsible obligations such as informationsharing, consultation and collective bargaining, under the labour and employment issues covered by the social and ethics committee, but the opportunity to do so was not taken.

Conclusion
The changing role of companies as members of society cannot be over stated. could be more beneficial as such representation grants employees direct consultation and decision-making rights by means of which they may be seen as partners in decision-making. Employee involvement which has direct participation as a central element is an option which extends to the social as well as the economic exchange of obligations beyond the employment contract. A reciprocal extension of trust and discretion takes place.
The Companies Act introduced significant changes into the corporate law landscape in South Africa. Employees are now more visible in corporate law, and issues such as human rights are now recognised as being important. The Companies Act addresses the issue of worker participation, for example, in the formulation of a business rescue plan, but it fails to involve employees in the approval of the plan, as employees cannot vote on this issue. It is submitted that the provision would have been more meaningful if the Companies Act actually granted trade unions substantive participation rights regarding the approval of the business rescue plan. The same problem applies to the social and ethics committee: the failure to grant employees' representation rights on the social and ethics committee is a lost opportunity on the part of the drafters of the Companies Act to enable input on issues such as health and safety and labour and employment, as well as other issues relating to employees (see the list above).
These matters affect employees directly. If they had been attended to they could have given companies, as employers, the opportunity to split so-called wage issues from non-wage issues, as well as providing employees with the opportunity to have a greater voice in the governance of a company by expanding their participation rights in the decision-making processes within the company. Although a more inclusive approach and a recognition of stakeholder rights is evident in the Companies Act, the enlightened shareholder approach is still preferred. The issue of representation on company boards is contentious. There are calls that South Africa should introduce representation at board level (as in Germany) or that the board should have a direct obligation to take the views of employees into account (as in England). At the same time, it has been pointed out that the German two-tier structure cannot simply be copied in South Africa due to the major social, economic and political differences between the two countries.
The one-tier board structure in South Africa can work if the provisions of the Companies Act, especially regarding issues directly affecting employees, are noted.
Employees will have a meaningful voice if they have a seat on the social and ethics committee, granting which would require an amendment of the Companies Act. The committee should be given more meaningful authority and powers in decision-making to ensure that establishing it is not just another tick-box exercise for companies. The Companies Act has failed employees, for example in imposing a direct obligation on the board to take employees into account (as in England). Further consideration of the issue is required, and it should be noted that cutting and pasting from the English system would not achieve much.
Companies in South Africa can and should be more accountable and responsible to their employees, for example, if they want to implement changes in strategy that directly and indirectly affect employees, as well as impact on the community (and society at large) within which they operate. For example, if a company wants to utilise more cost-effective machinery, the installation of which would result in job losses, the company could consider alternatives such as utilising the employees differently within the organisation or retraining them to operate the new machinery. Retrenching employees suggests that a corporation is not acting responsibly, as does paying huge bonuses to executives in economically distressed times and after retrenchments. Other legislation, like the LRA, offers employees a greater voice and participation. The LRA makes provision for workplace forums, a form of worker participation that has proved to be unsuccessful in South Africa, however. It is suggested that the provisions regarding workplace forums should be reworked in order to bring them in line with the provisions of the Companies Act, especially regarding non-distributive or production issues. A synergy between the issues identified in the LRA regarding consultation and joint decision-making powers in the workplace forum and the work of the social and ethics committee is possible if there is an overlap between the issues that fall within the ambit of the social and ethics committee and those granted by the LRA to workplace forums. These suggestions address the problems relating to the adversarial nature of collective bargaining, as non-distributive or production issues would be removed from the collective bargaining process and would be dealt with by the social and ethics committee, which possibly could enhance efficiency in the workplace. Such issues could include the restructuring of the workplace, changes in the organisation of work, the promotion of exports, job grading, or education and training, in so far as they impact employees.
The purpose of CSR initiatives, as well as corporate governance frameworks, is to make employees feel that they are insiders. CSR, for example, should not be merely voluntary. There is no guarantee for trade unions (and employees) that the company will regard CSR aspirations as not obligatory and subject to managerial discretion. CSR initiatives which fall within the ambit of the social and ethics committee call for trade union involvement to ensure that companies meet their obligations and to guarantee that companies report on these issues.
Employees are dependent almost exclusively on labour law to exercise their right to participation and to make their voice heard. Collective bargaining, an adversarial system, remains employees' primary and, perhaps, default means of having a say in companies. To this effect employees are empowered by a right to strike. However, this right should be exercised as the last resort, as it is exercised at considerable cost to employees, their families and the greater society (including the employer).
Therefore, the position remains unsatisfactory. Effective mechanisms should be provided for insolvency and employees should be recognised as stakeholders, as they are still vulnerable and find themselves last in the spectrum of stakeholders. These