Corporate governance deficiencies in the regulation and disclosure of director remuneration in the South African context of mergers and acquisitions

Includes bibliographical references.One of the first times the controversy of director remuneration reared its head was during the financial crisis of 2008 which was described as the biggest financial crisis since the Great Depression of the 1930’s. The Organisation for Economic Co-operation and Development (OECD) and the United Nations body United Nations Conference on Trade and Development (UNCTAD) both cited failures in corporate governance, the practices of director remuneration and inadequate regulation and control thereof, as specific causes of the financial crises of 2008. The reason for this is that remuneration systems employed by companies failed to sufficiently align remuneration packages of directors with the strategy, risk appetite and long-terms interests of the company and shareholders4 The controversy arose when even though many companies failed or showed great losses, directors were still paid out excessive bonuses and were considered to be rewarded for failure. This controversy was caused by the failure of corporate governance systems to effectively regulate and enforce company remuneration practices, the adequate disclosure of information regarding director remuneration, and the lack of shareholder input in the determination of director remuneration and bonuses. In addition is the fact that most corporate governance systems are based on a ‘comply or explain’ or ‘apply or explain’ approach which, despite its advantages, renders the application of corporate governance structures voluntary, or at a minimum, non-compliance could be explained away. This dissertation examines a weakness in the corporate governance structures of South Africa regarding the disclosure director remuneration in the context of mergers and acquisitions. The submission is that directors act in their own interests; that they benefit more from mergers and acquisitions than the company and its shareholders vis-à-vis short and long term incentives, contrary to the fiduciary duty owed to the latter; and posits that the current corporate governance system in South Africa, its disclosure requirements, and its application are insufficient