Authored By: Thapelo Mabela
University of Fort Hare
1. Abstract
Scandals involving corporate governance have become increasingly prevalent in the world of business, undermining public trust in institutions, destabilising markets, and destroying investor confidence. The accounting fraud in Steinhoff and Tongaat Hulett’s cases reveals systemic weaknesses in oversight, accountability, and ethical leadership. This article examines the root causes of corporate governance failures, including ineffective regulatory enforcement, ineffective boards, conflicts of interest, executive greed, and inadequate auditing procedures. It also assesses the adequacy of current legal frameworks and court rulings.
The article concludes by proposing solutions to improve corporate governance and prevent future governance failures.
2. Introduction
Corporate governance in South Africa is governed by the King IV Report and the Companies Act. Corporate governance is the manner in which companies are run, how they are structured, and for what purpose.1 The King IV Report seeks to improve the board of directors’ ethical and effective leadership in order to achieve ethical culture, good governance, effective control, and legitimacy.2
However, the governance frameworks are underdeveloped and often untested, and this leads to corporate collapses and personal liability for directors.3 Corporate scandals are immoral or unlawful actions involving financial misconduct or fraud that are committed within a company by those entrusted with the company’s interests.4 The near collapse of Tongaat Hulett Limited after allegations of financial misconduct, supported by forensic investigations which revealed governance failures and improper accounting practices, is an example of a weak corporate governance legal framework.5 This scandal, like others before it, demonstrates that South Africa has serious weaknesses in how companies and public bodies are monitored.
The persistence of these scandals raises a fundamental question: why do corporate governance scandals persist even when many laws and regulations are in place to prevent them?
This article argues that weak systemic enforcement, improper incentives, unethical leadership, insufficient board monitoring, and regulatory capture are the main causes of corporate governance scandals. Even though laws have been enacted, they are not adequately enforced or monitored. The discussion begins by examining the applicable legal framework before turning to its interpretation by the courts and, finally, to a critical assessment of its practical shortcomings.
3. Main Body
A. Legal Framework
In South Africa, corporate governance is enforced through the Companies Act 71 of 2008 (legislation) and the King IV Report on Corporate Governance (governance code).
Section 66 of the Companies Act states that a company’s operations and decisions are controlled by its board of directors, and that the board has the power to exercise all of the company’s rights and carry out its activities, unless specific laws or the company’s memorandum of incorporation limit this authority.6 The Companies Act further sets out the directors’ fiduciary duties and the standard of their conduct.
According to section 76 of the Companies Act, a director must not exploit their position or any confidential information gained through their role to benefit themselves or others outside the company or its wholly owned subsidiaries, nor must a director intentionally harm the company or its subsidiaries.7 The section further mandates that directors perform their duties in good faith, always putting the interests of the company first. Directors are expected to carry out their duties with the same degree of care, skill, and diligence that a reasonable person in the same situation would apply.8
The King IV Report on Corporate Governance aims to advance corporate governance as an integral system that delivers outcomes such as ethical culture, good performance, and legitimacy. It seeks broader acceptance of the King IV across different sectors and organisations. It encourages transparency and meaningful reporting to stakeholders in order to achieve accountability. Lastly, it emphasises that corporate governance involves not only structures and processes, but also awareness and behaviour.9
Principle 8 of the King IV encourages the governing body to have arrangements for delegation within its own structures to promote independent judgment, assist in balancing powers, and ensure the effective discharge of its duties.10 This principle encourages the governing body, among other things, to establish an audit committee to audit its finances, a committee responsible for nominating members, and a committee responsible for risk governance.11 These committees are usually composed of non-executive directors.
B. Judicial Interpretation
In Fisheries Development Corporation of South Africa Ltd v Jorgensen, the court differentiated between executive and non-executive directors. The court held that non-executive directors are not bound to give continuous attention to the affairs of the company, as their duties are of an intermittent nature, to be performed at board meetings and at any other meeting that may require their attention. They are not involved in the day-to-day management of the company and are not required to possess detailed knowledge of the specific business they direct. Executive directors, by contrast, are involved in the day-to-day running of the company’s business.12
C. Critical Analysis
Non-executive directors serve to hold executive directors and the entire board accountable by providing an unbiased evaluation of the board’s strategy, performance, and risks. They maintain objectivity because they are not involved in daily operations, allowing them to oversee governance impartially and ensure responsible decision-making.13 However, this very non-involvement in the management of the company undermines their oversight function: without knowledge of what is occurring within the company, non-executive directors are prone to relying on executive directors for information, which compromises the independence that their role is meant to guarantee.
The King IV Report is voluntary. Although some of its elements are incorporated into the requirements of the JSE listing and certain legislation, it ultimately remains within each company’s discretion as to how to implement it. The Steinhoff and Tongaat Hulett scandals exposed the misconception that JSE (Johannesburg Stock Exchange)-listed companies had strong governance frameworks and were therefore immune to widespread corruption.14 Steinhoff International Holdings wiped more than R200 billion off the JSE and devastated the pension funds of millions of ordinary South Africans.15 The Tongaat Hulett CEO and others faced 19 fraud charges totalling R3.5 billion for allegedly backdating the sale of properties and falsifying the group’s financial statements to inflate revenue.16
The Tongaat Hulett and Steinhoff scandals demonstrate that even with the framework established by the Companies Act and the King IV Report, directors can act dishonestly without being detected — or without being detected early enough. The legal framework is sound in theory, but without more effective enforcement and genuine commitment from companies, shareholder interests are not fully protected.
D. Suggestions
The non-executive director’s function should not remain intermittent in nature. Non-executive directors should be required to provide regular, substantive oversight of company affairs — including, at minimum, meaningful engagement on a weekly basis. Furthermore, the King IV Report should not be compulsory only for JSE-listed companies; its application should be extended to all companies, irrespective of their listing status, in order to establish a uniform and enforceable standard of governance across the corporate sector.
4. Conclusion
In conclusion, corporate governance scandals persist due to weak enforcement, inadequate board oversight, and unethical behaviour by directors, despite existing laws such as South Africa’s Companies Act and the King IV Report. The cases of Steinhoff International and Tongaat Hulett illustrate that robust regulations alone do not guarantee honest conduct — the manner in which those regulations are applied and internalised matters equally. Corporate governance is crucial for protecting stakeholders and maintaining economic trust. To prevent future scandals, the focus must shift to enforcing laws effectively, enhancing board vigilance, and fostering genuine ethical leadership, rather than merely maintaining sufficient regulations on paper.
5. Bibliography
Primary Sources
Cases
Fisheries Development Corporation of South Africa Ltd v Jorgensen 1980 4 SA 156 (W).
Legislation
The Companies Act 2008, S 66(1), S 76(1) and S 76(3).
King IV Report on Corporate Governance in South Africa (2016) 54–55.
Secondary Sources
Books
Farouk HI Cassim and Others, The Law of Business Structures (2nd edn, Juta 2021) 324.
Internet
Daily Investor, ‘Steinhoff, EOH, and Tongaat Hulett crushed South Africa’s financial image’ (Daily Investor, 5 November 2022) <https://dailyinvestor.com/south-africa/4660/steinhoff-eoh-and-tongaat-hulett-crushed-south-africas-financial-image/> accessed 28 February 2026.
Rose R, ‘Steinheist: The inside story behind the Steinhoff scandal’ (Daily Maverick, 21 March 2024) <https://www.dailymaverick.co.za/article/2024-03-21-steinheist-the-inside-story-behind-the-steinhoff-scandal/> accessed 28 February 2026.
Financialmail, ‘The case against the Tongaat executives’ (Financialmail, 11 February 2022) <https://www.businesslive.co.za/fm/features/2022-02-11-former-tongaat-executives-appear-in-court-facing-19-fraud-charges/> accessed 28 February 2026.
Mashego P, ‘Tongaat Hulett goes after former execs including ex-CEO Peter Staude in R450m civil claim’ (News24, 11 January 2022) <https://www.news24.com/business/companies/tongaat-hulett-goes-after-former-execs-including-ex-ceo-peter-staude-in-r450m-civil-claim-20220111> accessed 07 February 2026.
Duffy DW, ‘What is Corporate Governance?’ (Corporate Governance Institute) <https://www.thecorporategovernanceinstitute.com/insights/lexicon/what-is-corporate-governance/> accessed 07 February 2026.
Booysen TM, ‘Corporate Governance: Stagnation, Scrutiny and the urgent need for digitisation’ (Praefectus, 10 March 2025) <https://www.praefectus.co.za/2025/03/10/corporate-governance-stagnation-scrutiny-and-the-urgent-need-for-digitisation-2025-03-10/> accessed 07 February 2026.
Flesher DL, ‘Corporate scandals’ (2024) EBSCO <https://www.ebsco.com/research-starters/law/corporate-scandals#full-article> accessed 07 February 2026.
Thesis
Seedat F, ‘Section 76 of the Companies Act 71 of 2008 as a mechanism of enforcement for the King IV Code on Corporate Governance for South Africa’ (LLM thesis, University of KwaZulu-Natal 2019) 26.
Footnote(S):
1 David W Duffy, ‘What is Corporate Governance?’ (Corporate Governance Institute) <https://www.thecorporategovernanceinstitute.com/insights/lexicon/what-is-corporate-governance/> accessed 07 February 2026.
2 Farouk HI Cassim and Others, The Law of Business Structures (2nd edn, Juta 2021) 324.
3 Terrance M Booysen, ‘Corporate Governance: Stagnation, Scrutiny and the urgent need for digitisation’ (Praefectus, 10 March 2025) <https://www.praefectus.co.za/2025/03/10/corporate-governance-stagnation-scrutiny-and-the-urgent-need-for-digitisation-2025-03-10/> accessed 07 February 2026.
4 Dale L Flesher, ‘Corporate scandals’ (2024) EBSCO <https://www.ebsco.com/research-starters/law/corporate-scandals#full-article> accessed 07 February 2026.
5 Penelope Mashego, ‘Tongaat Hulett goes after former execs including ex-CEO Peter Staude in R450m civil claim’ (News24, 11 January 2022) <https://www.news24.com/business/companies/tongaat-hulett-goes-after-former-execs-including-ex-ceo-peter-staude-in-r450m-civil-claim-20220111> accessed 07 February 2026.
6 The Companies Act 2008, S 66(1).
7 Ibid, S 76(1).
8 Ibid, S 76(3).
9 King IV Report on Corporate Governance in South Africa (2016).
10 King IV Code on Corporate Governance in South Africa (2016) 54.
11 King IV Code 54–55.
12 Fisheries Development Corporation of South Africa Ltd v Jorgensen 1980 4 SA 156 (W).
13 Fatima Seedat, ‘Section 76 of the Companies Act 71 of 2008 as a mechanism of enforcement for the King IV Code on Corporate Governance for South Africa’ (LLM thesis, University of KwaZulu-Natal 2019) 26.
14 Daily Investor, ‘Steinhoff, EOH, and Tongaat Hulett crushed South Africa’s financial image’ (Daily Investor, 5 November 2022) <https://dailyinvestor.com/south-africa/4660/steinhoff-eoh-and-tongaat-hulett-crushed-south-africas-financial-image/> accessed 28 February 2026.
15 Rob Rose, ‘Steinheist: The inside story behind the Steinhoff scandal’ (Daily Maverick, 21 March 2024) <https://www.dailymaverick.co.za/article/2024-03-21-steinheist-the-inside-story-behind-the-steinhoff-scandal/> accessed 28 February 2026.
16 Financialmail, ‘The case against the Tongaat executives’ (Financialmail, 11 February 2022) <https://www.businesslive.co.za/fm/features/2022-02-11-former-tongaat-executives-appear-in-court-facing-19-fraud-charges/> accessed 28 February 2026.
