An MBA will never change the world – we leave that to our graduates

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An investigation into the relationship between good An investigation into the relationship between good

corporate governance and corporate sustainability: the corporate governance and corporate sustainability: the

case of public further education and training colleges in case of public further education and training colleges in

Gauteng province of South AfricaGauteng province of South Africa

Presented Presented

byby

Manager. M. Muswaba (FCIS)Manager. M. Muswaba (FCIS)D. Tech. StudentD. Tech. Student

Tshwane University of Technology: Business SchoolTshwane University of Technology: Business School

12 November 201112 November 2011

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Outline of the oral Outline of the oral presentationpresentation♠ Introduction and background of studyIntroduction and background of study

♠ Research problemResearch problem

♠ Research objectivesResearch objectives

♠ Methods and materialsMethods and materials

♠ Results of studyResults of study

♠ Recommendations Recommendations

♠ Limitations of studyLimitations of study

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IntroductionIntroduction

Turbulent environment within the Public Further Education and Training Turbulent environment within the Public Further Education and Training

College (FET) sector which dated back to the nineteenth century (Behr (1988) , College (FET) sector which dated back to the nineteenth century (Behr (1988) ,

Malherbe (1977), governance structures, processes and systemsMalherbe (1977), governance structures, processes and systems Public FET Colleges criticised for failure to increase output and their failure to Public FET Colleges criticised for failure to increase output and their failure to

provide stakeholder needs, despite having been receiving huge funding provide stakeholder needs, despite having been receiving huge funding support from the government in recent years. support from the government in recent years.

Research seeks to establish whether FET College council boards with their Research seeks to establish whether FET College council boards with their increased level of responsibility and accountability has had an impact in increased level of responsibility and accountability has had an impact in fostering good corporate governance in their colleges in the recent years.fostering good corporate governance in their colleges in the recent years.

The thesis provides a practical approach in identifying the availability or failure The thesis provides a practical approach in identifying the availability or failure of key good corporate governance principles for corporate sustainability in the of key good corporate governance principles for corporate sustainability in the FET Colleges.FET Colleges.

Contribution of the study Contribution of the study Explore factors of good corporate governance and corporate Explore factors of good corporate governance and corporate

sustainability within the public FET colleges and suggest the integration sustainability within the public FET colleges and suggest the integration of these factors.of these factors.

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confirmed empirically the existence of numerous factors that moderate confirmed empirically the existence of numerous factors that moderate the link between improvements in corporate governance and the link between improvements in corporate governance and corporate sustainability of public colleges. corporate sustainability of public colleges.

Recommended governance strategies, models and frameworks for FET Recommended governance strategies, models and frameworks for FET institutions to realise their optimal potential performance.institutions to realise their optimal potential performance.

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Study specific objectivesStudy specific objectives To identify key factors that affects best practices and enforces To identify key factors that affects best practices and enforces

effective sustainable and good corporate governance in the public effective sustainable and good corporate governance in the public FET Colleges in Gauteng Province of South Africa. FET Colleges in Gauteng Province of South Africa.

To identify suitable models for ensuring sustainable development as To identify suitable models for ensuring sustainable development as well as good corporate governance in the FET colleges in South well as good corporate governance in the FET colleges in South Africa.Africa.

To assess the impact of corporate governance and corporate To assess the impact of corporate governance and corporate sustainabilitysustainability

in the public FET institutions of Gauteng Province of South Africa.in the public FET institutions of Gauteng Province of South Africa.

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Public FET Colleges have been receiving criticism for failure to increase Public FET Colleges have been receiving criticism for failure to increase

output and their failure to provide stakeholder needs, despite having output and their failure to provide stakeholder needs, despite having

been receiving huge funding support from the government in recent been receiving huge funding support from the government in recent

years. (HRSC, 2009)years. (HRSC, 2009)

The research seeks to establish whether FET College governing boards The research seeks to establish whether FET College governing boards

with their increased level of responsibility and accountability has had with their increased level of responsibility and accountability has had

an impact in fostering good corporate governance in their colleges in an impact in fostering good corporate governance in their colleges in

the recent years.the recent years.

The thesis provided a practical approach in identifying the availability The thesis provided a practical approach in identifying the availability

or failure of key good corporate governance principles for corporate or failure of key good corporate governance principles for corporate

sustainability in the FET Collegesustainability in the FET Colleges.s.

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Literature ReviewLiterature Review

Davies, (1999) Greek word Davies, (1999) Greek word kubernaeinkubernaein meaning meaning steering steering Cadbury (2002) Latin word Cadbury (2002) Latin word gubernaregubernare meaning meaning to steerto steer Pierre & Peters (2000)Pierre & Peters (2000) French word referred to royal officer French word referred to royal officer Soanes,Soanes, ( (2002) the action or manner of governing. 2002) the action or manner of governing. Soanes,Soanes, ( (2002) to govern means conduct the policy and affairs of a state, 2002) to govern means conduct the policy and affairs of a state,

organisation, people or either to control or influence. organisation, people or either to control or influence. Hirst (2000) governance alternative to government, to control by the stateHirst (2000) governance alternative to government, to control by the state Peters P(2000) old governance and new governancePeters P(2000) old governance and new governance

Defining good corporate Defining good corporate governance governance

Elkington (2001) triple-bottom line, as a focus towards economic prosperity, Elkington (2001) triple-bottom line, as a focus towards economic prosperity, environmental quality, and social justice. environmental quality, and social justice.

Welford and Jones (1998) translate conceptual theories of sustainable Welford and Jones (1998) translate conceptual theories of sustainable

development by looking at their own ethics, their objectives and their own development by looking at their own ethics, their objectives and their own

forms of organisation, corporate culture and communication in practical way.forms of organisation, corporate culture and communication in practical way.

Defining corporate Defining corporate sustainability sustainability

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Theoretical Theoretical FrameworksFrameworksTheories of corporate Theories of corporate governancegovernance Agency theoryAgency theory StakeholderStakeholder Contingency approachContingency approachManagerial HegemonyManagerial HegemonyCorporate governance frameworksCorporate governance frameworks King I, II, IIIKing I, II, III CardburyCardbury Green Bury Green Bury Hambury Hambury TurnbullTurnbull CombinedCombined

Stakeholder involvementStakeholder involvement Corporate citizenshipCorporate citizenshipBoard structure and board composition Board structure and board composition Review of board performanceReview of board performance company secretarycompany secretary principles of good governanceprinciples of good governance principles of corporate sustainabilitprinciples of corporate sustainabilityy

Evolution of FET governance in South Evolution of FET governance in South AfricaAfrica FET colleges until 1955FET colleges until 1955

H.E.A 30 of 1923 H.E.A 30 of 1923 Colleges juristic personsColleges juristic persons Gvt Union of representatives worked Gvt Union of representatives worked with with ProvincesProvinces1924 Colleges transferred to CG1924 Colleges transferred to CG1954 colleges became state owned1954 colleges became state owned

FET Colleges 1955-1982FET Colleges 1955-1982 VV. E A. 70 of 1955 (problems of control . E A. 70 of 1955 (problems of control and mgtand mgt Act no. 104 of 1981 brought in State Act no. 104 of 1981 brought in State Aided Aided Colleges and State collegesColleges and State colleges

FET Colleges 1982-1994FET Colleges 1982-1994 Williamson (1992) 1982 two governance Williamson (1992) 1982 two governance systemssystems formed SAC & SCformed SAC & SC

FET college 1998- 2011 FET college 1998- 2011 FET Act 98 of 1998FET Act 98 of 1998 FETC Act 26 of 2006FETC Act 26 of 2006

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Methods and materialsMethods and materialsStudy designStudy design The design of the study was descriptive and cross-sectional The design of the study was descriptive and cross-sectional

Sample size of study and sampling techniquesSample size of study and sampling techniques Population of 128 College Council members of public FET colleges in Gauteng province.Population of 128 College Council members of public FET colleges in Gauteng province. The entire population of 128 council members constituted the sampleThe entire population of 128 council members constituted the sample

Data collection instruments Data collection instruments A structured, self-completion questionnaire A structured, self-completion questionnaire [[Quantitative research design: Quantitative research design: Best and Best and

Kahn (1993), Zikmund (2003)]Kahn (1993), Zikmund (2003)] Face to face in-depth interviews Face to face in-depth interviews [Qualitative ([Qualitative (Garbers (1963), Gudmunsdottir (1996)]Garbers (1963), Gudmunsdottir (1996)]

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Statistical methods of data analysis (Qualitative + Qualitative)Statistical methods of data analysis (Qualitative + Qualitative) Frequency tables and cross-tabs were used for summarising data Frequency tables and cross-tabs were used for summarising data Binary logistic regression analysis was performed between good corporate governance Binary logistic regression analysis was performed between good corporate governance

and various factors that affected good governance (Hosmer and Lemeshow, 2002)and various factors that affected good governance (Hosmer and Lemeshow, 2002) The reliability of the fitted logistic regression model was assessed based on standard The reliability of the fitted logistic regression model was assessed based on standard

classification tables, and the Hosmer-Lemeshow goodness-of-fit test classification tables, and the Hosmer-Lemeshow goodness-of-fit test Adjusted odds ratios were used as a measure of effectAdjusted odds ratios were used as a measure of effect Odds ratios were adjusted for potential confounding variables (gender, age category, Odds ratios were adjusted for potential confounding variables (gender, age category,

race, place of residence and level of education) race, place of residence and level of education) In-depth interviews were analyzed based on tallying, coding and text analysis In-depth interviews were analyzed based on tallying, coding and text analysis

(Qualitative research) . Triangulation with subject matter specialists was used for (Qualitative research) . Triangulation with subject matter specialists was used for verification. verification.

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Results of studyResults of studyFrequency tables for categorical variables of Frequency tables for categorical variables of

studystudy Y: Good corporate governance (Yes, No) is Y: Good corporate governance (Yes, No) is

the dependent or outcome variable of study. the dependent or outcome variable of study. Y1: Corporate sustainability (Yes, No) is the Y1: Corporate sustainability (Yes, No) is the dependent or outcome variable of studydependent or outcome variable of study

The dependent variable of study (Y) is The dependent variable of study (Y) is dichotomous because its 2 possible values dichotomous because its 2 possible values are 1 and 0are 1 and 0

Y=1 if factors needed for the efficient and Y=1 if factors needed for the efficient and effective corporate governance and effective corporate governance and sustainability are not available. Y=0 if sustainability are not available. Y=0 if factors needed for the efficient and effective factors needed for the efficient and effective corporate governance and corporate corporate governance and corporate sustainability are available .sustainability are available .

Figure 2: Good governance factors Figure 2: Good governance factors

Figure 3: Sustainability Figure 3: Sustainability Factors Factors

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Variable of study associated with factors Variable of study associated with factors affecting good corporate governance affecting good corporate governance

P-ValueP-Value

Audit committee principles being practicedAudit committee principles being practiced 0.0000.000

Evidence of effective and transparent systemsEvidence of effective and transparent systems 0.0000.000

Fairness concerns being addressedFairness concerns being addressed 0.0000.000

Integrity systems in placeIntegrity systems in place 0.0000.000

Accountability systems and structures available Accountability systems and structures available and effectiveand effective

0.0000.000

Four or more meetings held per yearFour or more meetings held per year 0.0000.000

Council committees available and functional Council committees available and functional 0.0000.000

Strategic planning available and being Strategic planning available and being implemented implemented

0.0080.008

Table 3: Results obtained from the Pearson chi-Table 3: Results obtained from the Pearson chi-square test of associations (1)square test of associations (1)

Table 4: Results obtained from the Table 4: Results obtained from the Pearson chi-square of associations Pearson chi-square of associations

(2)(2)Variable of study associated Variable of study associated

with factors affecting with factors affecting corporate governance corporate governance

sustainabilitysustainability

P-ValueP-Value

Evidence of stakeholder Evidence of stakeholder involvementinvolvement

0.0000.000

Social, Social, concerns being addressedconcerns being addressed 0.0000.000

Environmental concerns being Environmental concerns being addressedaddressed

0.0000.000

Organizational cultural concerns Organizational cultural concerns being addressedbeing addressed

0.0000.000

Economic issues being addressedEconomic issues being addressed 0.0000.000

Results obtained from binary logistic regression analysisResults obtained from binary logistic regression analysisAdjustment was done for five well known potential confounding variables in the FET Adjustment was done for five well known potential confounding variables in the FET college college sector of Gauteng Province. These confounding variables were, level of education, sector of Gauteng Province. These confounding variables were, level of education, age category, age category, race, gender and the status of council membership (internal or external). race, gender and the status of council membership (internal or external). Adjusted and unadjusted odds ratios were similar in magnitude and significance. Adjusted and unadjusted odds ratios were similar in magnitude and significance. This shows that none of the five potential confounding variables was a confounding This shows that none of the five potential confounding variables was a confounding variable. Thus, the estimated results were not affected by confounding variables. variable. Thus, the estimated results were not affected by confounding variables.

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RecommendatiRecommendations ons

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College council boards to act as the focal point for corporate governance and sustainability College council boards to act as the focal point for corporate governance and sustainability byby identifying and taking account of the legitimate expectations of stakeholders. identifying and taking account of the legitimate expectations of stakeholders. The board should take account of the legitimate interests of stakeholders in its decisions. The board should take account of the legitimate interests of stakeholders in its decisions. college boards should have qualified company secretarycollege boards should have qualified company secretary A new framework and governance model for FET colleges should be developed. A new framework and governance model for FET colleges should be developed. College council boards should ensure that the colleges act as responsible corporate College council boards should ensure that the colleges act as responsible corporate citizens. citizens. Board to ensure that the college develops and implements an effective compliance Board to ensure that the college develops and implements an effective compliance frameworkframework and process.and process. Training and development of directors should be conducted through formal processes Training and development of directors should be conducted through formal processes The performance of the Board, its Committees and individual directors should be evaluated The performance of the Board, its Committees and individual directors should be evaluated annuallyannually The council boards should establish and delegate certain functions to well structured The council boards should establish and delegate certain functions to well structured committees withoutcommittees without abdicating its own responsibilityabdicating its own responsibility FET council boards should develop strategies and policies to guide its activities, to fall in FET council boards should develop strategies and policies to guide its activities, to fall in line with line with the actions of good corporate citizenship and good governance.the actions of good corporate citizenship and good governance. The council boards should establish systems to cultivate and promote ethical corporate The council boards should establish systems to cultivate and promote ethical corporate cultureculture The colleges should have an effective Audit Committee. Audit Committee members should The colleges should have an effective Audit Committee. Audit Committee members should be suitably be suitably skilled and experienced independent non-executive council members.skilled and experienced independent non-executive council members. Sustainable reporting and disclosure should be formalised as part of the college’s reporting Sustainable reporting and disclosure should be formalised as part of the college’s reporting processesprocesses To uphold integrity and honest council members must disclose any conflict or potential To uphold integrity and honest council members must disclose any conflict or potential conflict of interest. conflict of interest.

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Limitations of studyLimitations of study Study conducted in Gauteng Province only; Should be extended to other provinces . Study conducted in Gauteng Province only; Should be extended to other provinces .

Limitations of time, budget and capacity. Limitations of time, budget and capacity.

Sensitivity attached to corporate governance and performance affected conduct of Sensitivity attached to corporate governance and performance affected conduct of

interviews with council board level personnel in the colleges.interviews with council board level personnel in the colleges.

A number of future studies are needed to promote more frequent and meaningful A number of future studies are needed to promote more frequent and meaningful

sustainability systems and structures.sustainability systems and structures.

Comparative analysis among different geographical, economic, and political Comparative analysis among different geographical, economic, and political

contexts may also uncover some of the drivers of good governance and contexts may also uncover some of the drivers of good governance and

sustainability in the FET sector.sustainability in the FET sector.

Future studies should continue to investigate the indicators and data-generating Future studies should continue to investigate the indicators and data-generating

methodologies used in developing college governance guidelines and frameworks.methodologies used in developing college governance guidelines and frameworks.

Attempts by the researcher to integrate the different stakeholder responsibilities for Attempts by the researcher to integrate the different stakeholder responsibilities for

sustainability was limited to colleges, college councils as policy makers, students as sustainability was limited to colleges, college councils as policy makers, students as

consumersconsumers

and the government as the major shareholder.and the government as the major shareholder.

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Thank YouThank You

Manager. M. Muswaba (FCIS)Manager. M. Muswaba (FCIS)

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