Social and Ethics Committee of the Board fig 1The intention of the Act in prescribing the establishment of  a social and ethics committee of the board for defined enterprises, is to bring about a more structured and focused approach to social and ethical issues encountered in the workplace, requiring management to report in a standardised and comparable manner on these issues to the SEC. Complying with the provisions of the Act must be the point of departure of management when compiling the SEC report. 

All state-owned companies, JSE listed public companies and all other companies that have a public interest score in excess of 500 points, are obliged to establish a social and ethics committee of its board.

The SEC is a committee of the board comprised of a minimum of 3 directors, one of whom must be an independent non-executive director.   The committee can obviously have more than 3 members.

The functions of the social and ethics committee cover both monitoring and reporting responsibilities.  The SEC has an overarching responsibility to monitor and report directly to the shareholders at the AGM on all aspects of corporate sustainability and the social & ethics performance of the company, which responsibility neither the audit committee nor the risk committee of the board has. The mandate, responsibilities and powers of the SEC as defined in sections 72(4) to (10) of the Companies Act, should be taken seriously by the board and management.

Failure to comply with the provisions of the Companies Act as regards the SEC is an offense and subjects the company and all its directors to sanction as outlined in section 84(6) of the Act. Regulation 43 of the Companies Act defines the role, function, task and responsibilities of the SEC. Furthermore, section 72(8) of the Companies Act bestows certain powers and rights upon the SEC, enabling it to fulfil both its monitoring and reporting roles.

Talk to us. We can assist you to comply with this regulatory requirement.