Title: Hybrid systems of corporate governance: The cases of South Africa and the United Kingdom
This paper will start by investigating the models of self-regulation versus hard law as ways to regulate corporate governance. South Africa and the United Kingdom will be used as examples to indicate the success of a hybrid system of corporate governance as applied in these two jurisdictions. A hybrid system refers, in this context, to a legal system that has corporate governance rules and principles embedded in both legislation (hard law) as well as codes of best practice (soft law). The hybrid nature of the enforcement mechanisms- i.e. the combination of mandatory reporting with freedom to deviate plus the added dimension of market discipline and market forces will also be considered. Both these countries have had success with self-regulatory codes together with certain principles being codified in legislation. The focus will be on the South African King III Report on Corporate Governance as well as the Companies Act of 2008. Reference is also made to the upcoming King IV Report. For the United Kingdom’s position the emphasis will be on the UK Corporate Governance Code and the Companies Act of 2006. The Code for Responsible Investments in South Africa and the Stewardship Code of the United Kingdom will also be of relevance. Practical examples and case studies, from South Africa and the United Kingdom, will be provided to show the success of self-regulation as a method of enforcing corporate governance. Based on the analysis of the methods of regulation of corporate governance, applied in South Africa and the United Kingdom, as well as the practical evidence provided, a conclusion will be drawn on why a hybrid system is the best way forward when regulating corporate governance. The United Kingdom and South Africa, as early movers in corporate governance self-regulation, enjoyed much influence through exporting codes around the world e.g. to the European Union where code compliance is now included in the reporting framework. This will be linked with the regulatory approach as advocated by the European Parliament and Council Directive of 2014/95/EU on 22 October 2014 and the affect that this Directive will or can have on the position in South Africa and the United Kingdom.