Case study
The final report into South Africa’s first bank collapse in 12 years found directors at African Bank Investments failed in their duties to manage and protect the Johannesburg-based lender before its downfall almost two years ago. Such a corporate failure has been exposed during the reign of King III which is one of the most modern and update to date codes of corporate governance.
If you take the 2008 global crisis, the academic research shows that one of the contributing factors was that the nonexecutive board members on those banks’ boards (the likes of Citigroup, Lehman Brothers and other banks) had a notable lack of financial expertise.
Similarly at African Bank, questions have arisen over whether the board was independent enough, and had the capacity, to challenge management. Corporate governance failures continue to blight companies and governments across the continent. The failure of African Bank is about over-hype within the unsecured credit market and a business with no diversification.
Questions
1. Does catastrophe that happened with African Investment Bank reveal a basic weakness in our contemporary system of corporate governance? (2 pages)
2. If so this is so where are the weakness located? (1 page)
3. Are these weaknesses as set out in the question above, similar those that can be found in the public sector? Discuss. (1 page)