A legislative framework for shareholder approval of political donations and expenditure by companies in South Africa

Abstract

Political donations and expenditure by companies raise serious concerns due to poor corporate governance practices, which include the lack of accountability of directors to shareholders. The shareholders’ right to vote is one of the company-law mechanisms that may be used to control the directors’ discretion regarding political donations and expenditure. However, the Companies Act 71 of 2008 does not give shareholders the right to approve a company’s political donations or expenditure. Consequently, the directors enjoy a wide general discretion regarding a company’s political donations and expenditure. The article examines certain key policy considerations concerning the introduction of prior shareholder approval of political donations and expenditure by companies in South Africa. It examines the legislative requirements regarding shareholder approval of political donations and expenditure in the UK under Part 14 of the Companies Act, 2006, the philosophical rationale underpinning these legislative requirements, and the extent to which the introduction of shareholder approval of political donations and expenditure in the UK has achieved the underlying objectives of promoting transparency and accountability. The article then advocates for the introduction of the requirement for prior shareholder approval of political donations and expenditure under the South African Companies Act, and provides detailed recommendations on how such requirements could be implemented.