In my view, one of the most significant financial stories of the year to date is that of the liquidators of LeisureNet suing the directors of the failed company for a total of R1.2 billion in their personal capacities.
Ronnie Morris, the journalist who has covered the story for our sister publication Business Report, has exposed many of the unacceptable activities at LeisureNet, the company that owned the defunct Health & Racquet clubs.
The liquidators are not only suing LeisureNet's former joint chief executives Peter Gardener and Rod Mitchell, who were arrested in March 2002 on charges of theft, fraud, VAT fraud and income tax fraud. They are also after all the other directors, who may or may not have been aware of what was happening while the company was under the management of Gardener and Mitchell. If they were not aware of what management was up to, they ought to have been.
This story is important because it sends a strong message to all those who are entrusted with other people's money, mainly company directors and retirement fund trustees. The message is clear: if you fail to carry out your fiduciary duties, you can be held personally liable.
I raised this issue in a column a few weeks ago when I asked why one Jim Millar, a director of Jack Milne's PSC Guaranteed Growth (PSCGG) fund at the time of its launch, should escape scott free from the fallout of the scam. Millar now runs an institution in Johannesburg called the Financial Fitness College.
Milne is in jail for what he did, but the other directors of PSCGG are not being held personally liable to those who lost money investing in the scam.
Millar must have approved PSCGG's misleading prospectus. And if he did not approve it, then he is equally liable for failing to do his job as a director.
Responsibility
Too many people are quick to accept directorships of companies and then fail to take responsibility when things go wrong. If directors of public com-panies and trustees of retirement funds only accepted such positions after they had done a proper due diligence, and took their duties more seriously, there would surely be fewer financial disasters.
Joe Pamensky, the former chairman of LeisureNet, and Iqbal Surve, a former member of the board and now the chief executive of Sekunjalo Investment, were, it seems, not part of the nefarious goings-on at LeisureNet. It has never been alleged that they were. However, their presence on the board gave investors a degree of confidence in LeisureNet.
The fact that they accepted the directorships (for which they were paid) means they also accepted the responsibility that the company would be properly managed.
I do not think many people realise the part that they can play, particularly through their retirement funds, in cleaning up corporate life in South Africa.
You have immense power, particularly if you are a member of a retirement fund, to assist in the clean-up of corporate South Africa.
It starts with electing a trustee to your retirement fund who will act in the best interests of your fund, and ultimately in your best interests, and in turn ensure the asset managers keep a close check on the companies in which your money is invested.
Corporate governance
On the topic of sound corporate governance, the recent Ernst & Young Excellence in Corporate Reporting Awards was quite an eye opener.
One would expect that those companies responsible for caring for our savings would have superb levels of corporate reporting.
We, as direct and indirect shareholders (investors in retirement funds, life assurance policies or unit trust funds), rely on the annual reports of listed companies as the main source of information about these companies.
Financial institutions Absa, African Bank and Stanbic (Standard Bank) must be complemented for topping the list of companies who were recognised for excellence in corporate reporting. They all made the Top 10 with Absa in first place.
Apart from the Top 10, the contestants were ranked in the following categories: excellent, good, adequate and perfunctory.
Surprisingly, in spite of its recent problems, Nedcor made it into the "excellent" category, but its mother company, Old Mutual, was ranked as "adequate". First Rand and Investec were also in the "excellent" category.
Standards
Any financial service company below the excellent mark is, in my view, going to have to try harder.
Liberty, New African Capital (Metropolitan) and Sanlam made "good".
Along with Old Mutual in the try- very-much-harder "adequate" category, were Alexander Forbes and Discovery.
Down at the bottom, in the unacceptable "perfunctory" category was Rand Merchant Bank Holdings.
Unless the companies responsible for managing our savings set the standards for the rest of corporate South Africa, how can we be sure that they are managing our money properly?