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Broad-Based Black Economic Empowerment Act, 2003 (Act No. 53 of 2003)

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Chartered Accountancy Charter

Section C From Theory to Practice: The Scorecard

12. The Generic Scorecard for the CA Sector

12.2 Application of the CA Sector Scorecard

12.2.2 Management Control Scorecard

 

The Management Control Element measures the effective control of an enterprise by Black People.

 

The Management Control Element aims at addressing certain key issues surrounding black Management and control of enterprises. These issues include the following:

 

• Representation of Black People at executive board level: This provides incentives for the representation of Black People as executive directors, in order to reverse the trend that companies hire Black People as non-executive directors only.
• Involvement of Black People in daily operations and strategic decision making at the most senior level: This Code encourages the inclusion of Black People in driving the implementation of operational and strategic decisions.

 

Black People represented in positions that are key to the functioning of companies: This Code encourages the employment of Black People in positions that are core to the operations of a company.

 

The measurement takes place through indicator Weightings which are as follows:

 

Management Control indicators

Weighting points

Compliance Target for 2016

Code

CA sector

Board participation


• Exercisable Voting Rights of black board members using the adjusted recognition for gender

3

3

50%
• Black executive directors using the adjusted recognition for gender

2

2

50%

Top Management

 

 

 
• Black Senior Top Management using the adjusted recognition for gender

3

3

40%
• Black other Top Management using the adjusted recognition for gender

2

2

40%

Bonus point

 

 

 

Black Independent Non-Executive Board Members

1

1

40%

 

For purposes of the CA sector, indicator Weightings have the following definitions:

 

Board participation

 

• Board means the body consisting of persons appointed to undertake the executive management of the enterprise: Their main functions are to design, formulate and implement policy and undertake strategic planning, as well as to plan, direct and co-ordinate the overall policies and activities of the enterprise. These are also the persons responsible for governance of the enterprise as defined in the King Report.
• Board participation refers to the level of control exercised by a person over the decisions of the board. In the CA sector this usually means that the black persons participating in the board have Exercisable Voting Rights that are not subject to any limitation.

 

Top Management

 

• Top Management is a collective term for 'other Top Management' despite the fact that the EE Act does not contain these sub-categories.

 

• The EE Act contains a category for 'Top Management'. However, this is measured under Management Control and NOT under Employment Equity. Thus, if an Employee who is categorised as senior Management as per the EEA9 schedule is included in Top Management under Management, this Employee will not be accounted for under the Measured Entity's Employment Equity Element for the year under measurement.

 

• In certain instances where Senior Management is included in the calculation of Top Management, the Weightings should be adjusted as follows:
o Black Senior Top Management                6
o Black other Top Management                5
o Senior Management (code 300)        0

 

• The Target for Top Management will then be adjusted to reflect the ten-year Target for Senior Management under code 300, being 60%.

 

• Management means those persons who undertake the executive or operational Management of the enterprise, as well as operational implementation which includes directing and coordinating the policies and activities of the enterprise. Within the CA sector, this usually refers to the partners of the enterprise. The Management category can be subdivided into the following, where decision-making level and level of responsibility within the enterprise determine their title:
o In terms of the Code, Senior Top Management positions would include the chief executive officer, the chief operating officer, the chief financial officer and other people holding similar positions.
o For the CA Sector Code, Senior Top Management means Employees of a Measured Entity who are appointed by or on the authority of the board to undertake the day-to-day management, both with regard to general and financial management functions. These persons are actively involved in the development and/or implementation of strategy.
o In terms of the Code, other Top Management positions would include the chief information officer, the heads of marketing, sales, public relations, transformation and human resources as well as other people holding similar positions.
o For the CA Sector Code, other Top Management means Employees of a Measured Entity, other than Senior Top Management, who undertake the day-to-day management and are actively involved in the development and/or implementation of strategy, but limited to their area of responsibility.

 

• A Measured Entity must use the same data used in its returns filed with the Department of Labour under the EE Act, in calculating its score under the Management Control scorecard. This will not apply where such a Measured Entity is exempt from filing such returns.

 

• Where a Measured Entity does not distinguish between Top Management and other Top Management, Top Management is measurable as a single indicator with a Weighting of 5 points. It may include its Senior Management in this section. If a Measured Entity adopts this approach then the compliance Targets will be as follows:
o Years 0-5        43%
o Years 6-10        60%

 

• If in practice it is found that certain entities do not have a component of executive directors at all, the points for board participation should be collapsed into one indicator and the Weighting should be adjusted to 5 points and the Target will remain the same at 50% of Exercisable Voting Rights not in the hands of Black People.

 

• However, if Senior Management is included here, it will not be measured under Employment Equity (see statement 300).

 

• If Measured Entities do appoint Independent Non-executive Board Members, they are encouraged to appoint persons who do not serve in that capacity for any other Measured Entity.

 

• The adjusted recognition for gender should be calculated as per paragraph 12.2 and used in the calculations below.

 

Calculation of Management indicators

 

 

C is limited to a maximum of 50% the Target

 

Where  A     =      score for the measured Management indicator

               B     =      adjusted recognition for gender

               C     =      Target for that measurement category

               D     =      Weighting for measured indicator

 

Bonus point

 

In this section 1 bonus point can be achieved through the percentage that Black People, who are Independent Non-Executive Board Members, constitute of the total number of Independent Non-Executive Board Members. Particularly in the medium and small firms, this is not necessarily applicable to the CA sector.

 

Measurement of the bonus point

 

 

Where  A     =      score for the Management indicator of the number of black Independent Non-Executive Board Members of the Measured Entity as a percentage of the total number of Independent Non-Executive Board Members of the Measured Entity

               B     =      not defined in the Codes, but assumed to be the adjusted recognition for gender

               C     =      Target for Independent Non-Executive Board Members of the Measured Entity

               D     =      Weighting points