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Corporate Governance GapsKing II RequirementsPotential Implications of Non-Adherencec.All Board members wererepresentatives of composers /authors and publishers and,accordingly, there were noindependent Board members.The majority of non-executivedirectors should be independent asthis reduces the possibility ofconflicts of interest and promotesobjectivity.Every Board should considerwhether diversity and demographicsmake it effective. Diversity applies toacademic qualifications, technicalexpertise, relevant industryknowledge, relevant experience andother items.The fact that the membership was apre-requirement for becoming adirector reduced the pool ofcandidates who were capable ofbeing directors for SARRAL. As aresult, the Board had an inadequatenumber of qualified accountants withauditing and financial managementexperience.Objectivity and impartiality expectedfrom the independent Boardmembers was not possible.d.The Chairperson of the Board wasalso the Managing Director ofSARRAL.(Section 2.3.1) There should be aclearly accepted division ofresponsibilities at the head of thecompany, to ensure the balance ofpower and authority, such that noone individual has unfettered powersof decision-making.There is no evidence that the Boardtook appropriate actions against theChairperson of the Board for failingto implement the relevant controlswithin the organisation as themanaging director.The external auditors issued aqualified audit report for threeconsecutive years (2003, 2004 and2005) due to the fact that they couldnot verify the receipts anddistributions.The failure to verify the transactionscould only arise as a result ofmissing supporting documentation.e.Effective internal audit function wasnot in place.(Section 3): Internal audit isresponsible to both the Board andexecutive management, providingthem with reasonable assuranceregarding the effectiveness of thecompany’s corporate governance,risk management processes andsystems of internal control.The external auditors could not verifythe receipts from the SABC and themembers’ distributions (an indicationof systems break-downs).The internal audit would haveassisted with the investigations anddesigning appropriate controls toprevent the systems’ collapse.f.Effective risk management andinternal control systems not in place.(Section 3.2.1) A comprehensivesystem of internal control should beestablished by the Board to ensurethat the risks are mitigated and thatthe company’s objectives areattained. The control environmentshould also set the tone of thecompany and cover ethical values.The external auditors issued aqualified audit report for threeconsecutive years (2003, 2004 and2005) for failing to verify the receiptsand distributions. A good internalcontrol would have created goodaudit trails, which would haveallowed the auditors to audit.7.2 COLLECTING SOCIETIES (SAMRO, SAMPRA AND NORM) VERSUS KING III7.2.1. To minimise the risks of another collapse, it is important to analyse the state of corporate governance for theremaining collecting societies.- 48 -
7.2.2. The collecting societies play a significant role in ensuring that there is an efficient system of licensing, collectionand distribution of royalties. Based on the importance of their role, the CRC believes that the standard ofcorporate governance needs to be at the appropriate levels.7.2.3. In South Africa, the latest report on corporate governance is referred to as King III, which was compiled by theKing Committee. King III adopts an ‘apply or explain’ rather than a ‘comply or explain’ approach to governancecompliance. In other words, governance is voluntary and not legislated.7.2.4. The CRC’s assessment for the three collecting societies with regard to corporate governance (as per King III)revealed non-compliance in areas listed in Table 3.Table 3: Areas of Non-Compliance with King III RequirementsKing IIIPrincipleKing IIIRequirementsSAMRO SAMPRA NORMa. 6.1The Board shouldensure that thecompany complieswith applicable lawsand considersadherence to nonbindingrules, codesand standards.The Memorandum ofAssociation has beenin conflict with theCompanies Act of1973 for 37 years andit is in conflict with theCompanies Act of2008.The audited financialstatements for the lasttwo completedfinancial periods havenot yet been submittedto the Registrar ofCopyright, contrary tothe requirements of theCollecting SocietyRegulations and incontravention of theCompanies Act.The audited annualfinancial statements forthe year ended 31December 2010 werenot ready by 20 July2011.b. 2.16The Board shouldelect a Chairpersonwho is an independentnon-executivedirector.The currentChairperson is not anindependent nonexecutivedirector(representative of thepublishers).The currentChairperson is not anindependent nonexecutivedirector.The currentChairperson is not anindependent nonexecutivedirector.c. 2.18As a minimum, twoexecutive directorsshould be appointedto the Board, beingthe chief executiveofficer and the directorresponsible forfinance function.There are twoexecutive directorswho are the membersof the Board: CEOand COO. The headof finance reports tothe COO.The CEO is one of themembers of the Board.The Board is made-upof non-executivedirectors.d. 3.10The audit committeereport should beincorporated on theannual report.The audit committeereport is not part ofthe annual report.The audit committeereport is not part of theannual report.The audit committeereport is not part of theannual report.- 49 -
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TABLE OF CONTENTSLIST OF ABBREVIATI
Page 4 and 5: 11.8 RECOMMENDATIONS ..............
Page 6 and 7: LIST OF TABLESTable 1: Cases of Non
Page 8 and 9: NORMOSPsPOSAPPLPPL (India)ProLitter
Page 10 and 11: These problems are addressed in the
Page 12 and 13: xxi.The report considers developmen
Page 14 and 15: 1.3.8. Determine whether all money
Page 16 and 17: 1.4.9. The CRC derived considerable
Page 18 and 19: 2.3 SUBMISSION BY THE DEPARTMENT OF
Page 20 and 21: Aspects of Intellectual Property Ri
Page 22 and 23: (1) Subject to the provisions of th
Page 24 and 25: Copyright Tribunal or an arbitrator
Page 26 and 27: society, the South African Recordin
Page 28 and 29: 3.2.14. With the liquidation of SAR
Page 30 and 31: the final rate or rates to be appli
Page 32 and 33: (a)that payment is to be made to th
Page 34 and 35: information as to their use to enab
Page 36 and 37: The WCT and WPPT oblige members to
Page 38 and 39: Once the handset technology changed
Page 40 and 41: 4.3.16. In 2009, in what was coined
Page 42 and 43: 4.4.6. In exchange for the above li
Page 44 and 45: operators are licensed by NORM to p
Page 46 and 47: 5.2 FUNCTIONING OF COLLECTING SOCIE
Page 48 and 49: the grant of licences. Article 17 o
Page 50 and 51: 6.1.3. The CRC’s assessment of th
Page 52 and 53: 6.3.3. SAMPRA should be given one y
Page 56 and 57: King IIIPrincipleKing IIIRequiremen
Page 58 and 59: King IIIPrincipleKing IIIRequiremen
Page 60 and 61: 8 COLLECTION OF MUSIC ROYALTIES8.1
Page 62 and 63: 8.1.4.2. Needletime royalties are n
Page 64 and 65: 8.1.7.4. For the past five years, V
Page 66 and 67: PRS (UK)SPRE (FRANCE)SUISA(SWITZERL
Page 68 and 69: DetailsPerformance RightsSound Reco
Page 70 and 71: 8.2.7 Comparative Study Performed b
Page 72 and 73: y a collecting society. A rights ho
Page 74 and 75: agency, its rights being derived fr
Page 76 and 77: Mr Robinson said DALRO assumed the
Page 78 and 79: 10.1.6. The distribution to publish
Page 80 and 81: 10.4.4. Most of the other collectin
Page 82 and 83: 10.6.3.4. South African English-lis
Page 84 and 85: 10.10 CONTRACTUAL RELATIONSHIPS BET
Page 86 and 87: 10.12.2. The Regulations should rec
Page 88 and 89: licence that the licensee comply wi
Page 90 and 91: 11.4.6. The details of ICASA’s ta
Page 92 and 93: RecommendationsTimelines for Recomm
Page 94 and 95: enterprises. There was a suggestion
Page 96 and 97: Copyright as it relates to copyrigh
Page 98 and 99: 13.4 DEPARTMENT OF ARTS AND CULTURE
Page 100 and 101: Table 28: Comparative Study’s Key
Page 102 and 103: KEY ITEMS BRAZIL FRANCE INDIA NORWA
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KEY ITEMS BRAZIL FRANCE INDIA NORWA
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about 30%, which is the highest amo
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15.1.3. The Copyright Tribunal’s
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15.1.20. Local music content requir
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for the selected artists. The outco
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King III Report by Institute of Dir
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Paranagua Pedro, “Strategies to I
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Copyright Amendment Act of 1984Copy
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APPENDIX 1(B): SUMMARY OF ORAL REPR
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Due to the fact that the existing c
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Mr BrottelProtection of copyright m
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1.1.3. LIST OF ENTITIES VISITED AND
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In the 2009 Annual Report of ABRAMU
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The implementation of this law led
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ecordings. In respect of audio-visu
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In 1995, ECAD distributed 72% of it
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niches in the market to ensure fair
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Proprietary rights allow authors to
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International royalty distribution
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3.2. Relevant LegislationsThe prese
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IPRS uses the standard tariffs in r
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Ad-hoc workshops on copyright are c
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meaningful living out of their crea
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4.1.3. LICENSING AND LEGAL REGIMESI
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Ballet teachers; Teachers in the fi
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It was founded in 1928 by the Norwe
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6.2. STRUCTURE OF COLLECTING SOCIET
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6.5. COLLECTION OF MUSIC ROYALTIEST
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1957, when the Managing Director of
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16.4.14 SWISSPERFORM: CHF4 millionI
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Cross-border licensing of digital r
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algorithm could be used to determin
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Collecting societies in the UK all
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APPENDIX 3: RECOMMENDATIONS BY MITT
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1.PREAMBLEThe Music Industry Task T
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The environment in which the music
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3.1.3 IMPLEMENTATION AND ACCESSION
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In this regard, the Minister should
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3.5.6 OMBUDSMANThe music industry s
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RECOMMENDATION 23:The MITT recommen
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The MITT further recommends that DA
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APPENDIX 4A: EXTRACTS FROM COPYRIGH
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(f)(g)doing, in relation to an adap
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(i)requiring notice of any intended
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(b)any organization claiming to be
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PERFORMERS’ PROTECTION ACTNO. 11
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the parties may agree to refer the
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ANNEXURE 5: COPY OF SARRAL’S CONT
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ANNEXURE 6: SARRAL’S AUDIT REPORT
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TERMS OF REFERENCESNO’SREQUIREMEN
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