The effectiveness of the board

Online since 15.09.2015 • Filed under Industry news • From Issue 2 - September 2015 - February 2016 page(s) 13
The effectiveness of the  board

Professionalising the practice of directorship could help state-owned enterprises overcome governance crisis.

South Africa ’s state-owned enterprises have a key role to play in delivering services to citizens and in funding the National Development Plan. However, it is clear that many major parastatals are still not in a position to fulfil this mandate.

A recent editorial in Business Day places the blame squarely on a lack of governance. Parmi Natesan, Executive: Centre for Corporate Governance at the Institute of Directors in Southern Africa (IoDSA) broadly agrees, arguing that solving this problem begins with the board. ‘The challenges besetting our parastatals are complex, so it would be naïve to suggest that there is a silver bullet that can magically fix them. But, as many  commentators have pointed out, one common shortcoming is the effectiveness of the boards. One of the findings of the IoDSA’s board appraisals benchmark study was that public sector boards lag behind private sector boards in their performance. Given that boards play such an important strategic and governance role, the IoDSA believes that the parastatals should seriously consider a professionalisation mandate including Chartered Director(SA)’s for the boards of state-owned entities,’ Natesan points out. She adds that greater attention needs to be paid to the selection of board members at parastatals to ensure that they have the necessary professional and personal skills, as well as industry knowledge and experience. ‘It’s vital that proper due diligence on potential directors is carried out. Being a director is a tough job, particularly in the public sector, and much depends on his or her performance,’ Natesan maintains. ‘Care must be taken to find and appoint such people, or the board, and ultimately the company’s, performance will be adversely affected.’

According to Angela Oosthuizen, CEO at the IoDSA, the directorship role in both the public and private sectors is so important and so complex now that the IoDSA has launched a formal professional designation, the Chartered Director(SA), or CD(SA). The IoDSA’s intent is to professionalise directorship. The CD(SA) initiative recognises that directors require specialist skills,  experience and integrity alongside their purely business skills. Administered by the IoDSA, the CD(SA) designation gives directors a way to demonstrate their qualifications objectively, and to enhance them through a formal continuous professional development programme. Professional directors also subscribe to a code of professional ethics, and can be subject to the designation being revoked under certain circumstances. A credible professional designation also helps selection committees identify candidates with the right skills, objectively assessed. Oosthuizen says that government is aware of the potential for using the CD(SA) designation as a way of identifying the right calibre of directors. ‘Board members who are professional in their attitude, their skillsets, and their commitment to a code of conduct, will do better for the company.’ Another benefit of improving the skills of directors would be the strong signal that government is serious about governance and that it respects the role that boards have to play. ‘The board sets the tone for the whole company, oversees its strategy and ensures it is governed properly – a successful company needs a good board,’ Natesan insists. ‘If parastatals are going to be able to become contributors to the fiscus, they need to be properly governed.’

Institute of Directors Southern Africa

W www.iodsa.co.za

Issue 2 - September 2015 - February 2016

Issue 2 - September 2015 - February 2016

This article was featured on page 13 of SABI Magazine Issue 2 - September 2015 - February 2016 .

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