The ongoing parliamentary enquiry into the SABC has eluded to the suggestion that one of the causes of the public broadcaster’s poor performance was a board that did not possess the right mix of knowledge, skills and experience to be able to discharge its duties effectively. Parmi Natesan, Executive, Centre for Corporate Governance, Institute of Directors in Southern Africa (IoDSA), says that the investigation’s findings make a strong case for the benefits of professionalising directorship.
“The parliamentary enquiry into the SABC demonstrates that the quality of governance exercised by the board has a knock-on effect on a company’s operational effectiveness,” Natesan says. “It’s also clear that board members must have certain knowledge, skills and experience in order to fulfil their responsibilities. To give one example, recent media reports indicate that some of the board members did not properly understand the Broadcast Act, and thus were not in a position to ensure the legal mandate was fulfilled.
“However, board members cannot claim ignorance as an excuse, and the onus is on them to be properly informed prior to making decisions.”
This kind of situation can be avoided if board members are properly inducted onto the board, and proactively expand their knowledge of the company, the market/legislative regime in which it operates and developments in corporate governance. But they also need to have a good understanding of what their duties and responsibilities as directors are.
Angela Cherrington, CEO of the IoDSA, says that because markets change so rapidly and are increasingly competitive, boards are under increasing pressure to maintain the right levels and types of skill, experience and diversity to keep the company on the right course.
“Directors play a hugely important role, and their job is becoming much harder. The case for a new breed of professional directors is growing stronger by the day. Companies would be able to assess objectively what skills individuals have, and thus whether they would complement the existing board’s skills. As professionals, directors would also have to commit to a formal, ongoing programme of professional development,” she explains. “Professional directors would be bound by a code of conduct enforced by a professional body.”
In response to this growing need in corporate South Africa, the IoDSA launched a professional designation, Chartered Director (SA), or CD(SA). According to Cherrington, this initiative recognises that directors require specialist skills, experience and integrity alongside their purely business skills. The CD(SA) designation also gives directors a way to demonstrate their mastery of the director competencies, and to enhance them through a formal continuous professional development programme. They would have to subscribe to a code of professional ethics.
In addition, the IoDSA will soon be re-launching Certified Director, an interim designation on the pathway to CD(SA). This re-introduction aims to capture those individuals who do not yet have the board experience to enter the CD(SA) process, but who have the knowledge necessary to start their directorship journey.
The IoDSA administers, and is the custodian of, the both designations.
“We were delighted to see that PWC’s Non-executive directors: Practices and remuneration trends report for 2017 predicts that ‘non-executives will become specialised professionals’ in order to meet the challenge of increased business risk,” Cherrington concludes. “The CD(SA) designation provides a framework against which directors can be measured and grown, and it will increasingly become the gold standard for directors in both the public and private sectors.”
MEDIA CONTACT: Cathlen Fourie, 082 222 9198, firstname.lastname@example.org, www.atthatpoint.co.za
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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 not only in delivering services to citizens, but also 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,” she says.
Natesan says 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. As the IoDSA’s annual board appraisal benchmarking study consistently shows, public-sector boards suffer from the fact that board members (as well as members of the executive team) are often seen to be appointed or political reasons.
“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 says. “Care must be taken to find and appoint such people, or the board’s—and ultimately the company’s—performance will be adversely affected.”
According to Angela Oosthuizen, Chief Executive Officer 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. For example, at a recent IoDSA event, the Public Protector, Thuli Madonsela, indicated that the Minister of Public Enterprises, Lynne Brown, would support the certification of directors as part of the appointment criteria for parastatal boards.
“The CD(SA) designation is relatively new, so the pool of people entitled to use it is still small, but the Minister should certainly be encouraging parastatal board members to begin the process of certification,” Oosthuizen says. “In the meantime, members of parastatal boards need to keep abreast of developments, attend governance training, and generally make sure they understand their role. 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,” says Natesan. “If parastatals are going to be able to become contributors to the fiscus, they need to be properly governed, and ensuring that their directors are at the match makes sound business sense.”
Editor’s note: Click http://bit.ly/1gGntmW for supportive audio of Parmi Natesan, Executive: Centre for Corporate Governance at the Institute of Directors in Southern Africa
MEDIA CONTACT: Cathlen Fourie, 012 664 2833, email@example.com, www.atthatpoint.co.za
For more information on the IoDSA please visit:
LinkedIn: The Institute of Directors in Southern Africa group
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