 The news that John Lamola will assume the roles of both Executive Chair and CEO of South African Airways (SAA) suggests that the state has not learned the lessons of the past few years regarding the importance of good governance, says Parmi Natesan, CEO, Institute of Directors in South Africa (IoDSA). As the Zondo Commission’s reports show, governance lapses in terms of appointments, oversight and accountability are some of the fundamental causes of the implosion of our key state-owned enterprises, among them SAA.
“It is disheartening that the state seems to have overlooked governance best practice as espoused by the King Report on Corporate Governance,” she says. “This departure from governance best practice is all the more surprising in light of the Zondo Commission’s assertion that the way in which board and senior executive appointments were made simply cannot continue.[1] “Appointing the right calibre of person is one element but another, as King IV clearly outlines, is that it is vital to separate the roles that appointees must play in order for the organisation to function optimally. CEOs and chairs fulfil distinct, complementary roles and combining them is not ideal—especially in the case of the national carrier which has a long road to travel to re-establish its bona fides.” King IV Principle 7 states that The governing body should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively. Recommended Practice 31 states that the chair should be an independent non-executive director, while Recommended Practice 34 specifically says that the CEO of the organisation should not also chair the governing body.[2] According to Muhammad Seedat, Chair of the IoDSA Board, there are very good reasons for the clear separation of the roles of chair and CEO advocated by King IV. They may be summarised as follows:
[1] Judicial Commission of Inquiry into State Capture Report: Part IV(4) at 2500, available at https://www.statecapture.org.za/. [2] IoDSA, Report on Corporate Governance for South Africa 2016, p 54, 57. ENDS MEDIA CONTACT: Stephné du Toit, stephne@thatpoint.co.za, 084 587 9933, www.atthatpoint.co.za For more information on the IoDSA please visit: Website: www.iodsa.co.za Twitter: @The_IoDSA LinkedIn: Institute of Directors in South Africa Company Page Facebook: Institute of Directors South Africa
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 The recent suggestion by PSG CEO Piet Mouton that the requirement to disclose executive pay should be made optional raises important questions about an issue that consistently attracts controversy. This follows news reports of Sibanye-Stillwater CEO Neal Froneman receiving R300 million in remuneration for 2021, most of which related to conditional share proceeds.
“The issue of executive pay is highly complex, and quoting the data disclosed in the annual report without the necessary context can be misused by various stakeholders to further their own interests; this, however, does not mean that disclosure of executive pay is unnecessary,” says Dr Ronél Nienaber, Chair: Remuneration Committee Forum, Institute of Directors in South Africa (IoDSA). “Transparency is key to good governance globally, and thus to attracting investment—remuneration committees have to ensure absolute clarity in the remuneration reports when they describe how they reached their remuneration decisions, specifically indicating the alignment between performance outcomes and reward outcomes. Fair and responsible remuneration have to be demonstrated within the context of building value not just for shareholders but for the broader stakeholder community, including workers and the communities in which they live.” She notes that South African companies, in contrast to countries that have similar disclosure requirements but are operating in well-developed economies, face the additional challenge of a persistently worsening socio-economic divide, providing a context in which executive pay can be leveraged by unions to justify pay demands. Executive pay is not the cause of unemployment and poverty in our country; indeed, high-performing executives play a crucial role in creating jobs, growing the economy and alleviating poverty, and should be rewarded accordingly, she says. Dr Nienaber argues that remuneration committees need to ensure that targets linked to the variable pay plans are within management’s control, verifiable, relevant and with sufficient amount of stretch. Where there is significant upside at the end of the performance period due to tailwinds, the committee needs to give careful thought on how to handle this and ensure consistent decision making over time. The remuneration committee would also need to have a strategy for dealing with the opposite case in which a dip in prices would have eroded share values and so reduced executive performance bonuses. In each case, the remuneration committee would need to show how these facts were factored into their deliberations and ultimate decision. For example, in the case of Mr Froneman, it is clear that he has benefitted from the positive effects of the resources boom on the share price. Ideally, the remuneration committee should clearly explain why it did not intervene to cap the benefit caused, in part, by the commodity cycle. Such a conversation would include the investments made by the company into society more broadly, with the aim of showing how the benefits from the macroeconomic context have been distributed beyond the fortunate few. It is also clear that there is a huge need for initiatives to educate the workforce as well as other stakeholders, including the media, on how executive remuneration is constructed and approved. It should also be recognised that the disclosure of executive pay, albeit necessary, infringes on executives’ right to privacy, creating enormous security risks for them and their families. Pay disclosure may ultimately detract from the attractiveness of these positions. “Nevertheless, one of the fundamental characteristics of good governance is transparency. Whatever difficulties transparency raises, we need to acknowledge that the need for disclosure has undoubtedly meant that remuneration committees have been giving this important matter more consideration when they are making their decisions, and that’s to everybody’s benefit,” adds Parmi Natesan, CEO of the IoDSA. “Disclosure, well done, builds trust in the long run.” ENDS MEDIA CONTACT: Stephné du Toit, stephne@thatpoint.co.za, 084 587 9933, www.atthatpoint.co.za For more information on the IoDSA please visit: Website: www.iodsa.co.za Twitter: @The_IoDSA LinkedIn: Institute of Directors in South Africa Company Page Facebook: Institute of Directors South Africa  Reacting to the publication of the Zondo Commission’s latest reports on the capture of Eskom,[1] the Institute of Directors in South Africa (IoDSA) says that a concerted effort is necessary to address the ongoing issue of how directors and senior appointments are made in the public sector.
In its reports, the Commission notes that the Department of Public Enterprises has formulated procedures for the proper appointment of directors of state-owned enterprises (Zondo IV (3): 1273) but later it also states, “The way members of Boards of state owned [sic] companies are appointed cannot remain as it has been during all the years which have been covered by the investigation of the Commission. The same applies to the appointment of Chief Executive Officers and Chief Financial Officers of these companies” (Zondo IV (4): 2500). “Read together, it seems as though the problem is not that guidelines do not exist, but that they are improperly followed. This is an ongoing problem because, even after state capture became big news, governance remains shocking as we can see in the mismanagement of pandemic-related disaster relief funds,” argues IoDSA CEO, Parmi Natesan. “Clearly, if we had appointed the right people for the job in the first place, or at least removed the ineffective ones, we would be in a better place." “The urgent next step is for us to rectify the situation, and this can be done if key stakeholder groups take shared responsibility for fulfilling their duties.” Rule-setters. The relevant government department must amend the definition of an individual’s suitability for appointment to include their track record as a director as well as evidence of commitment to being a professional director (such as membership of a directors’ professional body or the achievement of a director designation) Evaluators. The relevant Ministers charged with evaluating the suitability of individuals for a board appointment must stick rigorously to the rules. Zondo IV (3) at 1562 identifies the way in which the Eskom board departed from the provisions of the company’s own Memorandum of Incorporation when appointing Brian Molefe as CEO. It’s also important that evaluators are themselves experienced board members so they know what directorship competencies to look for. “Evaluators are entitled to make use of external expert assistance in identifying and evaluating candidates, and should do so,” Ms Natesan says. “They should not be taking the easy option, and they should certainly conduct a rigorous due diligence of all candidates at the outset.” Directors. Once appointed, directors must proactively educate themselves about what their position entails. A first step is to know the law, especially the Constitution, the Public Finance Management Act and relevant National Treasury regulations, the Companies Act and its regulations, and the entity’s founding legislation and Memorandum of Incorporation. Good knowledge of the Common Law and King IV is also essential. Directors must be knowledgeable about any existing and applicable guides, handbooks and codes. They must know how to report wrongdoing and, if they come across it, report it immediately. They need to be courageous in doing what is right, and not fall into the trap of going with the crowd. Overseers. Finally, the relevant Ministers and ultimately Parliament, who are charged with oversight of our SOEs, should measure the board against high standards, not the bare minimum. Specifically, they should understand how to get rid of underperforming or unsuitable directors, and take action promptly to do so. “Directors are important—just how important the Zondo Reports demonstrate. And yet ensuring that the best, most qualified candidates are appointed is not difficult—this is something we can get right now if we have the will, and we should not delay,” Ms Natesan says. [1] Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector Including Organs of State IV (3) and (4), The Capture of Eskom, available at https://www.statecapture.org.za/. ENDS MEDIA CONTACT: Stephné du Toit, stephne@thatpoint.co.za, 084 587 9933, www.atthatpoint.co.za For more information on the IoDSA please visit: Website: www.iodsa.co.za Twitter: @The_IoDSA LinkedIn: Institute of Directors in South Africa Company Page Facebook: Institute of Directors South Africa  The media reports about the luxurious mansion inhabited by the previous chairman of the National Lotteries Commission—reportedly funded by kickbacks—have provided a lot of information to worry and disgust even corruption-weary South Africans. But what about the snippet that the individual in question is a director of “at least 40 companies, including some involved in mining, investment and communications,” asks Parmi Natesan, CEO of the Institute of Directors in South Africa (IoDSA).
“While I can’t comment on this specific case as I don’t have the facts, it does raise a perennial issue that boards need to keep in mind—just how many boards can an individual sit on and still discharge his or her duties with sufficient care, skill and diligence?” she says. “Forty sounds like too many, but what is the correct number?”. One should not apply an inflexible rule to this, Ms Natesan believes, because individuals’ capacities and free time differ; in addition, some sectors and industries are more demanding than others. King IV simply states that a candidate for election as a non-executive director should declare his or her existing professional commitments and supply a statement that confirms he or she has sufficient time to fulfil his or her responsibilities as a member of the board (King IV, Principle 7, Recommended Practice 18). It should be borne in mind that non-executive directors (NEDs) have an increasingly important role to play, and can face potential personal liability for not fulfilling their duties. It’s also true that NEDs should be experienced in the particular industry in which the company operates. Both of these facts suggest that directors should be wary of overextending themselves either by taking on too many appointments or taking on appointments in too wide a range of industries. Internationally, it seems as though four board appointments is becoming accepted as the norm in the United States and Europe, while 1.3 board appointments are the median in Australia. PWC’s “Non-executive directors. Practices and fees trends report” for February 2022 indicates that ISS, the proxy advisor, seems to be advocating that directors holding five or more mandates should receive a negative vote from shareholders. The PWC report shows that the majority of South Africa’s NEDs (1 247) hold only one board position, with 207 holding two and 84 holding three. Thirty-four held four board seats, with the most held by any one person being six (two individuals). “In some cases, boards prefer NEDs to serve on more than one board to gain experience,” Ms Natesan says. “At the moment, it seems as though South African directors are not indulging in serial directorships to the extent that they cannot discharge their duties adequately—the former chairman of the National Lotteries Commission excepted, of course. Boards must keep an eye on this issue to ensure that their NEDs are neither overextended nor too isolated.” ENDS MEDIA CONTACT: Stephné du Toit, stephne@thatpoint.co.za, 084 587 9933, www.atthatpoint.co.za For more information on the IoDSA please visit: Website: www.iodsa.co.za Twitter: @The_IoDSA LinkedIn: Institute of Directors in South Africa Company Page Facebook: Institute of Directors South Africa  Last week’s suspension of Comair’s licence to fly because of safety concerns is clearly a crisis for any airline. While the Civil Aviation Authority announced today that they have lifted the suspension, the incident serves as a reminder of the imperative for boards to identify and manage key risks proactively, says Parmi Natesan, CEO of the Institute of Directors in South Africa.
“In King IV, the governance of risk is one of the 16 Principles that underpin a successful and sustainable organisation and is thus a key board responsibility. Boards have to identify what the organisation’s key strategic risks are within the context of the industry in which it operates,” she says. “Clearly, an airline needs to be able to fly, so anything that could prevent it from doing so has to be proactively managed. Such risks would include natural disasters, damage to the fleet, loss of talent and more—including the temporary loss of a licence to operate, as we saw with Comair.” Boards thus need to ensure that such risks are on the organisation’s risk register, and that they are being actively managed. For any airline, safety would generally be one of the top risks because it potentially affects not only the company’s ability to earn revenue but also human life. The board has to be hyper-vigilant about such a risk, and a key mitigation strategy would be to ensure compliance with all applicable laws and regulations, coupled with a well-designed set of internal checks and indicators so that the board can be informed timeously that safety risk is not being effectively managed. “This type of risk doesn’t materialise out of thin air—it’s foreseeable. Safety is very much top of mind for airlines because the consequences of an accident are so dire, and the board has to be in a position to monitor how well it is being managed,” says Ms Natesan. “If, despite this, the risk happens to materialise, boards must also have a crisis communication plan in place to manage public perception and reduce the inevitable reputational damage.” ENDS MEDIA CONTACT: Stephné du Toit, stephne@thatpoint.co.za, 084 587 9933, www.atthatpoint.co.za For more information on the IoDSA please visit: Website: www.iodsa.co.za Twitter: @The_IoDSA LinkedIn: Institute of Directors in South Africa Company Page Facebook: Institute of Directors South Africa  Introducing additional shareholder votes is not necessarily the answer. Instead, the AGM resolution on director appointments needs much more focus
Authored by: By Parmi Natesan, CEO, Institute of Directors in South Africa (IoDSA) The long list of corporate misdemeanours seems to keep on growing, and one can be forgiven for thinking that drastic action is the only way to get corporate governance back on track. In that context, there are growing calls for shareholders to have a greater say via mandatory voting on certain issues at the annual general meeting (AGM). The draft Companies Amendment Bill, published for comment last year, proposed some additional powers for shareholders. These included binding votes on the company’s remuneration policy and remuneration implementation report, as well as a shareholder vote on the social and ethics committee report. So far, so good probably—but there is a danger that this approach could be taken too far. The issue is that it runs the risk of compromising the corporate governance framework itself by getting in the way of the board’s ability to fulfil its duties. In the end, excessive shareholder interference via targeted voting at AGMs could actually end up working against the company’s best interests. After all, as the IoDSA has repeatedly pointed out, it is the meddling by the state as shareholder in matters that should be the responsibility of the board that lies behind the disastrous performance of many of our state-owned enterprises. Revisiting the governance structure Let me explain. First, let’s not forget that shareholders are not the only group that has a vested interest in the company’s success. The company is a juristic person in its own right and has obligations to, and is dependent on, other stakeholders (such as employees, local communities and so on) to continue being successful into the future. These stakeholders’ viewpoints therefore also need to be taken into account in decision-making. More importantly, one needs to understand how the legal structure actually works. The shareholders, as owners of shares in the company, have the legal right and obligation to appoint a board of directors to oversee the company. Those directors, in turn, have a legal obligation to act in the company’s best interests, and can be held personally liable by the courts if they do not do so. Their liability is, potentially, unlimited. By contrast, shareholders have no legal duty towards the company and have only limited liability. One might therefore argue that care should be taken in giving shareholders the right to enforce or overturn board decisions—decisions for which they will not be held accountable and about which they would not necessarily be fully briefed. Avoiding role confusion At base, what I am arguing is that all parties need to understand what their role is and stick to it, or risk fundamentally undermining governance. So while it’s important that shareholders have a direct say in certain important issues such as the legal structure of the company and its purpose, the real emphasis should not be on second-guessing the board on specific issues but rather on ensuring that the right people are on it, and that they are held properly accountable. In my opinion one of the most powerful and important shareholder rights is the ability to appoint—and remove—the directors. Based on my observations of AGMs, it seems that shareholders don’t always pay enough attention to who is being appointed/ re-appointed to the board. Few questions as to their skills, experience, independence, personal competencies, track record and even how much time they have to devote to the job are ever asked. It would be advisable for shareholders to bring this neglected resolution to the forefront, and really interrogate who they appoint. Shareholders need to be confident that they are appointing directors in whom they have full trust. They then need to allow these directors to exercise their discretion in the fulfilment of their duties, while holding those directors accountable. They should also consider when removal of a director is appropriate as this is another powerful and important tool that a shareholder has to protect the company’s interests. Active shareholders are a blessing and should be cultivated, but the emphasis should be on encouraging them to play their proper governance role rather than carving out new ones. Governance frameworks do work, they just need to be used correctly. ENDS MEDIA CONTACT: Stephné du Toit, stephne@thatpoint.co.za, 084 587 9933, www.atthatpoint.co.za For more information on the IoDSA please visit: Website: www.iodsa.co.za Twitter: @The_IoDSA LinkedIn: Institute of Directors in South Africa Company Page Facebook: Institute of Directors South Africa  The Institute of Directors in South Africa (IoDSA) welcomes the announcement that two former directors of AYO Technologies have been disqualified from serving on the board of any listed company for the next five years. The two directors were members of the company’s Audit and Risk Committee; and the censure results from their failure to fulfil their oversight roles in relation to the 2018 interim results, which contained a number of material errors.
“The JSE’s ruling underlines the fact that directors have a pivotal role to play which is legally defined, and that there are serious consequences for not fulfilling it,” says Parmi Natesan, CEO, IoDSA. In its communication on this matter, the JSE outlined a number of points that directors should note carefully. The Companies Act stipulates that a director must exercise his or her powers and perform his or her functions in good faith, for proper purpose and with the degree of care, skill and diligence that may reasonably be expected of a person carrying out the same functions and having the general knowledge, skill and experience of that director. The two admitted to having scant knowledge of corporate governance or the rules and regulations governing the financial reporting of a JSE-listed company. They further conceded that they were inexperienced directors and so had not fulfilled the duty of ensuring that AYO Technologies had proper financial reporting procedures in place. The conclusion is clear. Better due diligence by nominations committees and shareholders is necessary before directors are appointed. In addition, the candidates themselves should not accept a board position if they do not have the requisite understanding of their duties, and the skills and experience to discharge them. Once appointed, directors have to participate actively and make a positive contribution. “This censure is welcome because it emphasises the principle of accountability in corporate life. However, the banning only applies to listed companies, so the two individuals could theoretically still serve on the boards of non-listed companies or other organisations,” Ms Natesan argues. “This serves to highlight the importance of the nomination and appointment process for members of the governing body of all types of organisations: only individuals who have the right qualities and, most important, skills and experience should be eligible to be considered for such an important role.” Related to this, the IoDSA has introduced two SAQA-registered director designations to assure that individuals meet minimum standards and are assessed against a Director Competency Framework. The designations also require that holders keep their skills updated via continuous professional development, and are bound by a code of conduct. “We commend the JSE for this bold step and encourage more regulators, nominations committees and shareholders to ensure that a new generation of directors is properly equipped to discharge their important role, both their benefit and ours,” she concludes. ENDS MEDIA CONTACT: Stephné du Toit, 084 587 9933, stephne@atthatpoint.co.za, www.atthatpoint.co.za For more information on the IoDSA please visit: Website: www.iodsa.co.za Twitter: @The_IoDSA LinkedIn: Institute of Directors in Southern Africa Company Page  As the Zondo Reports so graphically demonstrate, South Africa’s state-owned enterprises (SOEs) are in a truly lamentable state, with dire consequences for the economy and thus our country’s capacity to deliver reliable services to citizens, to create jobs and build a better life for all.
“Reading the recently-released Zondo Reports, it is clear that the rot comes from the top—the IoDSA urges the President to provide the courageous leadership the circumstances demand and set a new course, in which board and senior executive appointments will be guided by objective processes and criteria based on competence and an ethical commitment to the organisation’s best interests,” says Parmi Natesan, CEO, Institute of Directors in South Africa (IoDSA). “We are surely at or close to Ground Zero when it comes to rescuing our SOEs. The last SONA made no mention of the need to appoint the right people to the boards of SOEs, though previous ones highlighted this important issue. The President has to act now, or it may be too late.” The first two Parts of the Zondo Commission’s Report have caused a major upset because they have laid bare in clinical detail the extent to which the long-term sustainability of vital SOEs has been compromised. As the Reports make clear, the damage has largely been done by incompetent or dishonest board members and senior executives, and overly prescriptive Ministers. “There’s no getting away from it: the parlous state of our SOEs is a direct consequence of the breakdown of good governance,” she argues. “While there’s no easy way out, fixing the governance at our SOEs is an essential first step. “In his 2020 SONA, the President spoke about the need to stabilise the SOEs and yet chose not to address the vital leadership issue, which may be one of the reasons why we are still where we are today. He must not shirk his clear duty this time around, and civil society needs to unite to put pressure on Government to take the necessary steps to restore good governance at the SOEs. A first step must be a commitment to abide by the principles of King IV when it comes to appointing board members and senior executives.” ENDS MEDIA CONTACT: Stephné du Toit, 084 587 9933, stephne@atthatpoint.co.za, www.atthatpoint.co.za For more information on the IoDSA please visit: Website: www.iodsa.co.za Twitter: @The_IoDSA LinkedIn: Institute of Directors in Southern Africa Company Page  In view of their important role in supporting governance, boards must take steps to protect whistle-blowers and promote a culture of whistle-blowing.
By Parmi Natesan, CEO, Institute of Directors in South Africa The Zondo Commission’s first report highlights the key role that courageous individuals play in raising the alarm about corruption in general, and state capture in particular. People like Cynthia Stimpel at South African Airways and Athol Williams at Bain Consulting, it says, are “one of the most effective weapons against corruption.”[1] At the same time, though, the report makes the important point that the whistle-blower must be able to “trust that the disclosure will be treated in strict confidence and that the recipient can offer adequate protection against harm”.[2] The importance of whistle-blowers is also recognised in King IV. In particular, King IV recommends that in its management of ethics the board not only puts mechanisms for reporting ethical breaches in place, but deals with such disclosures “appropriately”.[3] As the report makes clear, this recommendation was simply not implemented various state-owned enterprises with devastating impact on their long-term sustainability, but also on the whistle-blowers themselves. Clearly, boards who take seriously their fiduciary duty to safeguard the long-term interests of their organisations must take heed of these findings and put measures in place to encourage whistle-blowing and also ensure that whistle-blowers themselves are protected from negative consequences. How to do it Cynthia Stimpel believes that creating a safe space in which people feel able to raise difficult questions without being victimised is the vital first step. Of course, creating a corporate culture is never easy or quick—it’s a slow, incremental process, she emphasises. “There are a lot of difficult conversations we need to have in South Africa, and they are just not happening,” she says, adding that personal courage is a prerequisite here. A comprehensive policy is an important building brick, Ms Stimpel says, something that The Ethics Institute’s Liezl Groenewald backs. Ms Groenewald notes that the Protected Disclosures Amendment Act makes it mandatory to have a policy. A policy is not enough on its own. Ms Groenewald says that it must be complemented by a range of channels that whistle-blowers can use. All too often, companies implement a hotline and consider the work done. However, research conducted by the Institute shows that a substantial 42% of South African workers prefer to report ethical violations to their line manager, with 13% opting for HR, 11% for risk management and 11% for another manager. Only 2% use the hotline.[4] Once a complaint is reported, it is vital that action is taken—only then will employees believe that the culture exists. Action, yes, but it must be the right action: the complaint must be investigated by the right individuals, confidentiality must be maintained and then consequences must follow. A key principle is that all complaints must be collated in a central node so that they can be monitored, and proper reports supplied to the board. The loop then needs to be closed by advising the complainant that an investigation has taken place and that action has been taken—the details don’t need to be given, Ms Groenewald adds. Because of their leadership role, Ms Stimpel feels that the CEO and executive team are pivotal. As always, boards have to play an oversight role—they must ensure that they receive the reports and interrogate them deeply. Given that directors are often part of the problem, she believes they should be members of the IoDSA so they can be held accountable. Training is an important piece of the puzzle. Directors can benefit from the programmes created by the IoDSA, but everybody in the organisation needs to know why whistle-blowing is so important as a way to protect the organisation (and thus their jobs), how to identify unethical behaviour and finally how to report it. Finally, protection. Clearly, providing an environment in which these kinds of concerns can be safely raised is part of it, as is scrupulous confidentiality during the reporting/ investigation/ action process. When and if the whistle-blower’s identity becomes known, the company can assist with better home security or a transfer to another office. Whistle-blowing, as the Zondo report says, have a vital role to play in fighting corruption. We must make it easier—and safer—for them in the future. ENDS MEDIA CONTACT: Idéle Prinsloo, idele@thatpoint.co.za, 084 587 9933, www.atthatpoint.co.za For more information on the IoDSA please visit: Website: www.iodsa.co.za Twitter: @The_IoDSA LinkedIn: Institute of Directors South Africa Company Page Facebook: Institute of Directors South Africa  The testimony of Mr Popo Molefe, the current chairman of Transnet, as set out in Part 2: Volume 1 of the Zondo Report (Zondo 2)[1] makes sensible and far-reaching suggestions relating to board and executive appointments at SOEs. Parmi Natesan, CEO of the Institute of Directors in South Africa (IoDSA) says that the IoDSA has been raising these same issues for many years.
“One of the most encouraging outcomes of the Zondo Commission is surely the public ventilation of important issues, and the fact that in this case the comments are made by a leading figure in business and political circles is heartening,” says Parmi Natesan, CEO of the IoDSA. “We recently wrote to Deputy Chief Justice (DCJ) Zondo in his role as chair of the Commission to ask that the report included a number of recommendations, and some of these were echoed by the Report’s summation of Mr Molefe’s views.” Mr Molefe’s overriding point was that the state capture project was characterised by the appointment of boards and senior executives to serve other interests than those of the organisation. This is an issue that the IoDSA has repeatedly emphasised, directors have to understand that they have a legal duty to the organisation and not to whoever appointed them. At the same time, board nominees must have the skills needed to function effectively as a director within the context of the organisation’s strategy. In our letter to the DCJ, we made the point that directors should ideally be measured against an objective competency framework and also required to be members of a professional organisation so they can be held accountable and disciplined. The IoDSA has developed a comprehensive Director Competency Framework and two Director designations to address these issues, so providing a way for nomination committees to identify individuals who are both suitably qualified and subject to a Code of Conduct. It is absolutely vital that board appointees understand their legal obligations and have the skills to do their jobs properly—if they do not, they face the real possibility of having to accept personal liability for losses suffered by the company. Mr Molefe’s testimony also proposes an alternative to the current flawed nomination and appointment process. In order that individuals with the right level of qualifications and ethics are appointed, a dedicated body or committee that is representative of various stakeholders should be convened to vet candidates, along the lines of the Judicial Service Commission. “Whether it’s a separate committee or the board itself, the principle is a sound one because it removes political interference from the nominations process, instead focusing on the candidates’ competence and ethical standpoints,” Ms Natesan sums up. “We are agreed that the goal is to get the right people with the right skills onto our boards.” ENDS MEDIA CONTACT: Idéle Prinsloo, idele@thatpoint.co.za, 084 587 9933, www.atthatpoint.co.za For more information on the IoDSA please visit: Website: www.iodsa.co.za Twitter: @The_IoDSA LinkedIn: Institute of Directors South Africa Company Page Facebook: Institute of Directors South Africa [1] Judicial Commission of Inquiry into State Capture Report: Part 2: Volume 1, available at https://cisp.cachefly.net/assets/articles/attachments/87235_part_2_vol_1_trasnet_report_of_the_state_capture_commission_part_ii_vol_i_010222.pdf. See particularly 1017 – 1020. |
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