By Parmi Natesan - IoDSA Executive: Centre for Corporate Governance

The recent news that Maria Ramos would be retiring in February after 10 years as CEO of ABSA should be a reminder to the boards that management succession planning is critical, especially when it comes to crucial positions like that of the CEO, says Parmi Natesan, who herself will soon become the new CEO of the Institute of Directors in Southern Africa (IoDSA).

“The CEO is the keystone of any organisation, and so a board should always have a clear strategy for replacing him/her,” says Ms Natesan. “Ideally, the board should plan well in advance for the exit of a key role player like a CEO, and even have a suitable successor in the pipeline. If the new CEO is an external appointment, it is very possible he/she would not be immediately available, so a strong interim CEO who is fully conversant with the organisation—as seems to be the case with Absa—is probably advisable.”

The IoDSA believes there are some critical issues that boards should consider when it comes to succession planning for the senior management roles they have the responsibility for filling, such as that of the CEO:

Be alert for the signs that a CEO has served long enough. One of the hardest decisions for a board is when a CEO should leave, both for the good of the individual and the organisation. While there are no easy answers to this perpetual conundrum, and every individual and organisation is unique, research does suggest that around five years on average is a good rule of thumb.

“Ms Ramos is at pains to stress her own conviction that CEOs should be systematically replaced to ‘allow for a regular refresh’, and that she only stayed in the post for so long because of the need for continuity and stability during a time of significant change for the organisation,” Ms Natesan notes. “In other words, a leading CEO confirms the view that, all other things being equal, even the best CEOs should not stay too long.”

Give culture/ value fit due weight in the selection process. Given the impact he/she has on an organisation, appointing the CEO is one of the board’s most critical responsibilities. With stakeholder relations and reputation management being core components of a CEOs role, care should be taken not to focus exclusively on the candidate’s ability to take the organisation forward strategically and financially; there should also be a fit in terms of the already established culture and values of the organisation. 

“This is particularly important when one considers the importance of embedding ethics into the organisation, and the fact that an ethical, values-based culture always comes from the top,” she observes.

Support the new CEO and be open to change. The board’s responsibilities do not end when the new CEO takes up his/her post. It needs to provide guidance and support to help the new CEO become effective as quickly as possible but, at the same time, the board should also be open to the inevitable changes that the new incumbent will introduce. The same goes for the rest of the executive team, who should consciously strike a balance between showing “how we do things here” and embracing the changes that the new CEO has, after all, been hired to initiate.

ENDS
 
MEDIA CONTACT: Stephné du Toit, 084 587 9933, stephne@thatpoint.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  

Recent news reports relating to the withdrawal of a non-executive director up for re-election due to his non-attendance at meetings for four years by Purple, a JSE-listed company, highlight one critical area of a director’s responsibility: the necessity to attend board meetings. Parmi Natesan, CEO Elect of the Institute of Directors in Southern Africa (IoDSA) says that King IV recommends that attendance at board meetings is an important responsibility for directors.
 
“King IV is clear that members of the governing body should attend meetings in order to fulfil their responsibility to discharge their duties effectively,” she says. “Non-executive directors need to prepare for, attend and participate in meetings in order to make a genuine contribution.”
 
The need to attend meetings forms part of the recommended practices for achieving Principle 1 of King IV: The governing body should lead ethically and effectively.  Attendance of directors at meetings is also thus one of the items that should be disclosed.
 
“It is important to note that boards take decisions collectively, so the process of debate that leads up to the decision also needs to be a collective effort. It is not simply a matter of providing input in between meetings, although that’s part of it,” she says. “It is in the process of constructive challenge and debate that ideas and decisions come to light. A good board is more than the sum of its parts, and this alchemy begins with directors interacting with each other at meetings.”
 
Attendance at meetings of the board should also be taken into account when assessing the performance of a director who is up for re-election. In light of this, nomination committees should carefully consider whether the director up for re-election has attended meetings, has been well-prepared for the meetings, was able to engage fruitfully at meetings, and has added value to the Board and the organization as a whole.
 
Directors can only make a positive contribution at meetings if they are present, and well-prepared, she says. “Of course, in today’s digital world that attendance need not necessarily be physical — directors in other parts of the world can still be present electronically. Dialing in is always an option but, even better, video-conferencing offers an increasingly good platform for personal interaction,” she adds. “A good resolution to begin 2019 is for directors to pledge to attend board meetings and make their contribution really count.”
 
ENDS
 
MEDIA CONTACT: Stephné du Toit, 084 587 9933, stephne@thatpoint.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