One of the most persistent challenges relating to governance is the tendency to focus on form rather than substance. In line with King IV, it’s time finally to accept that governance is not an end in itself, but a tool for delivering outcomes, says Parmi Natesan, Executive: Centre for Corporate Governance at the Institute of Directors in Southern Africa (IoDSA) and Professor Deon Rossouw, CEO of The Ethics Institute.

“Organisations only exist in order to deliver on their purpose and, similarly, governance only exists in order to help them do that,” says Professor Rossouw. “Governance got a bad name because people persist in seeing it in terms of compliance, structures and policies. Of course, these things are important only as tools to help deliver outcomes.”

This focus on outcomes is very much a feature of King IV, which was designed to link governance practices with four governance outcomes, notes Ms Natesan. “The critical point is that structures need humans to give them life, to use them to deliver the desired results. Governing bodies must therefore ensure that the governance structures are indeed achieving the desired governance outcomes,” she says.

King IV identified four governance outcomes: an ethical culture, good performance, effective control and legitimacy. Boards can therefore measure whether the structures they have put in place, and the way they are being used, are effective by measuring the extent to which these outcomes are being attained.

Clearly, then, the personal qualities and actions of the members of the governing body are critical in ensuring that the governance objectives are achieved, that substance follows form. King IV retained the four cardinal values that should underpin good governance—responsibility, accountability, fairness and transparency (RAFT)—but added two further ones: integrity and competence. This recognises that governance structures will only be valuable if they are used by people who are prepared to put their own interests aside and act ethically in the best interests of the organisation, beyond mere legal compliance, and who have the requisite knowledge both of the organisation and the industry in which it operates.

“It is important to recognise that governing-body members have to cultivate these characteristics in order to make them instinctual,” Professor Rossouw argues. “People aren’t born with integrity, competence or any of the others, they have to be nurtured.”

As with any enterprise involving human behaviour, moving from form to substance is no easy task. Some guidelines for assisting are:
•    Select members of the governing body carefully.  It all begins with selection, says Professor Rossouw, so nomination committees must actively seek people with these cardinal virtues.
•    Orient new members properly. Once selected, it is vital that new members of the governing body are properly educated about what their new role entails, and continually reminded that they are there primarily to serve the best interests of the organisation, not those of any particular stakeholder.
•    Structure meetings carefully to ensure that members have the right types of conversation, and do not confine themselves to ticking the boxes. Courage becomes important here—not just moral courage but also the courage to take the right risks.
•    Hold members of the governing body accountable. There are several elements to this. First, peer pressure must be harnessed to create a positive atmosphere in which members continually assess their own performance and that of their fellow members. Courage will also be at a premium here but it is equally important the board is truly diverse, says Ms Natesan. This is needed to overcome the “buddy mentality” in addition to measures like gender, race and age. At the same time, though, it must be recognised that self-appraisal is no substitute for the stakeholders assessment of the extent to which the four governance outcomes have been achieved.

Ms Natesan stresses that there is not necessarily more unethical behaviour now, just that it is more visible—something she sees as positive. She argues that, going forward, how governing bodies disclose about governance and its results will become more and more important.

The disclosure must convince stakeholders not just that the right governance structures are in place, but that they are delivering results, she says. Looking forward, adds Professor Rossouw, as we move away from compliance to reporting on integrated performance, the triumph of substance over form will be shown when it is clear that the organisation has not only achieved its purpose in the past, but is well-positioned to continue achieving it into the future.

ENDS

MEDIA CONTACT: Juanita Vorster, 079 523 8374, juanita@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 

The Institute of Directors in Southern Africa (IoDSA) welcomes the proposed guidelines for reforming the country’s state-owned enterprises (SOEs) recently released by government.

Parmi Natesan Executive, Centre for Corporate Governance at the IoDSA comments: “This initiative is most welcome as key parastatals provide the vital enabling environment for economic growth. The IoDSA has in the past noted that many of the challenges currently experienced by SOEs can be traced to inadequate governance.”
 
As highlighted in a recent article, much of the success of Singapore’s public sector is attributed to its adherence to strict governance guidelines. [1]
 
Board performance is strongly linked to organisation performance, which is why both King III and the Companies Act place such emphasis on governance and the function of boards, Natesan points out.
 
Natesan highlights some of the key governance issues for SOEs, as previously highlighted by the IoDSA and that now form part of the government’s reform plan:
 
Maintain the separation of roles
Perhaps one the key causes of SOE malfunction is the undue interference of the state in the running of SOEs. This includes short-circuiting the process for board and executive nominations, and issuing instructions to boards that are based on political rather than economic grounds. “If boards are to be accountable for the performance of the SOE, then they have to have the freedom to exercise their collective judgement in its best long-term interests,” she says. “The shareholder must, of course, spell out what the goals of the SOE are, but then it must allow the board and executive management team to do their jobs. The roles for each player need to be better understood and adhered to.”
 
Ensure boards have the right capacity
Natesan points out that boards need to have the right mix of knowledge, skills and experience or they cannot perform their strategic and oversight functions adequately. “Making appointments on political grounds alone has been a recipe for underperformance at best, and disaster at worst. SOEs have a unique economic and developmental role, and that must be incorporated into the skills matrix that guides board composition”, she says.
 
Natesan points out that South Africa does have a shortage of professionally qualified and experienced directorial talent. The IoDSA has already put in place a multifaceted plan to grow the talent pool by offering training related to the 20 competencies of its Director Competency Framework. This Framework will enable directors ultimately to achieve the professional Chartered Director (SA) designation. The IoDSA also offers associate membership to allow up-and-coming directors to upskill themselves and build their networks.
 
Board performance must be evaluated regularly
Evaluation is the only way for the state, as the shareholder, to assess whether the board is operating optimally, and to identify areas of improvement. Independently facilitated board evaluations provide the board itself, as well as the state as shareholder, with an objective understanding of how well the board is functioning, and what governance areas need to be addressed.
 
“Governance is receiving such attention globally because it improves performance,” Natesan concludes. “South Africa is a leader in this field—let’s hope that government finally benefits from our home-grown expertise to get our SOEs back on track.”

ENDS
 
MEDIA CONTACT: Cathlen Fourie, 082 222 9198, cathlen@thatpoint.co.za, www.atthatpoint.co.za
 
For more information on the IoDSA please visit:
Website:  www.iodsa.co.za
Twitter:  @The_IoDSA
LinkedIn: The Institute of Directors in Southern Africa group  

[1] Greg Mills, “The profit motive: What Singapore can teach Pretoria about business”, Daily Maverick, 15February 2016, available at http://www.dailymaverick.co.za/article/2016-02-15-the-profit-motive-what-singapore-can-teach-pretoria-about-development/#.VsQ9qvJ97ct.

The Institute of Directors in Southern African (IoDSA) in conjunction with the International Finance Corporation (IFC) and sponsored by the Swiss State Secretariat for Economic Affairs (SECO) is looking for case studies that are recent and relevant to the African continent corporate governance environment and landscape.

Case studies must be based on actual corporate governance cases in Africa, within organisation which can be expected to, or choose to, apply the principles contained in the King Code for Governance Principles in South Africa and the King Report on Governance in South Africa ("King III”) or the relevant corporate governance code of the country within which the organisation operates.

The IoDSA, the IFC and SECO are offering prizes to the value of R170 000.

For more information on criteria, submissions and prizes, please visit http://bit.ly/1gLtsGN

ENDS

MEDIA CONTACT: Cathlen Fourie, 012 664 2833, cathlen@thatpoint.co.za 

For more information on the IoDSA please visit:
Website:  www.iodsa.co.za
Twitter:  @The_IoDSA
LinkedIn: The Institute of Directors in Southern Africa group   

The Institute of Directors in Southern Africa (IoDSA) is adding a governance view to the concern being expressed in recent new articles around proposed changes to the SABC’s Memorandum of Incorporation (MoI) by Minister Faith Muthambi. Parmi Natesan, Executive: Centre for Corporate Governance at the IoDSA, says that some of the reported changes do not align to governance best practice.

One issue raised by Natesan is the fact that the changes to the MoI has the potential to blur the governance roles played by the shareholder (the state) and the SABC board. In the private sector it is very clear that the shareholders hold shares in a company and appoint a board to direct and oversee the company on their behalf. 

“The board could bear liability if its decisions are wrong, so it’s important that it has the power to make its own decisions,” Natesan explains. “Thus if shareholders interfere too much in the way that the company is run, then governance breaks down. This is unfortunately a common problem that exists in the public sector as boards become rubber stamps for the dominant shareholder—which results in poor board and ultimately poor company performance.”

Another adverse result is that these boards find it increasingly difficult to attract directors with the right levels of knowledge and skills. Individuals with governance knowledge would be reluctant to serve on such boards because they realise they will incur great responsibility and liability, whilst their true power to make the right decisions are restricted. 

The MoI also permits the Minister to appoint the COO as acting CEO when the latter position is vacant, and also gives her the power to extend employment contracts for the CEO, CFO and COO. 

Natesan points out that there is a danger of sacrificing general principles in order to achieve short-term goals. There’s widespread agreement that boards have to be responsible for executive appointments because executives are responsible and accountable to the board. When executives are appointed by the shareholder, they tend to feel accountable to the Minister, as the representative of the shareholder, and not the board. Again, as the IoDSA’s studies show, this causes significant confusion around role clarity and reporting lines within the governance structure.

A more complex, though related, issue is the power given to the Minister to recommend the removal of a board member. Shareholders have always had the power to remove directors but Natesan cautions that the dynamics are complicated when there is a single shareholder represented by a single individual. In the private sector, the fact that there are generally multiple shareholders ensures that alternative viewpoints compete, and the delicate balance between shareholders and board can be maintained. 

“The fact that public sector corporations have only one shareholder who is politically driven, makes it much harder to strike the right governance balance, and this in turn compromises the board’s ability to do its job,” says Natesan. “If the single shareholder refuses to follow governance best practices in pursuit of short-term, political ends, it will fatally damage the ability of an entity to function effectively. South Africa is a global leader in corporate governance—we should practice what we preach.”

ENDS
​
MEDIA CONTACT: Cathlen Fourie, 012 664 2833, cathlen@thatpoint.co.za 

For more information on the IoDSA please visit:
Website:  www.iodsa.co.za
Twitter:  @The_IoDSA
LinkedIn: The Institute of Directors in Southern Africa group  

Parmi Natesan’s job requires her to lead a balanced life and have it all. It requires her to attend detailed strategic discussions with clients, and helping her two children with their homework. It demands a focus to detail on complex corporate governance issues, and to apply the same attention to detail when sewing costumes for a school play.

Although this might seem like the perfect life, it requires being “fast-paced and super-organised” according to Parmi, who was recently promoted to Executive: Centre for Corporate Governance at the Institute of Directors of Southern Africa (IoDSA).

“I am also very fortunate to work for a company that allows me the flexibility that I need in order to be able to have it all.”

As an Indian female with deceivingly youthful features, Parmi has experienced her fair share of discrimination in the workplace, but did not allow it to influence her focus on making valuable contributions during her 12-year career serving a variety of industries.

In her new role as part of the leadership team of the IoDSA, Parmi can combine her knowledge, experience and passion to further the IoDSA goals of Better directors, Better boards, Better business.

With Bcom (Honours) and Bcom (cum laude) degrees from the former University of Port Elizabeth, Parmi is a Chartered Accountant (South Africa) passionate about the value of corporate governance for South African corporate and private citizens alike.

“We should all pay attention to corporate governance, even if we are not we are shareholders or directors of companies, as we are all inevitably stakeholders,” said Parmi in an interview following her appointment.

In line with her helpful nature, Parmi has provided a glimpse of her views on the world of work:

Q:        What do you think about when you are alone in your car?

A:         What I need to be doing, I am an absolute PLANNER.  Always thinking of what is next, organising myself

Q:        Describe a balanced lifestyle in 5 words or less

A:         “Having it all” - I don’t believe that having a demanding career means that I cannot be doing other things like taking my kids to the park, watching them play sports, cooking dinner, sewing costumes and doing other projects for school, helping my kids with their homework, organising my household etc.

Q:        What song best describes your work ethic?

A:         "Harder, Better, Faster, Stronger" by Daft Punk

Q:        What is the most common misconception about you?

A:         That I am younger than what I am.  People often get shocked at my appointments to bodies, at the fact that I have two children etc. because they don’t realise my age. When I first joined the IoDSA someone commented (when he heard my actual age) “Oh now your appointment makes more sense”.

Some may say I have lucky genes, but from a business perspective I sometimes feel under-estimated at first because of this ... that is until they interact with me and I prove them wrong!

Q:        What is your view on discrimination in the workplace, irrespective of the apparent reason for discrimination?

A:         My stance on discrimination in the workplace is that everyone should be given equal opportunity; it’s a fair playing field.  It is up to each individual to grab the opportunities available and make something of it.  I find that sometimes people use discrimination as an excuse, when they are not willing to put in the time and effort to succeed.

Q:        Why is a focus on corporate governance important?

A:         For many reasons! Corporate governance:

·         increases accountability 

·         increases entity value of companies, it improves share & credit ratings

·         lowers cost of capital

·         improves access to capital

·         improves operational performance

·         lowers risk of corporate scandals and damage to reputation.

·         improves decision making

·         ensures greater boardroom effectiveness

·         strengthens transparency 

Q:        What would corporate governance look like in a perfect world?

A:         In a perfect world we wouldn’t need as many rules.  So less laws/regulations and more self-governance with ethics and integrity permeating leadership, decision-making and oversight.

ENDS
_______________________________________________________________________________________________________

MEDIA CONTACT: Cathlen Fourie, 012 664 2833, cathlen@thatpoint.co.za 

For more information on the IoDSA please visit:
Website:  www.iodsa.co.za
Twitter:  @The_IoDSA
LinkedIn: The Institute of Directors in Southern Africa group 

Africa’s current shortage of experienced and skilled directors is one of the chief hurdles to the strengthening of its corporate governance capabilities. The African Corporate Governance Network (ACGN) aims to play a positive part by conducting research on and storing information on corporate governance. In this way, it will create a resource for its members to use, particularly when it comes to supporting the ongoing training of a pool of directors.

“The case for corporate governance in Africa is a strong one, but we face significant challenges,” says Jane Valls, chairperson, ACGN. “The continent’s economies are very diverse in terms of economic and political maturity, and there is no continent-wide standard of corporate governance. The ACGN has a critical role to play in lobbying legislators, as well as educating both the private and public sectors about the benefits of corporate governance.”

At its last meeting in Dar es Salaam, the ACGN has welcomed the Institute of Corporate Governance Ethiopia and the Institute of Corporate Governance of Tunisia as members, and both the Ethics Institute of South Africa and the Association of Chartered Certified Accountants have become associate members.

In all, 11 countries were represented at the meeting (Tanzania, Kenya, South Africa, Mauritius, Uganda, Nigeria, Mozambique, Zimbabwe, Zambia, Ethiopia and Tunisia), while the ACGN has now grown to represent a total of 14 countries, indicating how broad the support for the ACGN initiative is.

“The continuing expansion of the ACGN is good news for Africa’s growth prospects,” says Angela Oosthuizen, CEO of the Institute of Directors in Southern Africa. “South Africa is fairly mature in corporate governance terms, having released the first King Code in 1994 and with the fourth revision now underway. We are committed to making our experience available to our colleagues in the ACGN, and hope that King IV will act as a benchmark for African codes of corporate governance.”

The ACGN was founded in 2013 to help build capacity in corporate governance across the continent, so building better organisations and corporate citizens across Africa. Its members are united in their belief that strong corporate governance is essential to successful, sustainable companies and thus holds the key to African economic growth.

ENDS
_______________________________________________________________________________________________________

MEDIA CONTACT: Cathlen Fourie, 012 664 2833, cathlen@thatpoint.co.za 

For more information on the IoDSA please visit:
Website:  www.iodsa.co.za
Twitter:  @The_IoDSA
LinkedIn: The Institute of Directors in Southern Africa group