The Institute of Directors in South Africa (IoDSA) lays out five key trends for boards and directors to focus on in 2023. Parmi Natesan, CEO of the IoDSA argues that boards need to begin planning their agendas for 2023 to ensure they are on top of these trends—and that their members have the requisite skills to fulfil their duties.
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“Short-sightedness is one of the most damaging traits in directors, so companies must ensure that directors have the knowledge and skills necessary to embrace these trends and create a sustainable future for the company,” she says.
The five disruptive trends are:

Less time, more pressure. Businesses have to respond fast to a rapidly changing global environment that is increasingly automated - directors are under increasing pressure to take important decisions rapidly. The chair’s role becomes even more critical in striking a balance between facilitating an inclusive exchange of views while preventing unprepared directors or individual agendas to hijack or prolong the board’s deliberations. By the same token, directors must be properly prepared to make decisions on agenda items.

Less paper, more AI. Boards will specifically need to acquire the skills to interpret real-time data accurately in order to incorporate it into their decision-making process. They can no longer simply base their deliberations on the board pack but will need to ensure that artificial intelligence (AI) is effectively used to process large amounts of data to deliver relevant insights. In a similar vein, directors will need to allocate resources to streamline business processes within the company using AI and other Fourth Industrial Revolution technologies.

Less focus on operational issues, more oversight. The traditional view that extensive operational or managerial experience makes for a good director must now be discarded once and for all—directors need a distinct knowledge base and skill set. “Continuing learning is vital. The IoDSA’s advice is to plan training topics into the meeting calendar for the year and, if necessary, integrate training sessions into the board’s or committee’s meeting agenda,” Ms Natesan says. “The IoDSA can help by providing this phased and structured learning via two-hour snapshot training sessions.”

Less stability, more agility. Today’s world is volatile, uncertain, complex and ambiguous (VUCA), with economic and geopolitical issues more intertwined and harder to interpret than ever. Long and complex supply chains also expose companies to contingent risks and thus require extensive planning to ensure alternatives are in place.
In this VUCA world, the ability to respond rapidly and strategically is critical.

Less greed, more green. Environmental issues, including but not limited to climate change, should be prominent on the board agenda for a multitude of reasons. Directors need to have the skills not only to understand these complex issues but also how to measure and report credibly on the company’s progress in meeting its environmental targets.

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 South Africa Company Page 
Facebook: Institute of Directors South Africa

Events at Huge Group, as reported in the media, hold important governance lessons for all organisations, says Parmi Natesan, CEO: the Institute of Directors in South Africa (IoDSA). Reports stated that at a recent board meeting, the chairman and two other directors resigned with immediate effect, apparently over disagreements relating to corporate strategy.

“It’s very important that any board is collectively aligned on strategy as this drives the business and gives management direction on execution. It’s therefore not surprising that vehement disagreement on strategy would lead to a parting of the ways,” comments Ms Natesan. “Another obvious takeaway is that the departure of three experienced non-executive directors at once is a major loss of institutional knowledge for any company, something that it will take a long time to recover from—a well-thought-out board succession plan is clearly vital.”

When the news of the resignations broke, the simultaneous appointment of three substitute directors was also announced. On the one hand, this may indicate that a succession plan was indeed in place, or it may have been just quick action, Ms Natesan believes.

“Whilst the speed of finding replacements is to be applauded, one has to consider whether this was a missed opportunity for better demographic diversification on the board. After the new appointments, the board’s composition remains all male and majority white—this despite both the JSE Listings Requirements and King IV referring to targets and reporting on racial and gender diversity on boards,” she says.

There is widespread agreement that a diverse board does more than tick boxes and create a good impression. For example, 86% of respondents in a recent research survey believe that board diversity contributes to better board performance, while 77% link board diversity and improved corporate performance. Overall, 73% of respondents noted that their company was taking action to increase board diversity.

The research also indicates that investors are starting to ask questions about board diversity. Globally, just over a third (35%) of investors request such information, with this question most likely to be asked in Europe (43%). Investors are most likely to ask about boardroom diversity in relation to mega-cap (71%) and large cap (57%) companies.[1]
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“Common sense tells us that the more lenses through which a board can examine the world, the better. There’s also interesting research that links a company’s financial performance and gender and skill diversity on the board,”[2]concludes Ms Natesan. “This is a complex topic, but it’s clear that boards need to investigate it fully and, most importantly, have a succession plan that reflects their conclusions and resulting diversity goals.”


[1] Corporate Secretary, “Boardroom diversity: From disclosure to recruitment”, available at https://content.corporatesecretary.com/story/cs-boardroom-diversity-from-disclosure-to-recruitment/page/1.
[2] Khaled Hosny, Adel Elgharbawy, “Board diversity and financial performance: empirical evidence from the United Kingdom”, Accounting Research Journal (17 June 2022), available at https://www.emerald.com/insight/content/doi/10.1108/ARJ-02-2020-0037/full/html.

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 South Africa Company Page 
Facebook: Institute of Directors South Africa