Cricket South Africa (Cricket SA) has lurched into yet another crisis with the Members’ Council rejecting the interim board’s proposal that the new board be composed of a majority of independent directors. The move by the Council goes against widely-accepted international best practice, including the King IV Code on Corporate Governance, and is probably indicative of the lack of trust between the Members’ Council and the Cricket SA board, says Ansie Ramalho, Technical Facilitator at the Institute of Directors in South Africa and Chair of the King Committee on Corporate Governance in South Africa.
“The challenge that Cricket SA faces is common in the non-profit sector, small businesses and even some state-owned entities, where boards are often dominated by representatives of key stakeholders such as donors, communities, beneficiaries or investors. Stakeholder representivity might seem like a good idea as it gives stakeholders a say at the highest level, but in fact it is not ideal,” she explains. “Directors have a primary duty to the organisation itself—in this case Cricket SA—and not to the Members’ Council or other stakeholder groupings. Usually, the interests of the organisation and its key stakeholders are aligned but there are situations in which the short-term interests of a particular stakeholder may conflict with longer-term considerations relating to the organisation’s sustainability. So-called representative directors are often mandated to promote a particular agenda at the board which also increases the potential for conflicts of interests.”
For this reason, good governance practice for a company such as Cricket SA would be to have a majority of independent non-executive directors who are better placed to take a more objective view of issues, and to put the interests of the organisation first. This was also a recommendation by the Nicholson Commission of Enquiry in its 2012 report on maladministration at Cricket SA.
Ms Ramalho also argues that there is a good case to be made for the appointment of professional, career directors who have the governance and oversight skills necessary to discharge their fiduciary duties competently. The dilemma of non-executive directors is that they do not have the benefit of day-to-day knowledge of the organisation, and thus suffer from a “knowledge deficit” when compared with executives.
“Being an expert at wielding the tools of governance and oversight compensates for the asymmetry of information between non-executive directors and executives. Merely representing a stakeholder grouping or having had a successful career as an executive are not in themselves adequate for offering rigorous and objective oversight,” she says. “If the directors are not sufficiently independent and fully qualified to offer oversight and look after the organisation’s long-term interests, the whole system of checks and balances is rendered ineffectual.”
Ms Ramalho suggests that, the primary focus of the Members’ Council should be to ensure that Cricket SA has the best possible board, composed of directors with the ability to hold management to account competently and without bias. It is after all ultimately the responsibility of Members’ Council to elect the board members and it is therefore within its power to insist on a rigorous selection process that delivers this outcome. “That is the only way to ensure Cricket SA is governed with its long-term interests—and the interests of the game as a whole—at the forefront,” she urges.
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