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.
“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,”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.”
 Corporate Secretary, “Boardroom diversity: From disclosure to recruitment”, available at https://content.corporatesecretary.com/story/cs-boardroom-diversity-from-disclosure-to-recruitment/page/1.
 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.
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