One of the hardest issues facing remuneration committees is how to structure executive remuneration packages in such a way as to promote value creation, and reward performance that advances the organisation’s business strategy. All too often, the performance measures in the executives’ incentive schemes differ from those in the strategy. As a result, we find organisations asking executives to do one thing yet paying them to do another.

Speaking at the launch of a position paper authored by the Institute of Directors in Southern Africa’s Remuneration Committee Forum on Paying for sustainable performance, its chairman, Ray Harraway introduced the problem. “Over the years, our understanding of performance has deepened and broadened—financial performance alone is no longer considered to be a complete or adequate proxy for sustainable organisational performance.  The trouble is that organisations and their shareholders, especially institutional investors, find it hard to agree on what actually constitutes performance and thus what should be measured.”

As a result, many remuneration committees adopt remuneration policies and metrics that conform with industry benchmarks rather than the organisation’s unique strategy and the context in which it is operating. In other words, remuneration is often tied to metrics that do not actually create value for the organisation.
“This can be called the ‘strategy-remuneration’ gap,” Mr Harraway said.
Principle 14 of King IV spells out what remuneration committees have to aim for: The governing body should ensure that the organisation remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short, medium and long term.
The IoDSA paper proposes a three-step process to help remuneration committees bridge this strategy-remuneration gap:
Define the value outcomes. What these are and how they are measured will differ from organisation to organisation. Remuneration committees should consider measuring not just the outcomes, but the actions taken to achieve them, notes Tim Anderson, an independent governance consultant and one of the paper’s authors. “The reason is that outcomes can be achieved by ‘good’ or ‘bad’ actions and are open to manipulation” he explains. Clearly, remuneration should be linked to the positive actions.
Develop the strategy. This step confronts the question of how the organisation will achieve its defined value outcomes. The key step here is to identify the value drivers, the activities that will produce the desired value outcomes. It’s critical that each organisation positively establishes that there is a cause-effect relationship between value drivers and value outcomes.
A challenge here is to take into account the fact that long-term projects initiated during an executive’s term of office may only come to fruition long after he or she has moved on. This means that executives would have to be assessed throughout his or her tenure on meeting key milestones rather than on the final result.
Link to executive remuneration. The final step is to link the incentive design to the organisation’s strategy. In practice it is usually found to be the weakest of the three steps, and thus where remuneration committees need to do some deep thinking—this weakness is the origin of the strategy-remuneration gap. One key element is to ensure that the link between what is measured in determining remuneration is truly aligned with the business strategy but, counselled Mr Anderson, care must be taken not to include too many metrics.
“The skill comes in identifying the metrics that have the most impact on the organisation’s results—too many metrics and you risk confusing the executive and diluting the effectiveness of the remuneration design for creating value,” he said.
According to Chad Schaefer, People Advisory Services Africa Leader at EY (the sponsor of the forum), “Getting pay for performance right is hard, but it is the main task facing remuneration committees at the moment, especially given the high profile of executive remuneration. If you can credibly link the salaries and incentives you pay to performance and value creation, you can defend your remuneration policy successfully.”

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 first reports and disclosures in line with King IV principles are beginning to appear. King IV is effective in respect of financial years starting on or after 1 April 2017. It would appear that certain organisations still require a deeper understanding of the implications of King IV’s “apply and explain” approach, says Richard Foster, a governance advisor, professional non-executive director and Institute of Directors in Southern Africa (IoDSA) facilitator.

“King III’s ‘apply or explain’ regime had the unintended consequence of allowing organisations to adopt something of a tick-box approach to reporting and compliance. The new approach signals a decisive departure from that way of doing things because it requires organisations to explain how they have applied the 17 principles of King IV,” he says. 
“The idea is to give stakeholders a real idea of what the organisation is doing to embody the code and the quality of its governance—and how it is using the code to achieve all of this.”

The key here is the requirement to explain. Explanation means that stakeholders can easily ascertain whether the organisation is making satisfactory progress towards good governance. It also, to quote Professor Mervyn King, the convenor of the King Committee in his foreword to King IV, “encourage[s] organisations to see corporate governance not as an act of mindless compliance, but something that will yield results only if it is approached mindfully, with due consideration of the organisation’s circumstances.”Foster suggests the approach should be welcomed because it provides a great deal of flexibility in line with the principle of proportionality. Organisations are now free to adapt how they give effect to the Principles of King IV in line with aspects such as their risk profiles, level of complexity, resources, impact on the triple context and other specific circumstances—provided they explain clearly what their thinking was.
“Disclosure under King IV directs us away from a quantitative approach to compliance (‘We have implemented the following recommended practices’ or ‘We have implemented all recommended practices except’) to a qualitative one (‘In order to give effect to this Principle of good governance, we have taken the following actions’),” he explains.
“The Principles are generic and can be applied to any organisation, what’s unique is how each organisation crafts that application to achieve the goals or outcomes corporate governance: ethical culture, effective control, good performance and legitimacy.”
The challenge that organisations now face is that they have to engage deeply with the spirit of corporate governance, rather than its letter. That engagement, and the actions that flow from it, need to be informed by an ethical framework.
In practical terms, governance reporting in terms of King IV cannot be done satisfactorily in tabular form. Rather, a narrative approach, guided by materiality, should be used to explain how the organisation understands the Principle in its specific context and what it seeks to achieve; and then what practices were implemented in order to achieve the necessary application of that Principle.
King IV allows organisations to deliver their governance reports in various ways as best suits their circumstances: either as a standalone report, or as part of the integrated report or some other report as they consider appropriate for their stakeholders.

According to Parmi Natesan, Executive: Centre for Corporate Governance, the IoDSA has recently published its own governance report which can be used as an example of the envisaged approach.  A significant amount of time and thinking went into how we wanted to tell our governance story, to enable our stakeholders to make an informed assessment of the quality of the IoDSA’s governance.

“Reporting under King IV is all about understanding corporate governance and then explaining how you have implemented it; it’s not about keeping a register of which rules you have followed,” Foster concludes. “It’s highly flexible but it does require organisations truly to engage with what they are doing to improve governance, and what they hope to achieve.”

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 

When interviewing potential directors, nominations committees should not forget to investigate the hidden soft skills without which hard skills can prove less than useful, says Sarita Martin, a facilitator of the Institute for Directors in Southern Africa (IoDSA) and an independent non-executive director.

According to Martin there’s more to a successful board than just assembling the right skills, knowledge and experience around the table.  The dynamics around the boardroom table are influenced by the individual personalities on the Board.

“Boards often comprise a group of dynamic, highly accomplished individuals with strong views,” she comments. “If those individual directors are to deliver real value to their organisations through robust and productive discussions, they must have what have historically been referred to as the soft skills to operate within the context of the group, or one simply ends up with a set of individual opinions and no coherent decision.”

“Board members need to have the ability to be able to present their views in a respectful and coherent manner rather than be dictatorial.”

Read the room
The level of in depth discussion needed at board level is only possible if directors are able to listen well and are flexible enough to engage with others board members’ ideas to come up with new insights.

The courage to express one’s opinion while also engaging genuinely with other points of view is particularly difficult as today’s boards become more diverse from – among other things – a gender, age and cultural perspective. This diversity is obviously intended to provide the organisation with better visibility across the full socio-economic and political landscape, but it can mean that boards have to balance widely divergent points of views.

Often it is the body language and tone of voice of individual board members rather than their words that indicates their stance on a particular matter.

Replace “me” with “we”
Although eliciting the views of individual board members is crucial, it is important to remember that any board decision is a decision of the collective, of the majority of board members – the “we”.

An observation is that many of the new generation of board members may have no board or executive experience. In particular, they may be unaware of the protocol of board meetings, which is designed to support a non-adversarial atmosphere whilst promoting robust discussion and debate.

They may also not fully comprehend that the boardroom model is not a parliamentary one: the object is not to state one’s view as forcefully as possible and then vote, but rather to interrogate an issue from all angles in order to arrive at a decision in the best interest of the company.  

“It’s not who gets to make the decision, but the quality of the decision-making process itself. Directors have a fiduciary duty to act in the best interests of the company, not themselves or a certain viewpoint,” Ms Martin says.

According to Parmi Natesan, IoDSA Executive Director, “The personal and social competencies for directors are just as critical and the functional/technical ones. In the awarding of the Chartered Director SA designation, significant emphasis is placed on assessing these softer skills.  In addition, the IoDSA has also added two new programmes to its repertoire of director training – a practical boardroom simulation experience where delegates get to practices these skills; as well as a programme providing individuals who intend to become a non-executive director with a road-map to get there”  

Get it right, right from the start
So how do nominations committees set about establishing whether prospective directors have not only the correct understanding of how board decisions are reached, but the emotional balance and insight to handle difficult discussions in such a way as to promote the best outcome for the organisation? It’s not easy, Ms Martin acknowledges, because potential directors cannot simply be asked to take a psychometric test. However, typical interview questions can be used to probe these areas.

Understanding what motivates an individual to be a director in the first place can reveal how well he or she understands the role of the board. Nominations committees can assess during discussion with candidates about the business and corporate context how able the individual is to connect the dots to see the big picture. It also necessary to determine their understanding of corporate governance and how aware they are of current affairs.

Verbal communication skills, so important in a board interaction, can also be judged during an interview.

“Perhaps most important of all, nomination committees should look very carefully at what candidates have done in their lives and careers. This will not only show them whether the candidate possesses the requisite hard skills and experience, but also something about how they see themselves, and how they have displayed the ‘board temperament’ in the past.”

“Ensuring that board members are emotionally aware and possess the soft skills including good verbal communication and listening skills will assist in effective board dynamics and ultimately robust decision-making at a board level,” she concludes.

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 African Company Page  

In his much-lauded State of the Nation Address (SONA), President Cyril Ramaphosa devoted considerable attention to the challenge of rooting out corruption in government. “This is the year in which we will turn the tide on corruption in our public institutions,” he declared.

In this regard, President Ramaphosa made two key announcements in SONA.

Base SOE board appointments on competence
The first is that board appointments in the public sector will be based on “expertise, experience and integrity”—and not, by implication, on political connections or amenability to corruption.

“This is very good news; the IoDSA has consistently pinpointed the appointment of unskilled people to boards and a lack of due diligence on those appointments, as key weaknesses in our state institutions,” says Parmi Natesan, Executive: Centre for Corporate Governance at the Institute of Directors Southern Africa (IoDSA).

“In July last year government gave an undertaking to finalise a framework for board appointments as part of National Treasury’s Inclusive Growth Action Plan. The IoDSA made several recommendations at that stage, and we hope the President’s promise means the framework will be finalised and implemented. We are here and ready to help.”

Natesan points out that the ongoing tribulations at most state-owned institutions, as well as within the private sector, strengthen the IoDSA’s argument that building a cohort of professional directors is imperative in order to strengthen our economy’s ability to grow. To that end, the IoDSA has  formal Chartered Director (SA) and Certified Director designations that provide a framework for directors to acquire and demonstrate the specialist skills, experience and integrity needed to discharge their duties with mastery.

Remove SOE board members from procurement roles
Second, the President specifically promised to remove board members from any role in procurement, something that has become commonplace in some state-owned enterprises.

Comments Ms Natesan, “To ensure a well-governed, ethical organisation, it is essential that there is role clarity: directors must focus on governance and not get involved in operational matters like procurement. Doing so compromises their independence. Directors have to have unfettered discretion in making decisions in the best interests of organisation—they cannot be influenced by other considerations, such as who should get a certain contract.”

Natesan says that boards must develop ways of discharging their oversight role that do not cross the line into operational involvement, especially in areas like procurement, which is a high-risk area for public entities. These might include obtaining assurance from internal and external audit, ensuring that the organisation complies with relevant legislation such as the Public Finance Management Act, and instilling an ethical culture in the organisation through value-based leadership and a code of conduct—backed up by zero tolerance for unethical behaviour. Other tools would include proper oversight by the social and ethics and audit committees, and ensuring that the organisation has robust procurement (and other) policies and procedures.

Lead by example
Given the ultimate responsibility of governing bodies for the governance of ethics, it is critical that they themselves act ethically.

“The essential first step to achieving this laudable goal is to instill leadership that is both effective and ethical (as espoused in the first principle of King IV) across all sectors. If this does not happen, it is pointless to implement governance in a tick-box approach.  

“The link between ethical and effective leadership is one of the distinguishing features of King IV, and I think recent events have shown us the fundamental truth of this.”

The IoDSA has consistently argued that ethical institutions in both the public and private sectors alike are created from the top down, and that an organisation’s directors bear the main responsibility for ensuring that ethics are embedded in its DNA.

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 African Company Page

The Institute of Directors in Southern Africa (IoDSA) is conducting its third annual South African Directors’ Sentiment IndexTM survey until 6 February 2018.

The aim of the research is to track the sentiment of South Africa’s directors by measuring their views on a variety of elements covering Economic, Business, Governance and Directorship conditions.

The survey is not limited to IoDSA members only, but participants do have to be directors. Participants are encouraged to be as frank and open as possible when answering the survey.
 
The Directors’ Sentiment IndexTM survey is hosted and managed by an external independent research company who will manage the entire process, thereby ensuring that responses remain strictly confidential and anonymous.
 
The survey is available at http://bit.ly/directorsentiment and the reports for the 2016 and 2017 Directors’ Sentiment Index™ Reports can be downloaded at http://www.iodsa.co.za/page/DirectorsSentiment
 
ENDS

MEDIA CONTACT: Juanita Vorster, 079 523 8374, juanita@thatpoint.co.za
 
For more information on the IoDSA please visit:
Website:  www.iodsa.co.za
Twitter:  @The_IoDSA
LinkedIn:  Institute of Directors in Southern African Company Page 

Institute of Directors in Southern Africa & The Ethics Institute

​Eskom’s decision to pursue disciplinary action against its suspended acting-CEO, Matshela Koko, raises important governance and ethical issues that directors and executives should consider carefully, say 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 (TEI).
 
“Mr Koko stands accused of influencing the awarding of lucrative contracts to a company in which his stepdaughter is a director. While we should be careful not to prejudge this specific case, conflicts of interest like this represent a major hazard for board members and executives, if they are not managed correctly from the start. All of us should see Mr Koko’s predicament as a wake-up call to make sure our own houses are in order,” says Natesan.
 
The first point to make is that a senior executive like Mr Koko is both an employee of the company; and a deemed director or prescribed officer in terms of the Companies Act. Such a person is thus bound both by the internal policies of the company and the legal requirements of the Act. As regards the former, it would be necessary to see whether any company policies were breached in the way the contracts were awarded, and whether Mr Koko was himself involved in this process, and whether he disclosed his interest appropriately.
 
“It needs to be made clear that claiming ignorance is not a good enough defense.  As  a senior executive, Mr Koko should have investigated actively the interests of any of his related parties, even to the extent of requesting them in writing to inform him if they had any interests in organisations doing business with the company,” she explains. “This would show that he took reasonably diligent steps to be informed. One should never lose sight of the fact that as a senior executive, he has to set an example to the rest of the organisation and protecting its reputation.”
 
 
 
Natesan notes that conflicts of interest are to be expected in business, and do not necessarily constitute evidence of any impropriety: the key issue is how they are handled. King IV thus recommends that members of governing bodies should declare their financial, economic and other interests, and those of their related parties, at least annually. In the same vein, each board or board-committee meeting should be prefaced by a formal declaration of any specific conflicts of interest relating to the agenda.
 
Professor Rossouw points to the fact that humans are naturally inclined to act in their own interests or in the interests of their immediate family and friends. While the Companies Act and governance codes like the King Reports are examples of legal and voluntary constraints to the pursuit of self-interest, they will ultimately prove ineffectual unless the individuals concerned act ethically.
 
“I find it significant that the very first principle of the King IV Code on Corporate Governance emphasises that members of governing bodies, both individually and collectively, should act in an ethical manner. In unpacking what is meant by ethical behaviour, the Code starts by focussing on the personal integrity of members of the governing body. They are reminded that as directors, they must act in the best interest of the company, and that they must deal with conflicts of interest appropriately. King IV sees integrity as a characteristic that should be cultivated and exhibited, so that directors develop the inclination to act in the company’s best interests, not their own” he says.
 
“By sensitising directors not only to actual conflicts of interest but also potential or perceived ones, ethics plays a crucial role in avoiding the reputational damage and financial costs when a conflict of interest is found, or even suspected not to have been handled correctly —as we see in the case of Mr Koko.”
                                                                                        
ENDS

 
MEDIA CONTACT: Carla Coetzee, 072 112 8347, carla@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 African Company Page  
 
 For more information on The Ethics Institute please visit:[DR1] 
Website: www.tei.org.za
Twitter: @EthicsInst
LinkedIn: The Ethics Institute Company Page

Government’s undertaking to finalise a board-appointment framework for state-owned entities (SOEs) by March 2018 is warmly welcomed by the Institute of Directors in Southern Africa (IoDSA). The move is one of the key steps outlined in Government’s Inclusive Growth Action Plan, which was released by the National Treasury on 13 July 2017. The Plan is intended to kick start economic growth, end the recession and stave off further downgrades. 

“State-owned entities are key enablers of economic growth, particularly in South Africa, and the IoDSA has repeatedly argued that their lack of performance is linked to imperfect governance, particularly when it comes to appointing directors,” notes Parmi Natesan, Executive: Centre for Corporate Governance at the IoDSA. “We will certainly be making our specialist expertise in this area available to Government going forward, as it works to create the framework for appointing SOE board members.”

Natesan says that the IoDSA has already interacted with the Department of Public Service and Administration in this regard, and has made several recommendations for its consideration. As the torchbearer for corporate governance and the convenor of the King Committee, the IoDSA will certainly hold itself ready to contribute further as Government gets down to the details of the proposed framework. 

The IoDSA has long argued that “board composition probably has the greatest single impact on the future success of an organisation”, to quote its recent board appraisals benchmark study. 

Directors need to have the requisite knowledge, skills, experience and personal qualities, and should be appointed through a formal, independent process. This is critical in any organisation, but particularly for SOEs because of their influence on the rest of the economy, and the difficulty of keeping political and economic goals separate. 

As the IoDSA has pointed out before, it is critical that the state as shareholder and the board understand their respective roles, and that undue political interference in the appointment of board members is avoided. Boards cannot be held accountable for the SOE’s performance if they are unable to exercise their judgement freely and in the best long-term interests of the organisation, Natesan says. 

Another critical factor is the need for demonstration of appropriately skilled and experienced directors. To help resolve this, the IoDSA is playing a leading role by providing training related to each of the 20 competencies identified in its Director Competency Framework. It has also introduced the professional Chartered Director (SA) designation in 2013 and more recently the Certified Director designation, in a bid to professionalise the directorship role, providing directors with a way to ensure they build the right competencies; and organisations with a way to ensure they are getting the directorial talent their boards require to function effectively. 

The final piece of the puzzle is regular, objective assessments of board performance. 
“The IoDSA is committed to improving corporate governance across South Africa. Effective corporate governance can improve organisational performance over the long term, which has socio-economic benefits for the country as a whole, but it will also contribute to reversing the perception of corruption that is swamping our public life,” Ms Natesan concludes. “While the IoDSA is a non-statutory, voluntary body and cannot act directly to penalise improper conduct, we have a key role to play in building awareness, providing training and guidelines, and influencing governance policy. We believe this element of the  Inclusive Growth Plan offers a great opportunity for us to do so.”
ENDS

MEDIA CONTACT: Carla Coetzee, 072 112 8347, carla@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 African Company Page  

The Mail & Guardian reports that SAA chair, Dudu Myeni, has recently missed several special board meetings, and that her colleagues on the board are taking legal advice in this regard. If these reports are true, they may indicate that Ms Myeni is failing to fulfil some of her duties as a director, and more specifically a chair.

The reports also demonstrate the intimate connection between good governance and organisational performance and sustainability, adds Parmi Natesan, Executive, Centre for Corporate Governance, Institute of Directors in Southern Africa.

“It is common knowledge that SAA is in dire financial straits, and has been for some time. At such a time, more than ever, the board and especially its chair have a critical role to play in providing leadership in steering the organisation into calmer waters,” Ms Natesan says. “Not attending several special board meetings at a time such as this is worrying, especially given that board meetings are typically scheduled around the chair’s availability in the first place.”

The law requires directors to exercise care, skill and diligence in their role. It is generally agreed that in this context, board members should not only attend meetings, but also prepare rigorously for them in advance, so that they can make a valuable contribution. If they cannot attend, they should furnish valid reasons to the rest of the board, and also consider providing input before the meeting on the matters to be discussed.

Because board chairs play such an important role, various governance guidance documents elaborate on this responsibility.   Providing overall board leadership and presiding over board meetings to ensure that time in meetings is used productively are just two of the many vital functions that would be difficult to exercise when a chair is repeatedly absent.

“It would also be interesting to know whether the SAA board has a deputy chair in place, or a lead independent director, to ensure that meetings can proceed effectively in the chair’s absence,” says Ms Natesan. “The troubles at SAA and other parastatals provide yet more support for what the IoDSA has always emphasised: the principles of good governance are integral to improved performance and sustainability. We hope the board will show the courageous leadership that is needed to pull the organisation back on track.”

ENDS

MEDIA CONTACT: Juanita Vorster, 079 523 8374, juanita@atthatpoint.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 African Company Page 

​Social inequality is a strategic risk for businesses globally, and particularly in South Africa. Consequently, directors need to ensure that initiatives to reduce inequality are core to the organisation’s strategic thinking and planning, says Karin Ireton, Chair of the Sustainable Development Forum (SDF), a forum of the Institute of Directors in Southern Africa (IoDSA).
 
The SDF today launched a paper offering practical guidance to help directors and executives build effective, strategic responses to the challenge of social inequality.
 
“As we have seen over years of protests about service delivery, unequal access to the most basic services affects many South Africans. In turn, that inequality translates into greater challenges in obtaining education and employment, negatively impacting the environment in which business operates, from the national mood to employee productivity, market resilience and the health of the supply chain,” says Ireton. “When inequality is particularly marked, as it is in South Africa, it threatens the long-term profitability and sustainability of all businesses.
 
“While the primary responsibility for social redress rests with the state, business can and must play a role in promoting growth and prosperity. In line with the integrated thinking proposed in King IV, it makes good business sense to prioritise social inequality on the agendas of governing bodies and their strategic decision-making,” she adds.
 
In short, directors need to steer organisations beyond seeing corporate social investment or philanthropy as a sufficient response to this challenge. Rather, overcoming social inequality should be an essential part of an organisation’s strategic review and goal setting.
 
The paper shows how various aspects of social inequality impact specific business risks. For example, unequal education affects the available workforce and productivity; unequal healthcare affects productivity; and unequal opportunity creates resentment and, ultimately, an unstable market environment.
 
“These are real business risks, and their scale and urgency in South Africa means a more business-like approach is needed, with the focus shifting from the amount spent (the typical corporate social investment metric) to effective monitoring and the measurement of impact,” says Ireton. “We have already seen this shift in the skills area: as access to the right skills has become a real risk, so companies have moved from a conventional bursary programme as part of corporate social investment into a formal investment in skills development pipelines.”
 
The “talent risk” is particularly acute in highly unequal societies. Unequal countries like South Africa invariably have low-growth, unstable economies, and thus tend to become net exporters of those with scarce skills, who emigrate to seek greener pastures.
 
The paper offers a set of 13 practical guidelines for directors to consider as they seek to make a measurable impact on social inequality in the quest for sustainability. Such guidelines include a continuous assessment of the socio-political context in which the organisation operates, particularly in relation to the shifting landscapes of key stakeholders; identifying opportunities that return benefits that extend beyond shareholder profits and employee remuneration; and looking at these issues with an operational focus.
 
At a broader level, organisations need to find ways to promote inclusive capitalism and long term shared value, in which the widest possible grouping (stakeholders, consumers and communities) benefit from initiatives that also secure new markets for the organisation.
 
“As the King Reports have consistently argued, organisations do not exist in a vacuum, and thus helping to ensure a healthy, stable society is a legitimate business goal. Inequality, as the driver of social instability and reduced economic opportunity, has become one of the most pressing business risks in the country,” concludes Tanya Nassif, Governance and Legal Specialist at the IoDSA. “Directors thus have the obligation to integrate initiatives for reducing inequality into their fundamental strategies in order to mitigate this risk. This paper begins to show how this can be done.”
 
ENDS
 
MEDIA CONTACT: Carla Coetzee, 072 112 8347, carla@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 African Company Page