South African company boards, like those in the rest of the world, are changing. As corporates grapple with a fast-changing world, the state of the global economy and the need to seek growth outside our country’s borders, our boards of directors have had to adapt to meet these challenges. In line with global trends, we’ve had to look at aspects such as board composition, director tenure and director skills to ensure the right leadership is in place to take companies forward in an increasingly competitive world.
So how are South African boards shaping up, and what changes are still needed to ensure optimum board performance and effectiveness in today’s conditions?
- Corporate governance: Corporate South Africa is very well viewed internationally from a compliance point of view. While some feel the King Code of Governance Principles (King III) has brought a greater burden of compliance and governance, it has entrenched the perception globally that we have a well-run corporate sector. I believe this is one of the reasons international players who want to invest in Africa, view South Africa as the safest bet compared to the rest of the continent.
- International diversity: South African corporate expansion of operations and investment into other African countries and further afield has been gaining momentum over the past few years. This has consequences for leadership. It means we have to include far more international diversity on our boards, to ensure corporate strategy is implemented effectively. While we have come a long way in this regard, we are still playing catch-up from a global perspective. I believe we should move much faster in appointing board members from other countries, especially those in which our corporates are doing business.
- Director tenure: The days of being appointed to a board and remaining there for life are long gone. In South Africa, I believe we have too many board members that are, in effect, past their sell-by date. In today’s fast-changing business world, it is challenging to maintain independence of mind for lengthy periods of time. Organisations typically have five-year business strategies, and should evaluate whether their directors are still the best people for the job every three to five years. This will lead to less group-think and more innovation and creativity.
We also tend to have too many serial board members – leaders who hold more than six directorships. Four to six should be the maximum. And board chairpersons should ideally not chair more than one board. In the UK, this would not be acceptable to company shareholders – the role is a demanding one and it is difficult to imagine a chairperson being able to devote the necessary time and energy to multiple boards.
- Director skills: We do unfortunately have a dearth of skilled people who could qualify for directorships in our country. Our company boards should preferably be populated by people who have been CEOs or CFOs of successful businesses, either here or elsewhere. This is another reason why we need to look internationally in order to complement our existing board structures. On the other hand, we also seem to be unwilling to take on less experienced people as directors – I believe we should be on the lookout for people with potential and encourage them to come onto our boards.
A skill which is sorely needed on most boards, is digital expertise. These days, any industry can become the victim of digital crime. We have started to include tech experts on our boards – as recommended by King III – but we should go further and also include digital strategists
In general, I believe our boards are performing fairly well in challenging circumstances. If we up our game in terms of international diversity, tenure and skills, it will assist South African boards to move beyond a focus on compliance to deliver the necessary strategic input which could lead their companies into the next phase of growth – especially in new markets.
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