JOHANNESBURG - Directors have a vital role to play, both as decision makers and in setting the tone for an organisation. The ideal director must possess a formidable array of qualities.
A Chinese phrase says a fish rots from the head, the essential truth of which became more obvious during the so-called “decade of stupidity” (2000 to 2010) when Enron and other corporate scandals burst all sorts of bubbles. Consequently governance frameworks, like the King Reports, now focus on the qualities directors should possess and display.
Principle 1 of King IV states that “The governing body should lead ethically and effectively.” The pairing of ethical and effective leadership constitutes one of the fundamental features of King IV. It further recommends that members of the governing body should cultivate integrity, competence, responsibility, accountability, fairness and transparency (Icraft for short), and this list of characteristics provides the framework for an ethical and effective director.
In addition to these characteristics, it is useful to also consider other essential requirements to be a credible non-executive director/member of a governing body, as well as some key qualities such an individual should possess.
The requirements
* A thorough understanding of the responsibilities and obligations of a director of a legal entity. Specifically, this will include performing the director’s functions in good faith, in the best interests of the organisation, and with proper care, skill and diligence.
* Solid experience in the business and specific knowledge of a relevant industry or sector, and the organisation’s place within it. Knowledge of multiple sectors is obviously even better, as is a skill in one or more specific business disciplines, such as strategy, finance or marketing.
* Sufficient experience of life in general to be able to navigate the highs and lows of business life, and to cope with adversity.
* An understanding of international best practice in governance, and a good knowledge of the relevant legislation.
* The ability to influence colleagues, and also an openness to being influenced. Directors must have independent minds but at the same time avoid being doctrinaire.
* Enough time to discharge their duties properly - a point we made at some length in a previous article.
* A solid moral compass in order to find the ethical course. In particular, conflicts of interest are a fact of life and knowing how to manage them is vital.
* Relationships with stakeholders that will benefit the organisation.
* The courage to take calculated risks, and also to disagree with colleagues when necessary.
To get answers
* The ability to ask the right questions. Non-executive directors will never know as much as the executive team, but as they share the risk and potential liability, they must consider what questions need asking and have the persistence to get answers.
As Ram Charan and Julie Schlosser put it in a Fortune Magazine article: “The best questions are often disarmingly simple. So simple, in fact, that we often forget to - or are embarrassed to - ask them.”
In addition to these essential requirements all directors should possess, there are others that are desirable, of which directors should initially possess at least some and work towards achieving others.
Directors need to understand how they contribute towards creating and preserving value. They need to be able to think strategically, taking all the risks and opportunities into account, and avoid the siren call of operational detail.
Directors need to be both intellectually rigorous and flexible, able to absorb information and think through complex issues without losing focus. They need to find ways of challenging colleagues and executives constructively, but also to offer support when it is needed. A high level of what some call “emotional intelligence” is thus required.
Parmi Natesan is executive director: Centre for Corporate Governance and Dr Prieur du Plessis is chairperson of the Institute of Directors (IoDSA). Inquiries: [email protected]. Better Directors. Better Boards. Better Business.