Professional education vital for directors if firms are to prosper
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Parmi Natesan and Prieur du Plessis
MODERN-day directors have a vital but difficult job to do. They will succeed only if they have the right directorial skills and keep those up to date.
One just has to open any news site these days to read about some or other corporate/financial/governance failure involving public and private sectors alike.
Many internal and external factors are involved when an organisation runs into headwinds, but one can confidently state that a common thread is a board that is performing below par.
Here, again, there are many factors that could be contributing to suboptimal board performance. Among them are the skill of the chairperson, the independence of the board members, the quality of the relationships on the board, the appositeness of the board packs and the time board members take to prepare for meetings. But it must be conceded that one of the most obvious reasons a board does not function well must be that some or all of its members are simply not adequately trained and up to date with developments.
This is an important point, and it’s one that is still not properly recognised. Traditionally, boards tended to be populated with individuals who
had successful professional or business careers, and who were lending this expertise and experience to the organisation. However, this model fails to recognise that the responsibilities of boards have grown over the decades in line with a greater emphasis on governance.
The King Reports, in line with other governance codes, have consistently emphasised the importance of boards as the apex of the organisation – ultimately, the buck stops with the board. The Companies Act and other statutes have also codified the responsibilities of directors into law, along with the severe personal penalties they will incur for improper decisions.
In short, directorship has become
much more technical, and the range of subjects with which board members need to be conversant includes fraud, a constantly changing regulatory environment, cyberthreats and other IT risks and opportunities, reputational risk, a complex global business environment and thus legal framework, and the growing imperative to account to a wide body of stakeholders. In particular, directors need to understand their legal duties and how these differ from management duties, and ensure they exercise them competently.
As Bob Garratt, author of The Fish Rots From the Head, wrote: “An organisation’s success or failure depends on the performance of the board, yet the majority of directors have no special training for their role and are unsure about quite what it entails. As a result, many do not take their responsibilities and accountabilities as seriously as they should.”
Close reading of news articles about organisations that find themselves in trouble, or the growing number of court cases in which directors are sued, reveals that many directors simply do not fully understand what their responsibilities are, and frequently do not realise what risks they run if they do not have both the requisite understanding of what is expected of them or the skills to meet those expectations.
It’s for this reason that the Institute of Directors in South Africa (IoDSA) has been championing the creation of a new caste of professional directors. The IoDSA launched a professional Chartered Director (SA) designation in 2016, and relaunched the Certified Director designation in 2017, with a clear framework of skills that directors need to attain, along with a continuous professional development programme, in order to maintain the designations.
In this context, the value of professionalising directorship means that not only will directors be able to acquire a relevant set of skills based on the IoDSA’s Director Competency Framework but they will also have to keep those skills updated via a structured programme of continuous professional development.
The case for directors who are better educated about what directorship entails and have a constantly updated a set of directorial skills is surely unanswerable. But, on the ground, it must also be recognised that the new model of what a director should be is only imperfectly represented.
However, there are encouraging signs that things are changing, with the most recent IoDSA Directors’ Sentiment Index Report showing that 67 percent of IoDSA members (up from 61 percent), and just more than a quarter of non-IoDSA members, feel that continuous professional development affects board performance positively.
The nature of directorship has changed – and is changing – radically. Directors, and the organisations they lead, will prosper only if they have the right skills and keep them updated.
Parmi Natesan and Professor Prieur du Plessis are respectively chief executive and facilitator of the IoDSA; email: [email protected]
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