“TODAY’S directors need a whole range of qualities and skills, and the first order of business is understanding what they are.”
Various recent testimonies before the Zondo Commission have provided a graphic illustration of what a good director does not look like. But, on a more positive note, what does a good director look like?
This is an important first step to economic recovery – much on all our minds at present – because the damage caused by incompetent directors can be catastrophic. No matter how good an economic plan is, it will not succeed unless both the private and public sectors have the right directors to make growth happen.
The first place to look when considering important governance matters is the King IV Report on Corporate Governance. King IV’s first principle is: “The governing body should lead ethically and effectively.” As we’ve previously observed, this pairing of ethics and effectiveness is critical, and it should be self-evident to South Africans by now. According to King IV, the way to achieve this outcome is for board members to cultivate integrity, competence, responsibility, accountability, fairness and transparency (Icraft for short).
Icraft essentially provides the framework for ethical and effective leaders, and so it is worth unpacking each characteristic. It’s important to note that King IV says board members should not only cultivate them but exhibit them in their conduct – this is not a theoretical exercise!
Integrity. Directors have a fiduciary duty to their organisation and must act in good faith and in its best interests. If they do not, they can be held personally liable, and can suffer sanctions from the courts. Another aspect of integrity is avoiding conflicts of interest. It’s not enough to declare them; the conflicted individual must recuse him/herself from the matter. King IV makes it clear that the board must go beyond compliance and that it must consciously set the tone for the whole organisation.
Competence. Surprisingly enough, this is often overlooked. Directors need to be competent as directors in addition to the other skills and experience they bring. Directorship is an evolving discipline, so continuous professional development is a requirement. Directors must also make sure they gain specific knowledge of the organisation and its industry, and especially how value is created.
Responsibility. The many facets of responsibility include the specific duties of directors and also prepare for and attend meetings.
Accountability. Having executed their responsibilities, board members must also be prepared to take accountability for their actions and decisions, even when these have been delegated. The buck always stops with the board.
Fairness. This involves taking a stakeholder-inclusive approach and guiding the organisation’s operations to not adversely affect the natural environment, society or future generations.
Transparency. Transparency is essential to ensure accountability, but at a more general level board members must always be prepared to justify their decisions and actions – hence King IV’s “apply and explain” approach to disclosure.
So far, so good, but boards are more than the sum of their parts. The Icraft characteristics do not exist in isolation, and so there is a need for board members to possess other characteristics as well, some of them falling into the “soft” category. These characteristics enhance the model director’s Icraft characteristics while strengthening the functioning of the board as a whole.
The ideal director combines high cognitive abilities with strategic awareness to better understand how the organisation works/should work. He or she possesses a high emotional and conversational intelligence, is able to manage his/her own emotions and help others to do the same in the name of better decision making, and has the ability to create a board dynamic that is collegial but also challenging. A good director understands not only the financial drivers, but also the various success levers relevant to the organisation.
And finally, ideal directors use all these qualities to understand the wider context in which the organisation exists and how it affects decision making.
In short, the model of a modern-day director is a well-rounded individual who is able to bring myriad qualities to bear in helping to govern an organisation successfully. It sounds like a tall order because it is one, which is why the Institute of Directors in South Africa (IoDSA) has been spearheading a drive to professionalise directorship, with formal certifications that provide a framework that enables individuals to acquire these skills, demonstrate they have acquired them, and then keep them updated.
Parmi Natesan and Prieur du Plessis Parmi Natesan and Professor Prieur du Plessis are respectively chief executive and facilitator of the IoDSA; email: info@ boardgovernance.co.za
BUSINESS REPORT