The recent appointment of former ANC Youth League leader, Magasela Mzobe, to chair the interim board of Umgeni Water has been met with consternation in some quarters.
Facilitator of Director Development Programs at the Institute of Directors in South Africa, Dr Simo Lushaba, said that more public transparency is needed on such appointments in order to build stakeholder trust and, ultimately, give the appointees the best chance of succeeding in their new positions.
“The appointment of board members and key executives to state-owned enterprises (SOEs) presents a significant governance challenge because these appointments are made by the state as shareholder and not by the accounting authority (board), which would be governance best practice,” Lushaba said on Monday.
He said the SOE and the executive authority should be transparent regarding the processes followed for the nomination, election and appointment of governing body members.
“If ministers are not transparent about the reasons they appoint people to board or executive positions, the public may jump to the unfortunate conclusion that the appointments are political, especially given what has been going in our SOEs for too long. Perception is critical when it comes to building and/ or restoring trust,” he said.
He said the governing body [i.e. board] should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively.
In its Recommended Practices, King IV (a guide to corporate ethics for board members) makes it clear that the governing body should ideally have the responsibility for ensuring it has the right composition of members to discharge its duties.
However, SOEs represent a special case because their founding legislation typically gives the government as sole shareholder the power to appoint board members and, often, senior executives. Consequently, in its Sector Supplement for SOEs, King IV makes the recommendation that the governing body/ accounting authority and shareholder should work together and in a transparent way to follow governance best practice as closely as possible.
“If this course is not followed, the board is placed in the untenable position of being held accountable for the organisation’s performance but with little or no control over who sits on the board or in the executive suite,” Dr Lushaba points out.
He said the King IV’s principles were framed in terms of outcomes, not boxes to be ticked and that the reaction to Mzobe’s appointment shows that the desired outcome of restoring trust and legitimacy may not have been achieved.
Mzobe’s appointment early this month was reportedly met with murmurs as the appointee was deemed to be lacking corporate boardroom experience.
Daily News