Directorship should be a regulated profession – Institute of directors

Directorship should be a regulated profession to ensure that leaders are suitable people who know how to fulfil their roles. Institutions cannot prosper if their boards and executives do not have the right personal qualities, skills and experience.

Prof Parmi Natesan, CEO of the Institute of Directors in South Africa (IoDSA), says this is one of the governance lessons from the independent investigation into the governance of the University of Cape Town (UCT).

UCT already indicated that it is acting to restore the university community and regain public trust, while according to a SENS announcement, the former chair of the university council recently resigned from one of the boards she sits on to take the findings on review.

Natesan says the lesson is clear: governance failure has significant negative effects on institutions as well as the implicated individuals.

“The panel’s conclusions and recommendations should be required reading for all board members.”

She says leaders must be suitable people given the greatly increased scope of board members’ responsibilities and directorship should be recognised as a regulated profession to enable directors to gain the necessary skills and keep them updated.

According to Natesan, key directorial responsibility is the legal duty to act in the best interests of the organisation, in good faith and for proper purpose with care, skill and diligence – something that the report indicates some UCT Council members seem not to have practiced in numerous instances.

She says the report indicates that the former council “failed to act on the information …, leaving many members of staff vulnerable to further abuse of power”. It further refers to the vice-chancellor and chair advancing “their own interests, instead of UCT’s”.

ALSO READ: Board appointments at Johannesburg Property Company questionable – Institute of Directors

CEOs must have technical skills as well as moral compass

“The board also has a responsibility for appointing a CEO with the right levels not only of technical competence but also a moral compass and the personality to lead, another key responsibility that the previous UCT Council seems to have failed to live up to.”

She points out the report indicates that the selection committee appointed the vice-chancellor, despite “clear evidence of her inability to lead and manage senior executives”.

“One of the panel’s key recommendations was that the process for nominating and selecting council members should be revisited to ensure that fit and proper persons are selected in terms of current law as well as King IV. Who gets selected to serve on boards or similar governing bodies is crucial, as the IoDSA has continually pointed out.”

Natesan emphasises that board chairs fulfil a vital role., especially regarding the CEI.

“The board chair has leadership to hold the CEO accountable for his/her performance and conduct. Various paragraphs in the report indicate this not to have been the case.”

In addition, she says codes of conduct are important but must be policed.

“UCT’s former vice-chancellor was found to have breached the council’s code of conduct, as did the former chair of Council.

“Furthermore, Recommendation IX of the report indicates “multiple instances of violations of the Code of Conduct by members of Council”. Boards have a responsibility to act decisively in these instances and hold others accountable for their actions.”

ALSO READ: New Companies Amendment Bill gets directors’ nod

Directorship requires role clarity

Natesan says role clarity is crucial. “The report findings indicate that many of UCT’s governance problems derived from the fact that board members and executives constantly strayed out of their lanes, which we can assume to have been either deliberate interference or a lack of understanding of their role.”

For example, the report states that the council “irregularly … [involved] itself in day-to-day management rather than focusing its attention on governance and accountability based on UCT’s strategic plan”.

She says it seems that these governance failures had a devastating effect on UCT’s reputation and in the work environment at the institution.

“I cannot stress enough the importance of understanding what its specific governance failures were and then applying King IV’s best-practice recommendations to help avoid them in future. As we see again, governance excellence is critical to an organisation’s reputation and indeed its ability to function properly.”