Six available positions on the Transnet board have not yet been filled, which worries Futuregrowth Asset Management. These concerns are valid and present governance issues that all boards should take seriously, according to Parmi Natesan, CEO of the Institute of Directors in South Africa (IoDSA).
Given the importance of the corporation to our economy, she notes, “Futuregrowth’s analysis demonstrates that the failure to fill six vacancies on a 12-person board has reduced its ability to address the serious challenges the company faces.” “A board needs the right mix of skills to steer the organization well even in the best of times, but when the economy is unstable and there are major obstacles to overcome, the lack of board skills is existential.”
Natesan contends that Transnet’s board lacks diversity and that important board committees like the audit, risk, and social and ethical committees could be missing critical members. When it comes to the organization’s ability to overcome obstacles, these committees are essential to its governance. Organizations and board chairs “must pay particular attention to the need for the board to have, in the words of King IV, “the appropriate balance of knowledge, skills, experience, diversity, and independence for it to discharge its governance role and responsibilities objectively and effectively” (Principle 7),” says Natesan.
The fact that the terms of the six remaining non-executive directors will end in May 2024, according to Natesan, is a related issue. Having a lot of board members depart at once is obviously bad, even while it is a good idea to progressively rotate board members to ensure that skills are kept up to date and diversity is increased.
“Organisations need to focus on striking a balance between continuity and renewal. We see this kind of mass reshuffling of boards particularly in the public sector. The motivation behind rotation is good, but it needs to be handled intelligently to ensure that invaluable institutional memory is not lost,” she says.
Planning for succession is still another crucial factor. The organization must make sure that people with the necessary skills—including professional directorship skills—are waiting in the wings if board members are going to be rotated on a regular basis, as recommended by best practices. Thus, succession planning must be conducted concurrently with an ongoing skills audit to guarantee that the board is aware of the abilities it requires and that those nominated for the position possess them.
“Nobody in South Africa at least now doubts the important role that governance and oversight play in ensuring organisational health and effectiveness,” Natesan concludes. “The corollary—that the board needs to have the right mix of skills in order to fulfil this vital function—is equally true.”
Source: Railway News