Blacks and the boardroom
‘The suggestion that SA has this vast pool of black leadership talent that’s being overlooked by big business is patently untrue.’
THE ISSUE OF TRANSFORMATION – or the perceived lack thereof – on the boards of some of South Africa’s top companies has flared up again in the media of late. As so often happens, the debate tends to miss the point of what a board’s role really is.
Make no bones about it: it’s vital that we remain sensitive to the needs of black empowerment in our business dealings. But board appointments aren’t just a numbers game or a colour-coding exercise that we do in public. Today, more than ever, boards must deliver real value to the company and be accountable to shareholders.
A well-known piece of research by McKinsey into corporate governance shows that boardroom performance and behaviour can be directly linked to shareholder value. In fact, investors are generally prepared to pay a premium for companies that show high levels of good governance.
Developing an effective board that actively monitors and guides strategy, that ensures that corporate financial and non-financial communication to investors highlights key value and risk drivers and that holds senior executives accountable for successful strategy formulation and implementation gives investors more confidence and positions the company better for future success.
Needless to say, the boards of the top 40 companies on the JSE are understandably reluctant to appoint board members on the basis of potential alone – or make appointments that don’t add any meaningful strategic value to the company – simply to appease certain investors.
The suggestion that SA has this vast pool of black leadership talent that’s being overlooked by big business is patently untrue. Currently, there’s a huge willingness on the part of JSE companies to hire and develop black talent – if they can find it. In fact, black leadership talent is worth considerably more than the equivalent white leadership talent at the moment, and that is subject to the natural forces of supply and demand that regulate the market.
The truth is that there’s a distinct lack of the board level leadership skills our companies are looking for in SA across all sectors. There are a number of reasons for that. Many of our best executives are being lured overseas by lucrative opportunities. Others don’t stay in one position long enough to gain the necessary experience to progress to board level.
Yet another group of executives is opting to focus on black empowerment deals, which offer access to ownership, a non-executive lifestyle and an income from dividends without having to fret about the daily accountability for a company’s bottom line.
Part of the problem in South African boardrooms is that many non-executives have little experience of running businesses and don’t have a real, practical understanding of how corporate strategy works. They tend to focus on their particular area of expertise and the board therefore has difficulty finding common ground among all its members when finally confirming strategy.
Board members need to have a sound understanding of the business and a broad perspective of the market. When directors fail to develop a deeper understanding of the company’s business and the broader general business issues in SA they’re unlikely and unable to add any value at all.
So what’s to be done in the meantime? For a start, succession needs to become the focus of much more careful attention. Boards often spend a great deal of time on the financials and issues that can be dealt with objectively relying on hard numbers. The evaluation of candidates for board appointments and their succession is frequently delegated to nomination committees without the full board taking ownership of the process. We should also change the ways we’ve traditionally attracted and retained top leadership talent, both black and white.
We must put in place more rigorous frameworks to evaluate the performance of boards, to improve boardroom discipline and help them function more optimally. We need to realise that ever-increasing demands for transparency and compliance substantially raise the potential for conflict in the boardroom and have to find ways of managing that better.
In SA in particular, that potential is heightened by the phenomenon of multicultural boards that don’t have a long track record of trust borne out of knowing and understanding each other. The soft issues, such as trust and collegiality, are just as important as diversity, independence and representivity.
The bottom line is this: transformation and black empowerment are critical imperatives to any company in SA today. But they can’t come at the expense of good governance and boardroom rigour.