D I R ECTO R S H I PS Juggling too many balls
Findings by a specialist risk management credit bureau indicate that directors who serve on many corporate boards may increase the risk of noncompliance with governance practices. In SA, that situation of individuals having many directorships has arisen partly as a result of BEE deals concluded over the past 10 years.
Businessmen Cyril Ramaphosa and Patrice Motsepe, for example, serve on no fewer than 10 boards each — Ramaphosa is on about 15 — raising the question of how much attention they can dedicate to each company.
The research, conducted by Inoxico, states that directors of SA’s 20 largest companies serve on 14 other boards, on average. Inoxico CEO André Stürmer says that while such directors are skilled and sought-after individuals, the demands on their time mean they may not be able to fulfil their fiduciary duties.
There is no board membership limit prescribed by the King code of corporate governance, but some companies do require their directors to limit the number of positions they take on.
Ramaphosa is the chairman of both Bidvest and MTN, as well as joint chairman of Mondi. He also serves on the boards of Standard Bank, Lonmin and SABMiller. These are some of the largest companies listed on the JSE, worth a combined R1,2 trillion in market capitalisation. His schedule includes executive duties as chairman of Shanduka, as well as Alexander Forbes. Ramaphosa must also divide his time between the national planning commission, where he serves as deputy chairman, and the ANC, as a member of the national executive committee. As SA development licensee, Ramaphosa also sits on the board of fast food outlet McDonald’s.
Motsepe has been the executive chairman of African Rainbow Minerals since 2003, a position that includes the nonexecutive chairmanship of Harmony Gold. Motsepe is also chairman of both Naledi Mining and Future Mining. He is deputy chairman of Sanlam and an executive director at Absa and finds time to be the president of soccer team Mamelodi Sundowns.
BEE kingpins are by no means the only culprits when it comes to multiple directorships. Graham Mackay, executive chairman of SABMiller, also carries the title of senior independent nonexecutive director at multinational Reckitt Benckiser Group and cigarette maker Phillip Morris International.
Len Konar is also a serial nonexecutive director, who serves on the boards of Steinhoff International, Mustek, Sappi and the JD Group.
“Where do they find the time to prepare for [board] meetings?” asks shareholder activist Theo Botha. He also points out that directors must serve on subcommittees of the board, which typically hold four meetings each year — as do the boards of directors themselves.
Botha says investors need to scrutinse the quality of the directors’ contributions.
Ramaphosa admits having too many board seats is not ideal, but explains that the boards he serves on are Shanduka’s investee companies, or started out as such. Also, as a condition of the BEE deals concluded with the likes of Standard Bank and Mondi, founders had to serve on the boards of these companies. “We had to play an active role,” says Ramaphosa.
He adds that his colleagues at Shanduka provide “excellent” support and take on the responsibility of preparing for board meetings. “The quality of my contribution hasn’t weakened as a result of such quality assistance,” he says. “We invested as a group and we analyse the companies together as Shanduka.”
Ramaphosa says that as the deals reach maturity and the lock-in periods expire, his involvement will be wound down.