Timely insight into boards gone astray

DESPITE a thriving corporate governance industry focused on transparency, it seems that company boards are just like marriages — you have to be part of it to have any idea what’s really going on. Or wait for a high-profile divorce to get a glimpse of what was going on. And even then you may not get a very accurate picture — it will just be one party’s version after the fact.

Perhaps we should all be grateful to African Bank, PPC and HCI for providing us with an insight into the workings of boards that challenges the anodyne normative model the King III code would have us believe in. In terms of that model, the board is a well-oiled machine where highly skilled members of subcommittees ensure optimum efficiency and slick adherence to an evergrowing number of laws and regulations.

There isn’t much sign of slick efficiency at the three companies in the spotlight. No, they make boards look like extremely messy places made up not so much of skilled subcommittee members but of rather ordinary humans with egos and ambitions of above-average size.

And don’t you just wonder how many other board directors are whispering “There but for the grace of God . . . ”?

At African Bank it looks like a case of the CEO selecting a board he would be able to manipulate easily; one that would not challenge any decision he took, no matter how bizarre. Can any shareholder get access to the board minutes at which the Ellerines deal was discussed? Did the directors vote on it? No doubt these details will emerge from John Myburgh’s inquiry.

Over at PPC, it looks as if nobody had control over the board. This might not have had such a devastating impact if the CEO had total responsibility for the executive, but, rather bizarrely, the chief financial officer reported to the board directly and not to the CEO.

The drama at HCI is likely to be speedily resolved and, perhaps more significantly, resolved away from the glare of the media. Unless either of the two main protagonists foolish- ly decides to pursue legal action, HCI will soon resume life as an aggressive company under the control of Johnny Copelyn.

The remarkable thing is that in each case even the large institutional shareholders seemed surprised by events. In a way this is encouraging as it indicates that no shareholder has preferential access to the board. But the absence of an anchor shareholder is troubling because it means there is no one to play referee or to ensure that boardroom spats don’t become a source of high entertainment for the public.

These days institutional shareholders have to be wary about seeming to be too close to a board. Indeed, so wary have they become of contravening some or other regulation that most have adopted an extremely passive role and barely even bother to participate at AGMs. When they vote, it’s inevitably in support of resolutions. Often, votes are ceded to the chairman.

Some institutional shareholders explain that they do not need to attend shareholder meetings because the senior executives keep them abreast of developments. However, this risks contravening the regulations, and there are indications that the process is not as reliable as it was. Critically, it does not allow for robust engagement on the membership of the board.

Perhaps the institutional shareholders are keeping their fingers crossed and hoping that apparent adherence to all the King recommendations really means everything is OK.

The dramas at African Bank, PPC and HCI come at an ideal time for the Institute of Directors (IOD). As it looks to draw up the King IV governance code, perhaps the IOD could consider more realistic ways of balancing stakeholders’ needs with the board’s obligation to direct the company.

Top 100 Companies should also be helping the poor

I REFER to last week’s Business Times and the supplement relating to the Top 100 Companies awards.

As usual, I enjoyed the content. However, as far as the top 100 companies are concerned, I was unhappy with the criteria used for finding the winners.

In a normal society, the criteria would be acceptable, but in one where there is immense poverty, one would have thought that, in addition to successful companies, one would measure the impact they have on broader society, especially the poor.

If one had to use only the success factor, one could include the Mafia, because it also makes a profit.

The company that would win the award hands down if this additional factor were taken into account would be EOH Holdings, which has done so much to empower broader society.

It is certainly heeding former finance minister Trevor Manuel’s call for a more equal society.

The next five years pose many challenges for companies, and quite a few of these firms will disappear.

On a positive note, I believe more companies will step up to the plate when they are incentivised to be more community conscious by the creation of a prize that rewards community benefits and sustainability. —

So much money wasted, and we still don’t have post

THE South African Post Office loses R2.1-billion to irregular expenditure, or, to put it plainly, theft, and now wants a bailout — but its bosses still spent R115-million on overseas travel, “Post office director lifts lid on ‘board rot’ ” (October 26).

All that cash gone, and we still have no post? — THE pattern that has emerged is that of two factions of comrades, both wanting control and not caring a hoot about their actions or those they represent, which, in the case of both factions, are the workers.

They don’t need to worry about jobs or cash. The unions and post office management are confident that the generous minister of finance will come to the party.

Well, it’s actually not his money but that of the overburdened taxpayer, who has had enough.

Management and the unions are responsible for the shambles. Let them find the means of funding the organisation.

This has been a big letdown, Parcels sent from Durban to destinations overseas are still sitting in Joburg months after posting. At the time I was told that staff were only adopting a go-slow.

In times of crisis, management should make sure that functions continue, even if it means doing menial work themselves. —

Thanks to BEE, we import things we once made

SOUTH Africa will never solve its employment problems as long as we have a minimum wage system and black economic empowerment.

Our balance of payments is poor because we are not competitive.

This week, in the port of Durban, there were two ships discharging imported cement and one ship discharging steel coils. These commodities used to be made here. —