Magnifying the role of the chairperson of the board

Your chance to hold companies ACCOUNTABLE:

Positioned as an arbiter of a progressive transformation movement within South Africa’s corporate landscape, Ujuh.co.za has launched a campaign to highlight the role played by the chairpersons of the boards in the life corporations. See top icon on ujuh.co.za titled Chairperson Corner.

This campaign kicks off with the magnifying of annual chairperson’s statements which represent a critical point of communication between corporations and the general public. We will on these pages post annual chairperson’s statements and where necessary offer our interpretation of their significance and meanings. We however post these statements with a view of getting you the affected member of the public to share with the general public your impressions. In our posting we will focus on unedited extracts which address themselves on public life. The fact that we are focusing on annual statements which come once after 12 months is perhaps an indication that something is wrong in domain of our chairpersons who ideally should be in constant communication with the public. This then may spark a rhythm, ongoing conversations in between the annual statements.

In theory, a chairperson of the board is supposed to be the most important person in the compass of a corporation and how it connects with its environment. We have however noted that on many occasions this position has been reduced to a ceremonial role, largely owing to sloppiness of the chairpersons themselves and/ or existence of powerful interest groups that overbear on this critical position.

It would seem many chairpersons only exist to cash their board fees and are nowhere to be seen when critical events surround corporations need to be tackled. Many come to the fore when it is too late which is not in keeping with the latest demands of good corporate governance as largely captured in the King III codes. In deed we draw a lot from the King codes which state that “Good governance is essentially about effective leadership. Leaders need to rise to these challenges if there is to be any chance of effective responses. Leaders need to define strategy, provide direction and establish the ethics and values that will influence and guide practices and behaviour with regard to sustainability performance”.

In these pages we focus on the chairperson only to hold the entire board accountable through leadership of one person. This is recognition of the fact that other layers of the corporation and the executive while required to uphold a moral code can be understandably constrained by commercial realities. We believe that it is the role of the chairperson in consultation with the board to hold executives who can be subsumed by commercial realities of their broader responsibilities to society. Further extracts from the King III codes are useful for our course:

“The board should play a prominent role in the strategy development process and should not be the mere recipient of a strategy proposed by the management. The board needs to balance its role of maintaining prudent control with the performance of the company”.

“The board should ensure that there is an appropriate balance of power and authority on the board. No one individual or block of individuals should be able to dominate the board’s decision-making and the board should comprise a balance of executive and non-executive directors, with a majority of non-executive directors”

“The board should elect a chairman who can provide the direction necessary for an effective board. The chairman should be appointed by the board on an annual basis”.

“The chairman of the board should be independent and free of conflicts of interest on appointment, failing which, the board should consider appointing a lead independent non-executive director.”

“The chairman’s capacity and capability to add value to the company should form part of his annual evaluation”.

“The chairman should manage conflicts of interest. It is not sufficient merely to table a register of interests. All internal and external legal requirements must be met”

“Core functions performed by the chairman should include the following:

  • setting the ethical tone for the board and the company
  • providing overall leadership to the board without limiting the principle of collective responsibility for board decisions, but at the same time being aware of individual responsibility of board members, unless specifically provided otherwise by legislation;
  • actively participating in the selection of board members (via a nomination committee), and overseeing a formal succession plan for the board, CEO and certain senior management appointments such as the chief financial officer

“The chairman should carefully consider the number of additional chairmanships that he holds in companies”

Watch this space!

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