When a Board Pulls in Two Directions
Updated: Mar 23, 2019
More than a year ago, in October 2017, president Jacob Zuma announced a permanent SABC board to replace the interim structure that had been in place.
The interim board had come into being after a complete collapse in governance dating from the time the government saw fit to put Ellen Tshabalala and Ben Ngubane in charge of the broadcaster. As the governance crisis rapidly mutated into an operational fiasco, the SABC found itself paralysed from within as the Hlaudi Motsoeneng effect eroded all stability in the institution.
This week, the board yet again collapsed as four more members resigned. The board already had vacancies arising from the loss of members who were confirmed for a five-year period in October 2017 and promptly left within months.
The Broadcasting Act requires that 12 non-executive directors and three executive
directors serve as the guardians of the organisation. Right now, the board is left with just four non-executive directors and three executives.
The board is numerically inquorate.
Beyond that, there is a need to distinguish between a numerically quorate board and a functionally quorate one. To understand the distinction , it is important to understand what it is that board members sign up for.
For a long time, South African corporate governance had the 1973 version of the Companies Act as its guiding light. In 2010, the new Companies Act of 2008 passed into law. This act correctly highlights the roles of directors of companies. Section 76, in particular, confirms their fiduciary duties.
These include the need to act in good faith, avoid conflicts and always seek to promote the interests of the company.
More importantly, fiduciary duties and obligations are non-negotiable and cannot be waived randomly. This is because shareholders and society entrust directors with wide-ranging powers to take decisions that have farreaching implications.
For large entities and state enterprises in particular, their social reach tends to be pervasive as they are employers, producers and taxpayers all at once. To ensure their sustainability, we need to have the best directors in charge of affairs.
A board of directors must always have a number of specialist skills with a focus on financial matters. Whether we like it or not, when the livelihoods of employees, suppliers and other stakeholders depend on an organisation’s ability to remain financially viable, the voices of the financially savvy members will be amplified more than others. A board therefore doesn’t have to be just numerically quorate but must also be technically balanced to be effective.
Interestingly, the question of technically quorate structures matters more at the onboarding stage than during an exodus such as the SABC board is experiencing.
For the SABC and other entities, however, the onboarding process seems to be a delicate trade-off between skills and affiliation. In the October 2017 announcement, for example, the board chair was the head of the politically affiliated Bongi Ngema-Zuma Foundation. The former deputy chair — Febe Potgieter-Gqubule — is an office-bearer of the ANC. Another member who resigned this week — Krish Naidoo — is the official legal adviser to Luthuli House. John Matisonn — an other resignation from this week — is curiously referred to as the DA nominee to the board.
And that’s just a sample.
It is, of course, possible that politically affiliated board members are the most suitable candidates for appointment. What remains less resolved is what happens when the fiduciary duties clash with the political stance. In the SABC case, the resignation letter of Naidoo indicates the board includes individuals who are unable to “understand the difference between corporate independence, accountability and political interference ”.
Matisonn ’s letter makes it clear that the board is gravitating away from the political process and towards fiduciary duties. His recommendation for the board to change course and suspend retrenchments, for example, lays bare the tensions between the fiduciary question and the political question. The minister of communications — who has cut off all communication with the board — has no fiduciary duty as she is not a director. Her political position is simply that, but it is difficult to understand how directors whose primary duty is fiduciary can seek to champion the political mandate.
What we had at the SABC was a board divided into two quorums, one made up of the politically inclined and the other made up of those committed primarily to their fiduciary duty. For as long as the fiduciary champions remain, we should be grateful.
But as we have learnt, this will not last long
This article first appeared in The Business Times, Sunday Times on Sunday, 9 December 2018.