Interference in the appointment of boards of directors compromises corporate governance, as boards are the custodians of good governance.
The cadre deployment policy of the ruling African National Congress means the governance of South Africa’s State-owned entities (SoEs) will remain vulnerable and at risk, says corporate governance nonprofit association the Institute of Directors in Southern Africa facilitator of Director Programmes Dr Simo Lushaba.
President Cyril Ramaphosa recently testified before the Zondo Commission of Inquiry into State Capture, and acknowledged that “massive system failures” with board appointments had paved the way for SoE failures. At the same time, Ramaphosa defended cadre deployment.
According to King IVs sector supplement for SoEs, the composition of its board is a key factor driving the performance of an SoE.
Like the boards of all organisations, an SoE’s board must have the right balance of knowledge, skills, experience, diversity, and independence for it to discharge its governance role and responsibilities objectively and effectively. The deployment committee, which Ramaphosa described as overseeing board appointments to SoEs, should thus have been mandated to recommend people who were fit for purpose to be appointed to SoE boards, Lushaba says.
Further, some of the SoE board members now being questioned before the Zondo Commission about their alleged role in State capture, bypassed the oversight role of the deployment committee, he notes.
“The question then is what did the committee do about it. It clearly shows that it is a system that lacks accountability. If any individual can bypass a committee of this nature, and it does not act, it can only mean there is no respect for the committee or its mandate.”
South Africa was exposed to State capture because of the abuse of power. State entities failed because of the abuse of power, Lushaba says.
“Government seems to have created parallel structures outside of the established oversight government structures. If the deployment committee was a structure of government, as appointments are a responsibility of government, the deployment committee would account to Parliament. Why did the deployment committee operate outside the oversight of Parliament when it carried so much weight in providing names of candidates that are appointed to such key leadership roles in government and its entities?” he asks.
If the deployment committee is retained, it should be transparent and accountable. Its meetings should be public, similar to that of the Judicial Service Commission, which is responsible for the appointment of fit for purpose individuals in the judiciary.
The deployment committee should also be accountable for making appointments of individuals who display the necessary competencies and are fit for purpose to serve as directors, he added.
“Without transparency and accountability on board appointments, the current state of SoEs will remain the same or it may even become worse,” Lushaba says.