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News & Press: IoDSA in the Press

Molefe’s reappointment underlines an imperative for transparency: IoDSA

17 May 2017  
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The public outcry against the decision taken by the Eskom Board and Public Enterprises Minister Lynne Brown to reinstate Brian Molefe as CEO, demonstrates how important transparency is to good corporate governance. Parmi Natesan, Executive, Centre for Corporate Governance, Institute of Directors in Southern Africa (IoDSA) says that a lack of transparency casts doubts on the good faith of an organisation’s leadership —and raises questions about the long-term sustainability of the organisation.

 

“There have been differing public statements about this issue, and each one of them raises important questions about a key institution that is largely funded by public money and provides a service that is vital to the economy,” says Ms Natesan. “If unresolved, these questions could materially affect an organisation’s credibility and legitimacy with its stakeholders.”

 

When Mr Molefe’s bona fides were queried in the Public Protector’s State of Capture report in 2016, he stepped down very publicly, citing the “interests of good corporate governance”. There has however, been a failure to share what has changed since then to have convinced him and the board that his reappointment would now serve good corporate governance.

 

It has emerged that Mr Molefe was entitled to receive a very large gratuity in line with “early retirement”, even though he had stepped down under something of a cloud. “It is assumed that the board had a rational reason for accepting his request for early retirement, and that it was in line with company policy, but in the absence of any explanation, this action would seem to confirm the public perception that Mr Molefe is an individual who enjoys extraordinary rights.” Ms Natesan argues. “Accountability and transparency are even more vital when public funds are in question and the national interest adversely impacted.”

 

The same lack of transparency is evident now in the decision to reinstate Mr Molefe as CEO, she continues. If we are to take it that the board has reversed its earlier decision to accept Mr Molefe’s stepping down, which it is clearly entitled to do, the grounds for this should be articulated.

 

State-owned companies have a particularly strong need for transparency because the lines of accountability between board, shareholders and executives are somewhat less defined than in the private sector. The Minister, as representative of the shareholder, has a far greater say over executive appointments than the board, but as the King IV Report on Corporate Governance makes clear, good practice requires that the appointment of the CEO of a SOC should be a robust and transparent process that involves the the board to the greatest extent possible, even if the Minister representing government has the right to make the final appointment”.

 

“Without any explanation, the reasonable person might well conclude that there has been undue outside interference, as many media reports—and the Public Protector’s report— suggest,” Ms Natesan concludes. “The CEO is critical to the success of any organisation; and it is imperative that a CEO has the full support and trust of the board. It is difficult to see how Mr Molefe can deliver on his mandate with the clouds of suspicion gathering. Both the board and the Minister have an obligation to act in the organisation’s best interest. That also means they should offer the nation full accountability and transparency and disclosure on this reinstatement.”

 


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