Directors must adopt the principle of continuous education
27 September 2017
By Parmi Natesan and Dr Prieur du Plessis
Once they know what their duties are, directors have an obligation to see that they have the right skills to discharge them ̶ and that those skills remain current.
The continuing Gupta Leaks saga is a pressure test for our institutions, not to mention our private morality. One issue that particularly affects directors is the growing public anger over the complicity that some organisations have shown towards alleged state capture. Even more interesting, there are calls for boards more generally to show ethical leadership now more than ever.
It is a complex issue with many ramifications for sure, but the point we want to make here is that the director’s job continues to grow in complexity as its importance becomes more widely acknowledged. We also need to recognise that the range of issues directors should understand has broadened dramatically, and now includes fraud and financial scandals, changing regulations, shareholder and stakeholder activism, natural disasters, cyberthreats, reputational risks and, as we now see, social morality.
While Gupta Leaks is highlighting the expectation that boards need to demonstrate ethical leadership even at the cost of losing business, other related developments are driving home the link between board performance and organisational performance. For example, in a press release entitled “Strengthening the case for professional directors”, the Institute for Directors in Southern Africa (IoDSA) noted that the parliamentary enquiry into the SABC suggested that one cause of the poor performance of the public broadcaster was “a board that did not possess the right mix of knowledge, skills and experience”.
Similar points about the SAA board were made by the then Minister of Finance, Pravin Gordhan, in 2016. He was quoted by Biznews as linking the quality of the board and executive team to the likelihood of the airline receiving further guarantees from the National Treasury.
In short, directors need an eclectic mix of skills to rise to the challenge of leading organisations in these troubled times.
As Bob Garratt, author of The fish rots from the head, wrote: “An organisation’s success or failure depends on the performance of the board, yet the majority of directors have no special training for their role and are unsure about quite what it entails. As a result, many do not take their responsibilities and accountabilities as seriously as they should.”
We need to add here that in today’s fast-paced world, achieving the right skills as a director is not a target but a journey: business models, socio-economic models, political models ̶ sometimes it seems everything – are changing and old certainties seem to be in the process of continual redefinition. Directors, who play such a critical role in organisations and, indirectly, the fabric of public life, are least able to feel they have achieved the right skills mix. Like lawyers, doctors and other professionals, continuous professional education is a necessity for them.
The notion of directorship is currently being redefined in line with these realities, but it must be acknowledged that the change is not complete. Many directors were appointed, and continue to be appointed, on the strength of their past record in business or presumed connections ̶ and some find themselves quite unable to cope with the ever-changing realities of a connected, highly politicised world in which the very mission of business is radically changing.
But perceptions are shifting. The recent IoDSA Director Sentiment Survey Report showed that 61 per cent of respondents felt positive that continuous professional development makes a positive impact on board performance (20 per cent were “very positive”). Only 15 per cent were “negative”. Hopefully, subsequent Reports will show the proportion of “positives” rising as the links between skilled directors and high-performing boards, and between high-performing boards and high-performing organisations, become clearer.
King IV is clear that boards must ensure that directors are provided with the opportunity to continuously enhance their skills. “Education and training on a governance basis now is not a luxury; it is an essential,” said Prof Richard Leblanc, governance guru and author.
The IoDSA believes that there are now strong arguments in favour of professionalising directorship. Accordingly, it launched a professional Chartered Director (SA) designation in 2016, and relaunched Certified Director in 2017, with a clear framework of skills that directors need to attain, along with a continuous professional development programme in order to maintain the designations.
Whatever route directors choose to obtain and keep current their skills, one thing is certain: they must do it.
Parmi Natesan and Dr Prieur du Plessis are Executive Director: Centre for Corporate Governance and Chairman of the Institute of Directors (IoDSA) respectively.
Better Directors. Better Boards. Better Business.