News & Press: IoDSA in the Press

Eskom CEO: Board must put safeguards in place

Tuesday, 30 July 2019   (1 Comments)
Share |

The appointment of Eskom Chair, Jabu Mabuza, as interim CEO has provoked many questions, particularly from a governance point of view. While it is true that governance best practice is to keep the positions of CEO and Chair separate, there could be some justification for the move—provided that the right safeguards are put in place, says Parmi Natesan, CEO of the Institute of Directors in Southern Africa, the custodians of the King Reports on Corporate Governance.

Principle 10 of King IV states: The governing body should ensure that the appointment of, and delegation to, management contribute to role clarity and the effective exercise of authority and responsibilities.

“King is clear that the roles of the CEO and Chair are quite distinct, and that good governance requires them to be kept rigorously separate. The Chair leads the Board in exercising oversight over management, and should be independent, while the CEO leads the management team. The CEO and his or her team are accountable to the board, and this separation of powers is vital to ensure the necessary checks and balances are in place,” she says.

“However, King IV also makes it clear that governance is not a matter of blind compliance either—the board must exercise its judgement to come up with solutions that are in the best interests of the organisation, and will lead to a stated and desired outcome.”

Ms Natesan goes on to say that while governing bodies need to have the freedom to consider what would be best for the organisation, they must also take care to communicate their reasoning to stakeholders—transparency is critical in demonstrating that the board has exercised its judgement.

In the circumstances in which Eskom finds itself, appointing the Chair as CEO as an interim measure, with the purpose of creating a stable transition period until a new CEO is appointed, may be in the best interests of the organisation. However, this is not an ideal situation, clearly, and we urge that the following two issues are properly addressed.

First, in order to maintain accountability while Mr Mabusa holds both roles, there should be clear steps taken to ensure that the lead independent director plays an active role where necessary.

Second, it must ensure that the process of appointing a new CEO is transparent and, critically, that it is concluded within the short-term period as stipulated. To have to extend this temporary arrangement would not be ideal from a governance perspective.

A final point to be made is that succession planning for key management roles needs to be made a top priority. Ideally, somebody within the organisation should had been groomed to assume the CEO role, even temporarily in an emergency such as this.

“The way this three-month period is handled will show whether the individuals in power are acting decisively in the best interests of the organisation,” she concludes.

Comments...

Mlamli Booi says...
Posted Wednesday, 07 August 2019
It is a bad idea to have a Chairman acting as a CEO. Its not good for the executive team. Its not good for governance. It displays lack of trust on the capability of executive management to even play an acting role. In fact all executive managers should just resign .