Implosion of SA Tourism board highlights need for proper due diligence before directors appointed

The move by the Tourism Minister, Patricia de Lille, to dismiss the board of South African Tourism has been well received in most quarters. Reasons for the board’s axing apparently centred on the Tottenham Hotspur sponsorship scandal, a spate of board resignations and allegations of sustained sexual harassment by board members. Minister De Lille in addition specifically cited concerns about the composition of the board and the skills, competence and qualifications of its members as reasons for her decision.

“The tourism minister puts her finger on an important issue that should be at the forefront when any board member is appointed. It’s vital that there is a clear understanding first of what skills the board needs, and then ensuring that the specific individuals appointed actually possess those skills,” says Vikeshni Vandayar, Executive: Governance and Corporate Services at the Institute of Directors in South Africa (IoDSA). “In addition, the due-diligence exercise must ascertain whether the prospective director is a fit and proper person to serve on the board—as the Zondo Commission showed us once and for all, an ethical approach is critical to a board’s ability to discharge its fiduciary duties.”

The IoDSA has always emphasised the need for nominations committees to undertake comprehensive due diligence of prospective board appointees—and for prospective appointees to do their own due diligence of the organisation and its bona fides. The latter should not be ignored because board members assume personal risks through association with an organisation, and so need to be sure that its governance procedures, financial management, and strategic aims and objectives are aligned with their own.

In its guidance paper on “Governing Body Member Due Diligence”, the IoDSA also raises the issue of board members appointed by stakeholders such as empowerment partners, unions, communities and so on. The challenge here is that these appointments are effectively made by a third party, and so there needs to be agreement that the board’s needs in terms of skills and personal qualities are taken into account.

Organisations need to be able to contest the appointment of a director by a stakeholder organisation in terms of the desired criteria, the IoDSA says. It also advocates the signing of a mutually binding non-disclosure agreement given that the due-diligence process necessarily involves the sharing of sensitive information.

“The members of a board or any other governing body have a vital governance role to play and the success of the organisation hinges on their ability to do so. Principle 7 of King IV stipulates that governing bodies should have ‘the appropriate balance of knowledge, skills, experience, diversity and independence’, and a rigorous process to ensure that members are chosen with this in mind,” Vandayar concludes.