Advisory and Shadow Boards: Ill-fitted solutions for Governance and Inclusion in South Africa

By Parmi Natesan, CEO of IoDSA

Advisory and shadow boards are increasingly being touted as innovative tools to improve diversity, bring fresh perspectives to decision-making, and even develop underrepresented talent for future governance roles. While they may seem appealing at face value, these informal structures are, in my opinion, misaligned with South Africa’s governance frameworks. 

An advisory board is typically composed of external experts or professionals who provide specialised guidance to the formal board or executive team. However, advisory boards operate purely in a consultative capacity and are not part of the formal decision-making structure. 

A shadow board, by contrast, is usually made up of internal employees, often from younger or underrepresented groups, designed to mirror the formal board. While shadow boards aim to provide fresh perspectives and a pipeline for future directors, they too have no decision-making authority or accountability. 

The term “board” has specific connotations in South African law and governance. A board is widely understood to mean the formally recognised group of individuals who bear legal director duties under the Companies Act or common law, are accountable for making business judgment calls on behalf of the company; and operate as the ultimate governing body within the company’s formal governance framework.  All of which advisory or shadow boards are not. 

The Governance Gap in Advisory and Shadow Boards 

1. Misalignment with the Companies Act 

The Companies Act, 71 of 2008, places explicit legal responsibilities on directors. These include acting in the best interests of the company (Section 76(3)(b)), exercising a duty of care, skill, and diligence (Section 76(3)(c)), as well as managing conflicts of interest (Section 75). 

Advisory and shadow board members do not carry these statutory obligations because they are not formally recognised as directors.  

2. Risk to Confidentiality 

Boards frequently deal with sensitive and confidential information critical to the organisation’s strategy and competitiveness. While advisory and shadow board members can sign confidentiality agreements, these are significantly weaker than the legal duty to keep company information confidential, as imposed on directors under the Companies Act.  Directors are bound by legal consequences for breaches of confidentiality (Section 76(2)(b)(ii)), whereas non-directors face less stringent enforcement. 

3. Dilution of Accountability 

King IV emphasises the importance of accountability and clearly defined roles in governance. The introduction of informal advisory or shadow boards risks diluting this accountability, as while these structures may provide input, they do not bear responsibility for decisions. The formal board remains fully liable under both the Companies Act and King IV.  There is also the risk of confusing decision-making structures in that parallel or overlapping advisory groups can blur the lines of authority and create governance inefficiencies. 

King IV Principle 1 reinforces the need for ethical and effective leadership, requiring that boards act with integrity and in alignment with clearly defined mandates. Informal structures without accountability or legal responsibilities undermine this principle by introducing ambiguity and potential conflicts in governance processes. 

4. Unrealistic Expectations of “Board Experience” 

A common justification for shadow boards is that they provide participants with “board experience.” While these structures may offer developmental exposure to strategic thinking and decision-making, they do not expose members to the full responsibilities and risks of directorship. Real board experience requires fulfilling legal and fiduciary duties, navigating conflicts of interest, regulatory compliance, and stakeholder engagement; making business judgment calls on behalf of the company; and being held accountable, including the potential for delinquency orders under Section 162 of the Companies Act. 

Advisory or shadow board members may gain insight into governance and contribute useful perspectives, but their participation in these structures is supportive at most; and does not qualify as formal board experience for professional director designations such as Chartered Director (SA). These roles are developmental stepping stones and should be seen as complementary rather than equivalent to meaningful governance exposure. 

Practical Considerations for Boards 

Rather than relying on these structures, boards should focus on strengthening formal governance frameworks and creating meaningful pathways for underrepresented groups. Key considerations include: 

• Reframing informal groupings - if organisations wish to gather input from younger employees or external specialists, they should avoid calling these structures a "board." Use terms like shadow panel, advisory forum, or consultative group, which accurately describe their advisory function without conflating them with the legal duties of a formal board.
  
  
• Strengthening formal governance structures by creating diverse board committees that operate within the legal frameworks of the Companies Act and King IV.
  
  
• Developing talent through structured programmes like governance training, mentorship, and professional development aligned with recognised director designations like Certified Director or Chartered Director (SA).
  
  
• Expanding the boardroom talent pool by looking beyond the usual candidates and sources, while transparently advertising board vacancies and adopting inclusive recruitment processes to source diverse candidates.