Seven governance priorities for SOE boards in 2020

Still, SOE’s have existed before us and will continue to exist beyond us. However, what will future generations inherit? It is true that forward- looking governance approaches and optimistic solutions have been lacking. Therefore, revitalizing the governance trajectory of South Africa’s SOE will require a refreshed revisiting of ethical and moral behaviors.

SOE’s are managed by people who in turn deliver services to other people. This shows that people- centrality is thus essential in the governance of SOE’s. It is always important to understand the expectations of the populate, including having the capacity to meet these expectations. The Constitution alludes to human dignity, integrity and transparency as core values of our society, adherence to these values should foremostly be portrayed by those in public leadership.

All public servants are expected to be custodians of these values, especially in their duty to deliver services to the public at the cost of the public. Unjustified cadre deployment and nepotism fundamentally infringes on the outcomes of these values.

For example, in instances when people without the correct qualification, experience, business-judgment
and interpersonal skills are placed in decision-making positions. Their inability to make reasonable decisions and deliver as expected is at the detriment of national building and collective societal progress.

Public interest should always be central in the exercise of executive authority since advancing self-interest with public resources is a practice that has for so long gone unquestioned due to the lack of consequence management mechanisms in the SOE’s.

Mazars’ recent engagements with SOE Boards has led to highlight the following seven priorities as imperative to transforming SOE governance:

1. Strategically prepare for optimizing operations and service delivery; scenario-planning for political, economic and social uncertainties that have an impact on the SOE functionality is paramount.
2. Professionalize the Board of Directors; the composition of the Board should reflect the diversity of thought and experts who are able to add independent and professional value to the long-term sustainability of the SOE.
3. Continuous improvement to Board Independence; the management of politically exposed individuals on the Board will minimize political influence on the strategic direction of the SOE’s and maximize board effectiveness. Each board member should have key performance indicators developed for them, in order to ensure they discharge their fiduciary duties with skill, care and diligence.
4. Embrace long-term value; human capital management, especially succession planning in managerial positions, should gain much needed focus.
5. Accelerate consequence management; implementing impartial and vigorous ethics management mechanisms that encourage and protect whistleblowing within SOE.
6. Performance management tools; public servants should be appraised for their overall performance in SOE’s. The inability to deliver on set objectives should not be rewarded.
7. SOE Boards should be consistent; evolving and refreshing should take place at least after five years. This will allow for reliable ‘diverse competencies, innovative thinking, complex problem-solving and stronger governance’ in the interest of the public. SOE Board of Directors should allocate sufficient time and effort in addressing factors that contribute to the sustainable long-term value creation, while mitigating significant technology, geopolitical and social challenges that persist.

Mazars continues to promote good governance and ethical leadership within SOE’s by providing world- class board support through board effectiveness evaluation and board strategy development. Conclusively, a question for the SOE Boards to consider is ‘amid ongoing uncertainty, is the board overseeing allocation of capital and other resources in a way that protects assets, optimizes operations and executes on long- term strategies for growth – both playing it safe and doubling down?

References

1. Steve Klemash, Rani Doyle, and Jamie C. Smith, EY Center for Board Matters. ‘Eight Priorities for Boards in 2020’. Harvard Law School Forum on Corporate Governance, 14 January 2020.
2. Debbie McCormack and Robert Lamm, Deloitte LLP. “The 2020 Boardroom Agenda’. Harvard Law School Forum on Corporate Governance, 14 January 2020. 20 January 2020.