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Can't stand the heat, get out of the boardroom!

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The economic crisis and the prolonged global downturn and uncertainty have placed immense stress on organisations which have added greater demands and pressures on boards. There has been a demand for increased regulation and legislation, especially with regard to governance, transparency, sustainability and accountability. Personal values and ethical aspirations of boards are implicit in good corporate governance. When we assess the financial crisis and the corporate scandals that have rocked our world in the past few decades, in retrospect, it appears that board members were fiscally irresponsible and negligent in their fiduciary duties. Ethics without the courage to stand up for and to act in line with one’s belief system, keeps corporate governance in the realm of theory and ideals rather than practice. The lack of potent courage that is required for assuring organisational integrity could have been contributory to corporate failures and the economic crisis. It is likely that some board members did not have the courage to intervene timeously so as to not be seen as being distrustful of the motives and activities of the management, their practices and internal controls.

 

The past cannot be redone, but we can learn from history to avert future catastrophes. Being a board member is itself a risk. Knowledge, qualifications and experience are important, but board members must also have the courage to act responsibly and timeously. If directors limit interventions to a culminating event, they miss multiple opportunities to say or do something before it is too late to avert a crisis such as with the Eskom infrastructure investment programme. Board members need to overcome their fear of speaking and standing up for what they know is right. They cannot afford to be timid. It is crucial to conquer fear, apathy and indifference to be an effective director. It is easier to rationalise instincts or guts into silence and inaction. A director must be willing to take on sacred cows and respectfully challenge fellow board members and management. Productive challenges to the status quo are called for without destroying goodwill and establishing a demoralising board dynamic. Creative conflict of tough-minded, but courteous interactions between members who say what they believe is good for effective boards.

It takes courage to ask insightful, stupid questions, especially in front of those who are fearful to do the same and who think you or themselves “should” know everything. If a member of the board asks questions for a good reason to expose simplicity and reasoning buried in complexities, it cannot be a dump question. Such courage would have been appreciated in exposing liabilities of the toxic mortgage-backed securities. Board members need to summon the courage to say they do not understand and to disagree even with the technical experts where needed. When boards stop asking questions, they stop learning and take things for granted. A board member needs to act on their knowledge, but also have the humility to doubt what they think they know for sure.

Since board members have to deal with greater ambiguity and more complexity, they need to be enthusiastic about their own learning. Lifelong development of skills and knowledge through formal and informal training and education are critical to boards keeping abreast of new technologies and changing market demands. Boards of directors need to have the courage to stay at school to acquire the knowledge necessary to effectively chart the course of the organisation and to create opportunities. The post-crisis business environment may not need a radical overhaul of corporate governance as much as courageous leadership. Good governance is not going to result through enacting more legislation, but from individuals overcoming their fears and acting ethically and with integrity in pursuit of something greater than their own self-interest.

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Dudu Msomi

CEO: Busara Leadership Partners
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