SIBONGILE VILAKAZI | The art of choosing board members to safeguard the organisation

Shareholders have the ultimate responsibility to choose the right individuals to steward and oversee the organisation. It is in their interest to ensure that the organisation is in the hands of upright, well-meaning people who will, in turn, ensure that it is well run and thriving.

One bad apple on a board can badly influence the board dynamic, and shareholders can end up with egg on their faces. Shareholders must act in good faith and appoint members for a proper purpose. They must apply reasonable, informed processes to balance the relevant skills, governance stability, accountability, independence and integrity.

This was apparent in the decision by higher education minister Buti Manamela to place the National Student Financial Aid Scheme (NSFAS) under administration after reports of a leadership crisis on the board, governance failures, poor financial controls, disputes over the appointment of the CEO and board resignations.

Manamela termed the decision “temporary but necessary”. The minister has egg on his face because though he inherited the board from his predecessor, he had a responsibility to intervene immediately when he took over in July last year as there were already signs of instability brewing by then.

This is especially so because NSFAS has been unstable for a while. This is the third time since 2018 that the scheme has been placed under administration. The decision is beginning to look more like a habit than a “temporary but necessary” intervention, as the minister would have us believe.

On the other hand, Business Leadership South Africa — a business leadership organisation that represents the interests of big business — announced the end of the previous board term and the appointment of a new board last month. The new board will be chaired by Discovery Group founder and CEO Adrian Gore, and comprises both continuity directors and new directors representing major companies such as the JSE, Nedbank Group, Naspers and Absa.

At face value, the board reflects not only the interests of the big business that the organisation represents but also stability, gender and racial diversity and governance capability. The individual names carry weight because of the visible roles they hold in business and the accomplishments with which they are associated.

While prestigious boards are not immune from governance failures, visible reputational capital often creates a stronger incentive for accountability. The individual directors have reputations to protect. This should be true for all boards because, aside from fiduciary duties to honour, board members also have personal reputations at stake.

Being part of a board that is dissolved because of maladministration, infighting and interference in executive appointments does not bode well for individual reputations.

Importantly, shareholder intentions must be clear upfront. In a climate such as that at NSFAS — where reports indicate a basic collapse in both governance and operations — one wonders whether the collapse was accidental or designed.

Consider, for example, reports of maladministration: the misallocation of funds to the tune of billions flagged in investigations, poor verification processes, exploitation in accommodation payments with landlords overcharging the scheme and ghost students being paid. These begin to sound as if the NSFAS was being looted rather than merely poorly governed.

The destruction appears systematic and leaves one wondering whether board members should be allowed to resign without accounting for these issues. Boards do not merely oversee organisations. They shape governance culture and institutional legitimacy.

One board member who resigned observed that the organisation’s challenges included the need for organisational redesign, stronger executive capacity and improved governance systems. This suggests the organisation has been hollowed out and must be rebuilt from scratch.

Given that the minister did not have to dissolve the board after the resignations — because section 66(11) of the Companies Act provides that “any failure by a company at any time to have the minimum number of directors required by the act or the company’s memorandum of incorporation does not limit or negate the authority of the board or invalidate anything done by the board or the company” — one wonders why these board members are leaving without accounting for the issues raised in the forensic reports, because dissolution was not the only available intervention.

What this highlights is that appointing board members is like painting: the shareholder must be deliberate about the composition. The final picture depends on selecting the right mix of colours and textures — skills, independence, integrity and continuity — that blend into a stable, capable board able to steward the organisation as intended.

Shareholders must be clear about the job to be done and appoint, with care, a group of board members who collectively bring out the best in each other and the organisation.

• Dr Vilakazi is an academic and organisational development practitioner whose work focuses on how governance and power are exercised in institutions, particularly where they are misunderstood and misapplied.