KING IV AND THE DIRECTOR

The Chair

A recent conversation with two “key” board players raised a question in my mind on what transformational role Board members should play in Corporate SA. I call them “key role players” because one is a Company Secretary of a highly successful SOC. and the other a former Board Chairperson of a highly reputable SOC and currently chairing and sitting on a few corporate boards. The question was raised for the following reasons: The company secretary duly informed me that the board chair (of which she is company secretary) told her in no uncertain terms that she must only use “reputable” (read “white managed or owned institutions”) for all board training and or board required services. On the other hand, the Chair I referred to as the other “key” player advised me that the “white-owned” company on whose board he sits has a host of white service providers to service them, effectively excluding any hope that professionals of other races could service the said company.

Personally, I have no qualms with different races using “one of their own” to do business with, as long as this is based on competence and expertise. I do have a problem, however, where the only reason is prejudice and “job reservation”. The latter is mostly the case in South Africa for obvious reasons outside the scope of this paper. I believe that anyone should do business with anyone they believe will deliver on their task per their requirements.

Having said that, do  board members (particularly black board members) in corporate SA have a moral obligation to challenge the business status-quo particularly regarding the provision of outsourced services? How do you feel as a black board member surrounded by a white board of directors, receiving reports, opinions etc. from white professionals only, under your watch? What does that say about your appointment to the position? Should it be different if it is 100% black board of directors of an SOC or public entity? What do you do in a situation like that?

The Code

I often ask myself if people are aware that expertise comes after exposure and that there are many experts (who have had substantial exposure) in the fields of corporate management, governance, assurance, accounting, tax and business consulting in general from other races. It is a mistake to think that by remaining quiet under these circumstances that you are helping South Africa (no you are merely enforcing the status quo).

Racial prejudice in especially the professional services will remain if we continue to look the other way. The unfortunate outcome is that you will also be leaving this legacy to your children and perhaps even your grandchildren. The King IV Code regards as one of its foundations a concept called “inclusive capitalism”. This concept refers to the fact that when a business has a positive impact on society and the environment, this results in the improvement of the quality of life of society, which in turn results in positive returns for those companies. There won’t be an improvement in the quality of life of many SA citizens if the income gap continues to grow.

The Closing

It is not sustainable to exclude black professionals from the mainstream economy and to merely consider them as employees for the big corporates (for BBBEE compliance purposes). Corporate SA has a moral (and therefore ethical)  responsibility to ensure that all companies have equal opportunities. Let each company/man live/die by their own incompetence or lack of skill, but not through prejudice. We also cannot leave this responsibility to the state alone, the state is playing its part.

The long-term horizon planning as envisaged by King IV should become a key consideration regarding the appointment of service providers. Board members have a moral obligation to transform the SA economy and to put their foot down in ensuring true empowerment and improvement of all stakeholder relations whether within or without their immediate environment. Black professionals do not need empowerment, they need opportunity! Corporate SA, as beneficiary of the environment must come to the party.

Ronny Mkhwanazi is a Corporate Governance, Corporate and International Trade Law expert.