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Capable directors could have a considerable influence on the prosperity of shareholders and other stakeholders, say a team of researchers from the Department of Business Management at Stellenbosch University.
THE Companies Act stipulates that directors could be held personally accountable should they not fulfil their duties. Enhanced focus is therefore placed on director development to enhance governance practices in the constantly changing corporate environment.
A growing body of academic literature suggests a directorate that comprises well developed, diverse individuals could present a competitive advantage. As the strategic contributions of directors are associated with organisational success, capable directors could have a considerable influence on the prosperity of shareholders and other stakeholders.
In line with institutes of directors in other countries, the King IV Report offers several guidelines regarding the orientation of newly appointed directors and the training and continuous development of all directors. Governing bodies are encouraged to offer development initiatives to directors at different stages of their career paths. Mentoring is furthermore highlighted as a possible approach to share wisdom that has been accumulated over several years with mentees.
We investigated the board development initiatives of the JSE Top 40 companies over the period 2011 to 2015 to gain insight in their development practices. Pertinent attention was given to disclosure on director development initiatives in these companies’ integrated reports.
In addition, a number of interviews were conducted with directors who served on the boards of selected JSE Top 40 companies in 2015 to gauge their views on director development.
Most of the considered companies mainly mentioned director development initiatives in 2011, without providing details. Although they gradually disclosed more information over the research period, 14% of the companies did not disclose any information on director development.
It was evident from the research that many of the JSE Top 40 companies spend considerable time and resources in developing their directors.
Development initiatives at the considered companies were mostly aimed at new board members, while less attention was given to the continuous development of long-serving directors. Only about one third of companies disclosed that directors were regularly briefed on relevant matters and changes in the company’s operating environment.
Interviewees confirmed the findings of the content analyses. Despite a King recommendation that directors should be regularly briefed, one interviewee remarked that lengthy reports are often “dumped” on them rather than highlighting relevant changes.
Very limited attention was given to mentoring programmes in the companies’ integrated reports. Due to the informal nature of mentoring, it is possible that some of the considered companies had mentoring programmes, but did not disclose it in their integrated reports.
Interviewees were of the opinion that mentorship could be an appropriate mechanism to develop diverse board candidates. They remarked that even though formal mentoring programmes are not necessarily in place, executives typically receive informal mentoring at different stages in their careers.
One interviewee remarked that formal mentorship becomes more important when a company requires “new and young” board members. Directors also cautioned against cultivating group thinking among mentees. These results concur with academic literature.
Some seasoned directors were of the opinion that they have already spent sufficient time and resources to develop their skills and competencies. As such, they did not regard further training and development as essential. Board chairs and chief executive officers should encourage all directors to participate in continuous learning activities, irrespective of their level of development.
Facilitators should highlight the potential value-adding benefits of continuous learning during development sessions. Attention should also be given to individual development needs to customise programmes. If directors are required to provide feedback on development initiatives, the effectiveness of these could be optimised.
Experienced directors should be encouraged to share their knowledge with less experienced candidates and newly appointed board members. A company might otherwise lose considerable know-how when an experienced director retires. Care should, however, be taken not to stifle divergent thinking through mentorship.
It is important to find the right balance between developing inexperienced directors by exposing them to senior directors’ views and allowing them the opportunity to share their alternative viewpoints.
- Dr Nadia Mans-Kemp and Prof Suzette Viviers are academics in the Department of Business Management at Stellenbosch University. Ms Blanche-Mari Staal and Mr Jurie van Schalkwyk were postgraduate students in the same department in 2016.
