The role of state-owned entity boards in exercising ongoing strategic oversight of a strategy implementation

Abstract

State-owned entities (SOEs) in South Africa have received unprecedented attention in recent years due to their persistent poor operational and financial performance, as well as their systematic and chronic corporate governance challenges. The function of SOE boards' strategic oversight has become more crucial in the wake of corporate scandals that have resulted in the collapse of large corporations and significant losses for shareholders. Thus, strategic oversight is delegated to an independent board to steer an organisation and limit managers' opportunistic behaviour as a corporate governance mechanism. A lack of board strategic oversight results in inadequate decision-making, impacting the entity's performance, especially during times of uncertainty. However, there is uncertainty and a lack of clarity on how boards effectively participate in an entity’s strategic oversight process. The aim of the study was to determine how SOE boards discharge their fiduciary responsibilities to effectively exercise ongoing strategic oversight of strategy implementation. Qualitative research methods were used to explore the role of board strategic oversight of the strategy implementation. Twelve semi-structured interviews were conducted with participants who had experience in board strategic oversight. The participants were past and present SOE board members (i.e., non-executive directors, executive directors (Chief Executive Officers), and executives (Company Secretariat)). The participants represented five state-owned entities sectors namely the Financial, Insurance, Broadcast, Aviation, and Energy. The data collected during the interviews were analysed using thematic analysis. The findings from the study demonstrate that there are internal and external factors enabling the board to effectively conduct strategic oversight over the strategy implementation, such as board strategy setting and performance, adequate governance committee, effective leadership, composition, corporate culture, decision-making information, stakeholder, and economic outlook. Furthermore, the study demonstrated inconsistencies in the board nomination process were identified, and in terms of skills and attributes the board needs to have functional and personal competencies for effective oversight. Moreover, lack of board oversight understanding, lack of capacity, and lack of decision-making information are barriers noted for directors, while lack of leadership and relational dynamics and noted for the board. Delay in obtaining Minister approval on strategic initiatives, incompetent executives to implement the strategy, and political interferences. More importantly, the study demonstrated that there are factors that enable effective board strategic oversight However, there are systematic issues such as inherent barriers and negative culture in SOE barriers that limit SOE boards from effectively discharging strategic oversight over the strategy implementation.