The perceived effectiveness of directors of multiple boards in South Africa

Abstract

This study analyses the perceived effectiveness of directors who sit on multiple boards in South Africa. Recent guidelines and reforms to South AfricaÕs corporate governance architecture are outlined in detail at the outset of this study. They provide the context for the subsequent overview of the competing scholarly perspectives on the benefits (e.g. experience) and disadvantages (e.g. reduced capacity) of including so-called Ôbusy directorsÕ on boards, especially as they relate to the distinct political, social and business environment of South Africa. Through a qualitative approach based on a series of detailed, semi-structured interviews with representatives of three key groupings Ð busy directors, company secretaries and board governance experts Ð this study then probes a number of key factors that may diminish or enhance director effectiveness and impact board recruitment decisions. Particular attention is paid to issues of capacity, experience, networks and board culture. Complemented by a comprehensive review of relevant literature, the study reveals a complex picture of the busy director phenomenon in South Africa. The findings give heavy prominence to the value of ÔexperienceÕ in board director selection, so much so that firms often overlook the negative impact on capacity of directors stretched across multiple boards. Although limitations on busy directors have been imposed in other regions such as Europe and North America, this study finds that the particularities of the South African context may make similar restrictions unwarranted Ð at least for the time being Ð owing to the relative scarcity of certain skillsets and experiences within the current pool of potential board directors. A ÔDirector and Board Effectiveness ModelÕ, devised by the researcher based on the research findings, is presented in the final section of this study to help sensitise directors, boards and firms on the need to better understand the complex dynamics around busy directors.