Board characteristics that influences effectiveness of the state-owned Companies

Abstract

State Owned Companies (SOC) have proven to be a vital component for economic growth and have also played a significant role globally to drive economic progression or resurrect collapsing economies. South Africa currently has an excess of 700 SOCs that contributes approximately 9.2% to the Gross Domestic Products, and these entities have been exposed to numerous challenges that range from recurring poor financial performances, high staff turnover at board level, incompetency, corruption and leadership conflicts mainly driven by poor governance structures. This research study focuses on board characteristics within the SOC that can optimise organisational effectiveness and performance. The study was quantitative in nature and was conducted on SOCs across various sectors and government departments. In determining the board characteristics, which represent an independent variable, the following attributes were chosen, gender, race, qualifications, age, experience, board committees, while the relevant outcome being organisational effective/performance was assessed used the EBITDA level, return on assets and audit opinion. The research paper raised two questions, whether board compositions are essential for SOCs success and what characteristics of a SOC board structure may influence the effectiveness of these organisations and ultimately, their performance? Three hypotheses were raised relating to availability of board structures and impact on performance, the impact of political appointees on board independence and whether diversity at board impacts company performance. The research confirmed the theory in that politically appointed directors have little impact on company performance, and that adequate board structure have weak relationship to company performance and that diversity at board level, depending on attribute, does have a positive impact on company performance.