The fine line between "overboarded" and overburdened: Critical factors impacting the effectiveness of "busy directors" in South Africa

Abstract

Neither the King IV Report on Corporate Governance for South Africa (Institute of Directors South Africa, 2016), nor the Institute of Directors South Africa (IoDSA) have, as yet, made recommendations about the number of directorships deemed acceptable for non-executive directors. Nevertheless, around the world, the impact of “busy directors” on business performance and their effectiveness in fulfilling their fiduciary responsibilities is a subject of academic and business debate. Adding to a global focus on board effectiveness, South Africa faces the challenge of having a relatively small pool of competent non-executive directors (Natesan & Du Plessis, 2018a). Moreover, the influence of Broad-Based Black Economic Empowerment (B-BBEE) legislation creates additional demand for directors from historically disadvantaged groups, thereby further limiting the pool of qualified professionals. A research project conducted by Mpho McNamee as part of her MBA studies found that, in the South African context, the importance of experience – and by extension, networks – in the board selection process was highly regarded by the experts interviewed. However, companies may be overlooking the critical importance of capacity that, when compromised, has the potential to negatively impact the performance and functioning of boards and organisations. The issue of board culture was also identified as a critical factor. While limitations on “busy directors” have been imposed in regions such as Europe and North America, this whitepaper highlights how the particularities of the South African context may make similar restrictions unwarranted – at least for the time being – owing to the relative scarcity of certain skillsets and experiences within the current pool of potential directors. This whitepaper outlines a Director and Board Effectiveness Model framework to help sensitise directors, boards and companies to the considerations around “busy directors” in order to better understand the complex dynamics at play.