Exploring board characteristics and performance effectiveness in developing countries State-Owned Enterprises (SOEs)

Abstract

In the wake of various State-Owned Enterprises (SOEs) scandals involving the board of directors, the performance of these entities' boards came into question from multiple sources. There has been an increasing call for SOE reforms, especially in developing countries where they have been flooded with looting and plain right theft of resources meant to provide basic needs for the general citizens. This research aimed to explore and gain new insights and understanding of how the characteristics of boards of directors that are known to build effective boards can contribute to the performance effectiveness of these entities. The study aimed to understand how appointing independent directors contributes to SOE performance effectiveness. It further explores how the board composition and size impact the SOE performance effectiveness and how board skills of directors contribute to the SOE performance effectiveness. The research aimed to add to the limited literature discussion on board characteristics in the context of SOE in developing countries. Board characteristics such as independent directors, board composition and size, and board skills have been linked to company performance in the private sector. The depth of scholarly literature available discusses these characteristics from the perspective of other companies. Still, not much was said about SOE boards using these characteristics in the context of performance. The qualitative study explored how board characteristics and performance effectiveness can build effective SOE boards in developing countries. Fourteen semi-structured interviews were used to gather data with participants serving on commercial SOE boards in Namibia, a developing country. The data were analysed systematically using a thematic approach. The research findings revealed a deficiency in ethical leadership within State-Owned Enterprises (SOE) boards. Additionally, the study highlighted instances where directors exploit board fees for personal benefit without positively impacting SOE performance. Furthermore, it noted that board sizes follow legislation rather than a best practices framework. As a recommendation, the study proposes the formation of an independent nomination committee to ensure that individuals appointed to SOE boards possess a comprehensive understanding of governance best practices.