According to a recent media report, the Minister of Tourism has allegedly threatened to dissolve the SA Tourism board over what has been described as an unlawful meeting during which it appears to have been resolved that the CEO of the organisation would be suspended following various allegations.
“The stability and proper functioning of a governing body is fundamental to good governance within any organisation,” says Parmi Natesan, CEO of the Institute of Directors in South Africa (IoDSA). Boards in general should not be put in a position where they are unable to act and fulfil their duties.
The article states that the board meeting in question was said to be unlawful or ultra vires, as only the chairperson of the board could convene a special board meeting in terms of the organisation’s board charter. However, the appointed chairperson had already stepped down from the board at the time.
“When a chairperson steps down, continuity mechanisms should exist,” says Natesan. “The guiding policies and processes should provide for someone to act in this key leadership role so that the functioning of the board can continue seamlessly. In fact, King IV specifically recommends that governing bodies should designate a lead independent director to lead in the absence of the chair, amongst other duties.”
While a board charter documents the role, responsibilities, membership requirements, and procedural conduct of the Board it cannot override the board’s statutory and fiduciary duties in terms of the law.
A governing body must still be able to exercise its responsibilities to act in the best interests of the organisation, even if the chairperson is unavailable or no longer serving in the position.
In this instance, the interpretation of the charter appears to be form over substance. One must consider the intention of the provision in the board charter – surely it was never intended that the board’s ability to function would collapse simply because the chairperson stepped down. Good governance requires that continuity mechanisms are in place so that the board can continue to carry out its duties effectively.
The news report also refers to the board’s decision to suspend the CEO.
In this regard, Natesan explains: “King IV is clear that the governing body should appoint the CEO and that the CEO should be accountable to the governing body. It naturally follows that the board may also, in its discretion, suspend or remove a CEO, provided this is carried out in line with fair labour practices.”
In addition, the article infers that the CEO had previously suspended the company secretary without the board’s support.
Natesan comments: “In terms of King IV, the governing body should have primary responsibility for the removal of the company secretary. The company secretary should have a direct line of accountability to the board, typically via the chairperson. Therefore, while the CEO is an employee of the organisation, it stands to reason that decisions around the suspension or removal of the company secretary should involve the board, not the CEO acting alone.”
Finally, on the reported ministerial threats to dissolve the board, Natesan cautions: “While ministers act as shareholder representatives for government, shareholders appoint boards to provide oversight and act in the organisation’s best interests. It is concerning if any boards feel that fulfilling their statutory duties could lead to their dissolution. Effective governance requires that boards be empowered and trusted to carry out their roles without fear.”