Recent media reports regarding the precautionary suspension of the CEO of the Insurance Sector Education and Training Authority (INSETA) and the subsequent intervention by Higher Education and Training Minister Buti Manamela raise important questions about the role of boards in public entities and the principles of sound governance.
According to reports, the INSETA board placed the CEO on precautionary suspension following concerns relating to governance and operational matters. The Minister subsequently issued a directive raising concerns about the suspension process and reportedly instructed the board to reverse its decision.
Parmi Natesan, CEO of the Institute of Directors in South Africa (IoDSA), comments: “The governance concern is whether a duly constituted board is able to exercise independent judgement in relation to the accountability of the CEO.”
Natesan notes that one of the most fundamental principles of governance is that management should be accountable to the governing body.
“Boards are appointed precisely because they are expected to oversee management, exercise independent judgement and act in the best interests of the organisation. If concerns arise regarding the conduct or performance of a CEO, it is the board that has both the responsibility and, ordinarily, the authority to address those concerns.”
King V emphasises that the governing body should be accountable for the appointment of the CEO and that the CEO should report to the governing body. This reflects a widely accepted governance principle that accountability flows from management to the board and not the other way around.
“Where a board forms the view that a precautionary suspension is necessary to facilitate an investigation or protect the interests of the organisation, it should be able to exercise its judgement, subject to applicable law and due process,” says Natesan. “If boards are unable to take action in relation to CEOs without fear of ministerial override, their ability to fulfil their governance responsibilities becomes significantly weakened.”
Natesan says this matter also raises broader questions about the relationship between shareholders and boards within state entities.
“Government, as shareholder, has an important role in setting policy direction and ensuring accountability. However, good governance depends on a clear distinction between the role of the shareholder, the role of the board and the role of management. Once a board has been appointed, it should be entrusted to carry out its oversight responsibilities.”
She notes that governance frameworks generally rely on shareholders appointing competent boards and then holding those boards accountable for outcomes rather than intervening directly in matters relating to management.
“Directors are expected to apply their minds independently and exercise objective judgement. If boards are prevented from acting on matters involving CEOs, or if their decisions can routinely be substituted by external parties, it creates uncertainty regarding where accountability ultimately resides.”
Natesan adds that this issue extends beyond any single organisation.
“South Africa has spent many years strengthening governance within public institutions. A key lesson from that experience is that effective oversight depends on boards being empowered to discharge their responsibilities. Weakening board authority risks weakening accountability.”
She concludes: “Whether the board’s decision was ultimately correct or incorrect is a matter that should be determined through proper governance and legal processes. The broader principle remains that boards must be able to exercise their oversight role independently. Without that, the foundations of good governance are placed at risk.”