Dumisani F. Ntini | Governance & Strategy Practitioner
Having witnessed recent developments in public and private sector boards locally and abroad, one need not have undertaken governance studies to appreciate the importance of governing boards in influencing organisational profitability and success, as well as their impact on sustainability and business continuity.
Ample instances can be cited where firms experience stoppages in productivity, internal strife at executive and managerial levels and eventual collapse due to ineffective board compositions, enervated strategies and consequently compromised mandate implementation. A plethora of factors contribute to high-level governance inconsistencies, leading to uncoordinated efforts and misguided interests/actions relating to Agency Theory. A crucial factor in this regard is the much-needed – albeit regularly undermined – aspect of board inductions.
Widely accepted definitions of inductions label them as structured approaches of apprising newly appointed members of governing boards on pertinent and material information required to serve confidently in their roles. Definitions also entail the provision of support to these new appointees for them to gain an understanding of the organisation, its operational context, business environment and their responsibility to drive organisational success.
Board inductions are of the utmost importance. It is during this phase that board members (and in many cases, organisational executives) gain clear and concise comprehension of the organisation’s mission and purpose, which will guide service expectations and outcomes. They are necessary for informing appointees of their conceptual role of shaping organisational policy, codes of conduct, objectives and overall direction.
During inductions, board members are apprised of their duties of sub-committee formulation, adoption of resolutions, and their oversight of Chief Executive Officers and Internal Auditors (and depending on organisational structure, other executives but respecting the need for independence and avoidance of micromanagement). During inductions, appointees are enlightened on their responsibilities for dividend decision-making and the need for establishment and maintenance of effective controls.
Inductions allow new board members to appreciate the need to comply with governing documents, e.g. statutory legislation including the Companies Act and other regulatory instruments (for state-owned entities). Non-profits may also have pertinent legislation with a bearing on composition and performance of their boards, which must be communicated clearly. This is crucial in guiding directors as they outline governance frameworks of the organisations they serve. Always bearing in mind that the board is a constituency of willing and capable individuals with a legal, moral and fiduciary responsibility to govern an organisation, it is during inductions that their duty to act in good faith, with care, skill and diligence must be emphasised to avoid future mishaps.
Inductions must stress the need for ethical conduct for avoidance of corruption. A regime recommended by Professor Mervyn E. King is that of qualitative governance which entails adherence to intellectual honesty and the application of the board members’ minds in the best interests of the organisation for all matters within the board’s purview and jurisdiction.
Inductions must entail the questioning of interests and probing of capabilities. Granted, appointments may have been made at this point; however, inductions present an opportunity for a more thorough understanding of whether the members are passionate about organisational causes (regardless of independence) and if they envisage that their forthcoming duties will be fulfilling. Members must also be reminded of the fact that time will have to be devoted to the organisational cause and inductions give them an opportunity to reconsider and re-evaluate their own commitments vis-à-vis those of the organisation.
Team dynamics form a substantial proportion of the induction agenda and it is during this stage that the collective can assess the members’ ability to cooperate and build consensus as they govern the organisation. A thorough induction will outline, reveal and address any instances of intellectual naivete and ensure that directors are aware of the five corporate sins of greed, fear, sloth, pride and arrogance.
From a personal perspective, inductions are pivotal in affording all participants a chance to reflect on the value they present and the opportunities for each of them to make a difference both in and for the organisation. The members can assess the health of the organisation as inductions give them an idea of the status quo. They must be informed of the need to ensure adequate resources and to manage them appropriately. Any organisational limitations affecting their service as well as those having a bearing on the overall ‘character’ of the company should be outlined to the directors during this induction phase. It is from this standpoint that strategy can be formulated for organisation-wide implementation. The need for continuous evaluation – both self-evaluation by members and collective recollection – must be pointed out. Consistent board evaluation can highlight both orientation towards set purposes and vividly outline the trajectory of the firm.
Having considered these factors, it can be noted that organisations experiencing the problems we read about and see in the media fail due to having undermined this first, primary and crucial aspect of a comprehensive induction. Inductions are not merely the first ‘meet and greet’ for appointed board members. They are essentially the primary opportunity for them to clearly understand the pivotal task of being the ever-so-crucial link between stakeholders and the organisation. They can only appreciate, through a proper, thorough induction, the gravity of their duties of accounting to the public for the organisation’s very existence, offerings and fiscal responsibility.
Views and opinions expressed in this article are those of the author, Dumisani F. Ntini – Governance and Strategy Practitioner. Contact email@example.com.