Directors know when to quit!

03 May, 2015 - 00:05 0 Views
Directors know when to quit! It is important to know when to quit

The Sunday Mail

It is important to know when to quit

It is important to know when to quit

Proctor Nyemba

Anything that has a beginning comes to an end. It is important to prepare for your exit. When you get appointed as a board member in any company, there comes a time when you have to exit.

Below are red flags that your term could come to an end, and when it does, how to exit honourably.

Term limits

If your term of office has expired, it is time to let go. It is difficult to add something new if you overstay. Leave the board when your term has come to an end. For example, if you are called to serve two, three-year terms and they expire, don’t hang on. Quit honourably.

Time constraints

If you are finding it too difficult to make it to board meetings as and when they are called, it is high time to call it quits. Most of the time when board meetings are called do they conflict with your other obligations?

If yes, consider resigning.

Your record will not only become bad in terms of professional attention to the issues but it will also indicate that you are a poor time manager and planner. When you accept appointment to the board and you only attend one meeting out of four, maybe you have so many other commitments, this way you are not adding any value to the company.

When you are a board member, there are certain expectations that naturally come with the job.

However, some people just feel proud to say I am a board member of company X even when they are not adding any value.

Put simply, if you are a board member and you do not have time to attend the meetings, the best way is to tender your resignation to the person who appointed you.

Do not deny the company the opportunity to have another capable member serving the board.

Unhappy?

The board of directors is responsible for recruiting and supervising the managing director. Once you recruit the MD, you then provide oversight and risk management of the company through the managing director.

This means, the managing director MUST be fully accountable to the board.

Many times, after joining as a board member you may find the MD has difficulty in steering the company. It may be she/he was not competitively recruited and is too much “overwhelming” in terms of influencing the board.

If you generally think the direction the managing director is taking is not good, you will have to voice this concern to the board but if they are not listening, it is a red flag.

In some instances, the complaints of a new board member are not taken seriously. Corporate politics might be at play. The managing director might know which board members to influence and how i.e. what are their weaknesses or pain points?

Some MDs/CEOs even go to great lengths to buy the allegiance of some of the board members. The said board member will naturally be corrupted. It then becomes difficult for the board members to question the MD.

It will mean the board has lost the ability to prevail over an employee that they are supposed to supervise.

Ownership interference

Owners of some businesses usually interfere with the day-to-day running of the enterprise. This is usually a big problem in the private sector where you find the owner is the board chair, managing director, finance manager and his or her decision is final.

Usually, the appointment of the board might be pushed by external partners who might be interested in the good governance of the organisation. But where the owner is the chairman of the board, then there is limited or no separation of powers.

People must be wary of such companies that set up window-dressing boards.

Some boards are appointed merely to project the image of good corporate governance to outsiders.

Theoretically, structures such as internal audits, external audits, board of directors and documented policies and procedures show impressions of good governance.

If structures such as these exist in name only, then you should know that you are unlikely to add any value if you join them.

The best thing to do is resign.

How do you resign?

If some of those above red flags exit, you consider resigning. It will be the best decision you can make as a professional.

In addition, you must resign when you are not happy with the direction the company is taking.

Take time to help people see the business clearly. Also, try to articulate this to the person who appointed you to the board.

If everything else fails, resign. However, before you resign, manage relationships.

Before you even write a letter, talk to the board chair or the person who appointed you so that you are not leaving in a bad taste. As a professional, you must be concerned with managing the relationship.

You want to resign in a professional way to ensure no one is hurt in the process, especially the shareholders.

For some public companies, if a key member of the board exits, it could cause a run on the company in terms of loss of value in the share price since valuations depend a lot on future value, which is a result of good governance and risk management.

 

Proctor Nyemba is the founder of Proctor & Associates are registered forensic auditors. This article is in support of the National Code on Cooperate Governance which was launched few weeks ago and was written for The Sunday Mail Business.

Share This:

Survey


We value your opinion! Take a moment to complete our survey

This will close in 20 seconds