The Sunday Mail
USUALLY any literature by Robson Rhodes, a British-based corporate governance guru, makes interesting reading.
But it is his take on boards that is particularly instructive and insightful.
In essence, Rhodes believes corporate boards fall into seven categories: The effective board, the rubber stamp board, the talking shop board, the number crunchers, the dreamers, the adrenalin junkies and the semi-detached board.
Clearly, this provides an interesting reference point for local companies as they can easily identify the category they fall into.
It is therefore proper to try and interrogate the strength and weaknesses of each of these categories, including making an effort to assess the type of boards that characterise Zimbabwe today.
Effective board
An effective board has no weaknesses at all; its strength lie in a clear strategy, the vigorous implementation of the strategy, monitoring of the key performance drivers of the company, effective risk management, alliances with key stakeholders and the regular evaluation of board performance.
It is argued that these are the essential qualities of an effective board.
Companies that endeavour to be successful often push to possess these qualities.
The rubber stamp board
Such a board makes clear decisions, listens to in-house expertise and ensures that decisions are implemented. But its weakness is that it usually fails to consider alternatives. It is not rare that this board is often dominated by executives, rely on fed information, focuses on supporting evidence, does not listen to criticism and limits the role of the non-executive members.
The talking shop
Most boards that are considered as talking shop boards are known to consider all options. All opinions are given equal weight as well. Their main shortcoming, however, is that they lack direction from the chairman, there is no effective decision-making processes, failure to focus on critical issues and there is no evaluation of previous decisions.
The number crunchers
A board of number crunchers is often prudent in decision making, and short term needs for investors are considered. Crucially, such type of boards are too risk averse, they excessively focus on financial impact, they lack long term wider awareness, lack of diversity of board members and impact of social and environmental issues are ignored.
The dreamers board
It is strong on long-term focus and considers social and environmental implications. Board members usually have long-term strategies. However, they have insufficient current focus, they fail to identify or manage risks and are excessively optimistic. Does this describe your board? Do not be a dreamer but execute on strategy.
Adrenalin junkies
The adrenalin junkies board has clear decisions and their decisions are implemented. Even though they implement, this kind of board lurch from one crisis to another.
They excessively focus on short-term, they lack strategic direction, too much internal focus and they have a tendency to micro manage.
Semi-detached board
The last type of board is the semi-detached board. This board has strong focus on the external environment and is intellectually challenging.
The worst part of this board is it is out of touch with the company. There is a little attempt to implement decisions and it is very poor on monitoring and evaluation.
Companies should therefore aspire to have very effective boards because it is the board that gives direction to the executive. By extension, the executive’s duty is to effectively implement the vision of the board.
If that vision is half-baked, then the short and medium term prospects of the firm are in jeopardy.
In the local context, boards are critical in the corporate governance framework.
Corporate governance is surely broad and once it is understood and implemented, companies will be able to mitigate risk.
But independent non-executive directors have a role to ensure that boards are balanced.
They also eliminate conflict of interest between management and shareholders.
Administration of local companies can ideally improve if all these “hygiene” issues are attended to.
Over the years, many companies have been collapsing simply because boards were not exercising the oversight role that they are supposed to undertake.
There is therefore an urgent need for shareholders to assess their boards, recalibrate them if need be in order to ensure that the governance architecture of the companies is what it should be.
At a time when Government is reviewing its own internal systems and processes in order to ensure that is becomes effective, the private sector is also duty-bound to review its own internal processes as well.
It is time for Zimbabwe to redefine itself.
A template of the seven categories of boards is already available, all that is needed now is for companies to introspect.
Taurai Changwa is an articled accountant and ACCA finalist. He is the managing director of SAFIC Consultancy and writes in his personal capacity. Changwa can be reached at [email protected], Facebook page SAFIC Consultancy, and WhatsApp number 0772374784.
