Critical Success Factors for a Board of Directors in South Africa
Date
2011-03-31
Authors
Coovadia, Zaheer
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Abstract
The purpose of the research was to determine the critical success factors that
are needed to ensure the optimal functioning of an organisation’s board of
directors. In the process, attributes of effective boards have been identified
with the view of improving their abilities to make corporate governance and
their organisations a success.
A literature review was completed in order to apply existing theory to the
research problem. From the literature review, it was found that the following
critical success factors exist: understanding the roles and functions of the
board, the role of the CEO and chairperson (duality versus role separation);
the composition of the board (proportion of executive, non-executive and
independent directors); the size of the board; relationship dynamics amongst
board members and board “process”; structured and effective board
meetings, management development, board diversity (educational, functional
and industry background, race and gender, length of service on the board)
and compensation.
The methodology for the research is then described. Qualitative research was
used with the research instrument being in-depth interviews. Twenty four
interviews were completed with top management and board members of
major South African companies within the communications, banking, auditing,
consulting, retail, IT, financial, technology and educational sectors. Interviews
were transcribed and content analysis performed on them to extract recurring
themes related to the questions asked. The results of the interviews are then
presented and interpreted.
Of the propositions formulated (which formed the basis of the research), the
following were proved:-
· Successful boards understand what their key roles and functions are.
ii
· Boards where the roles of CEO and Chairman are split function more
effectively.
· A majority of non-executive and independent directors on the board
ensures that the board functions more effectively.
· Smaller boards function more effectively.
· Constructive conflict amongst board members improves the
effectiveness of the board.
· Staging structured board meetings improves board effectiveness.
· In order for a board to be successful, a good relationship between the
board and management is needed.
· The degree of diversity (in terms of race, gender, functional
experience, industry experience, director experience and education) on
the board is positively associated with their successful functioning.
The research found no definitive link between the two propositions listed
below and board effectiveness:-
· Boards where members have served together for long periods of time
are less effective.
· High levels of incentives in compensation are an effective means of
ensuring superior board member performance.
The research also identified board appraisals as crucial to creating and
maintaining an effective board.
The modest contribution of the research has added to the existing knowledge
of critical success factors for corporate boards.
Description
MBA - WBS
Keywords
Boards of directors, Critical success factors