The trade-off between compliance and value in
Date
2011-03-30
Authors
Coetzee, Irma
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Abstract
This study examines the role of the board of directors of companies in
various industries in South Africa with regard to the future strategy of the
organisation. Specifically in the backdrop of an environment where there is
increased focus on the internal controls within organisations due to the
guidelines around effective corporate governance, the goal was to ascertain
whether the board still focuses on the future value of the organisation.
One of the propositions tested as part of this research states that the board is
in fact only focused on internal controls and does not provide sufficient input
to the strategic thinking process about the future direction of the organisation.
Semi-structured interviews were conducted with directors of companies in
order to establish the role that the board fulfils in that company and whether
there is a balance between creating value on the one hand and mere
compliance on the other. Content analysis was performed on the transcribed
interviews. Due to the fact that convenience sampling method was used,
there were more executive directors on the list than non-executive directors.
The findings were interesting and shed light on the actual role that the boards
are playing in large public companies in South Africa. An interesting finding
was the fact that there was such a large difference in the involvement of
executive directors as opposed to non-executive directors and that the
executive directors generally seemed to discount the value that the nonexecutive
directors contribute to board decisions, providing a topic for
interesting further research.
It was generally found that the propositions that formed the basis of this
research held true in the cases that were reviewed. In South Africa the
executive directors tend to act autonomously in the directing and controlling
of the companies in which they operate, with mere ratification from the full
board of directors and insufficient involvement from the non-executives in the
strategic thinking process.
The strategic scorecard that was developed by CIMA is a useful tool that
should be used by companies’ boards in order to ensure that they spend
sufficient time focusing on the strategy and the future direction of the
organisation. The scorecard covers all aspects of strategy at the appropriate
level of involvement that is required from the board to ensure that they
monitor and oversee the strategy development and implementation
processes effectively.
Description
MBA - WBS
Keywords
Boards of directors, Corporate governance