By Wendy Spalding
As the number of CEO and CFO resignations continues to rise in South Africa’s business landscape, primarily due to the challenging economic environment, a new issue is emerging in boardrooms.
The breakdown of the relationship between Executive Board members and the Independent Board can erode trust and is cited as a leading reason why several CEOs are opting to step down from their positions, according to Wendy Spalding, Director at Tuesday Consulting, an Executive Search firm.
Succession planning is a critical responsibility of the Board. Selecting a new CEO is one of the most significant decisions a Board will make, and the choice between internal and external candidates can be challenging.
Seeking guidance from an Executive Search Firm with a proven track record can greatly enhance the process of finding the right leader.
Firms such as Tuesday Consulting, conduct thorough assessments, considering both internal and external candidates, and utilise industry insights to evaluate a candidate's potential and fit for the organisation, enabling the Board to make informed decisions efficiently.
With vacant seats at the table, Board members are stepping up to fill interim positions to preserve investor confidence and provide leadership while succession plans are being developed.
While there is no one-size-fits-all formula for nurturing the relationship between the Board and the executive, the primary issue often lies in the blurred lines of their respective responsibilities. Spalding offers insights on navigating this confluence of priorities:
The Board is entrusted with safeguarding the interests of shareholders. It holds the responsibility for setting the overall strategy and direction of the organisation, while the executive team is tasked with executing and implementing this strategy.
When the Board perceives issues with strategy execution, the lines between responsibilities can become muddled, leading to a situation where the Board interferes in operational matters, potentially creating governance challenges.
CEOs of companies with substantial private equity investments often face unique challenges, as board members representing these firms may be deeply involved beyond a traditional oversight role.
In such cases, the CEO, usually possessing industry expertise and strategic insight, may find themselves more experienced in certain areas than the board members, who often specialise in finance and governance.
It is vital for executives to acknowledge and respect the governing role of the Board within the organisation, while the Board must also recognise and support the executives' responsibility for executing the organisational strategy.
Establishing and maintaining an interdependent relationship built on accountability and trust is crucial for effective governance.
Wendy Spalding is the Director at Tuesday Consulting.
BUSINESS REPORT