If South African boards could apply the transformational aspirations of King IV properly, they would refuse to accept and act on only one version of the truth as presented to them by management.
That was the gist of what panellist Ncaba Hlophe said last week during the first CFO Talks networking event for 2017.
The talk focussed on stakeholder relationships and Ansie Ramalho, King IV Project Lead at the Institute of Directors in Southern Africa (IoDSA), spoke about the fact that stakeholder inclusivity is the future of corporate governance, which requires ethical and effective leadership.
This is also where integrated reporting on capitals other than financial capitals plays an important role, including environmental, intellectual, human, social and relationships capitals which need to be reported on in a way that would enable boards to make informed decisions about the sustainability and prospects of the organisation.
Judging by questions from the audience and contributions from panellists, it is clear however, that there is a lot of uncertainty on how to report on especially relationships capital.
Hlophe, who is the CEO at Stakeholder Relationship Assessments (part of King IV Stakeholder Committee), said boards are the strongest instruments that the business community have to influence the behaviour of businesses, as they are put there to represent all social values and ethical standards that business stands for.
“My sense is, as a business community we can have a bit of control over our immediate (business) environment, and that is where codes like King IV come into play because it is basically where we can institute a bit of discipline about how we behave. When that is not done correctly, you run into the problem of not knowing what is fact and what is truth”, he said.
He said in general, reports given to boards do not speak to the true state of relationships and that the measurement of stakeholder relationships have to be based on a balanced perception, and not only on internal perceptions.
Boards also need a perception from the counterparts that businesses are dealing with.
He says once there is such a balanced perception, the board can be presented with what is almost a third party audit.
“That also speaks to what Mervyn King has been saying: that boards have been exercising uninformed oversight.”
As an example he referred to MTN’s $5,2bn fine for a regulatory contravention in Nigeria.
That sent MTN’s board of directors out of the boardroom to engage with other regulators in order to establish whether there were more possible contraventions that they did not know about.
Hlope said that over time, the truth that have been fed to the MTN board by management only represented a part of the truth.
“There was another truth that they did not see, and they realised that when MTN was slapped with a $5bn fine.”
Ramalho said some of the criticism against the bigger role of oversight that boards should take on, is that if boards are made accountable to too many parties, the result is that they will be accountable to none.
“But actually, that ís the task of governing bodies,” she said.
CFO Talks™ is devoted to sharing ideas and conversations between CFOs. A platform, which facilitates insightful and powerful talks relevant to CFOs, CFO Talks™ is an initiative between IAFEI, UNISA SBL, CIMA, and SAIBA. Through their network thry are able to source and connect knowledgeable talk leaders with the CFO community, covering all issues affecting the CFO including science, business and global issues.