CEO Parmi Natesan says the roles of chair and CEO are distinct and need to be kept separate.
On Monday 29 July, Public Enterprises Minister Pravin Gordhan announced the appointment of Eskom chair Jabu Mabuza as acting CEO for three months while the power utility looks for a permanent CEO.
However, the Institute of Directors in South Africa CEO Parmi Natesan expressed some concern over Mabuza’s dual role as chair and CEO, referring to principle 10 of King IV, which states that “the governing body should ensure that the appointment of, and delegation to, management contribute to role clarity and the effective exercise of authority and responsibilities”.
“King is clear that the roles of the CEO and chair are quite distinct, and that good governance requires them to be kept rigorously separate. The chair leads the board in exercising oversight over management, and should be independent, while the CEO leads the management team. The CEO and his or her team are accountable to the board, and this separation of powers is vital to ensure the necessary checks and balances are in place,” Natesan said in a statement.
“However, King IV also makes it clear that governance is not a matter of blind compliance either ? the board must exercise its judgement to come up with solutions that are in the best interests of the organisation, and will lead to a stated and desired outcome.”
Natesan says that while governing bodies need to have the freedom to consider what would be best for the organisation, they must also take care to communicate their reasoning to stakeholders ? transparency is critical in demonstrating that the board has exercised its judgement.
The statement said that in Eskom’s circumstances, appointing the chair as CEO as an interim measure, with the purpose of creating a stable transition period until a new CEO is appointed, may be in the best interests of the organisation. However, it reiterated that this is “clearly” not an ideal situation.
The IoDSA urges that in order to maintain accountability while Mabusa holds both roles, there should be clear steps taken to ensure that the lead independent director plays an active role where necessary, and it must ensure that the process of appointing a new CEO is transparent, and that it is concluded within the short-term period as stipulated. “To have to extend this temporary arrangement would not be ideal from a governance perspective.”
The release went on to say that succession planning for key management roles needs to be made a top priority. “Ideally, somebody within the organisation should have been groomed to assume the CEO role, even temporarily in an emergency such as this.”
“The way this three-month period is handled will show whether the individuals in power are acting decisively in the best interests of the organisation,” Natesan concluded.