Abraham Shilomboleni
A company’s management and activities are supervised and managed by the board of directors. The board’s responsibility is to monitor the administration and efficient structuring of operations in order to advance the interests of shareholders and the group, if there is any.
The audit committee and the human resources committee should be the minimum number of committees on the board. The general meeting, which releases the board of directors’ members from accountability, holds the board of directors accountable for its operations.
Continually and currently, we have had and continue to have entities which fail dismally in the hands of ineffective and incompetent board members. How these individuals become board members of failing entries raises eyebrows. Running a business entity is not an easy walk in the park, and is in no way just a rhetoric. In-depth operandi for holistic business understanding is key and without that, you will most likely forecast dismal failure.
To run a business, you at least need to know-how to read and interpret a financial statement. Without such basic knowledge, I would say sorry, that entity is highly likely to fail. Before one becomes a board member, at least know the basics of accountancy, the accounting equation, and what it entails. One should know how to interpret financial ratios, to the understanding of better running an entity in the most desired direction that serves vertically to the core purpose of the business, mandate and its shareholders. Board members should understand debt to equity ratios, liquidity ratio, leverage ratio, efficiency ratio, profitability ratios and market value ratios.
These financial ratios are vital for one to know and be able to interpret when running a business entity as a going concern. It is observed with keen interest where entities have serving board members who do not have the knowledge or expertise in running a business, and this is one of the major factors that are causing profitable companies to die, or just become unprofitable.
Business strategic application is key, and we should put entities in the hands of those who possess financial skills and business knowledge to run and successfully steer corporates in a prudent direction. Amidst the business operational level, decisions which are made at board level affect the direction of the entity. Hence, you can’t have a composition of board members who are either just boarding, loafing, and incompetent for that matter. I will always advice that one looks at the element of ‘business competency’ in a board candidate before we just paint whoever as a board member.
When you have a board comprising competent members and independents, this drives companies in their most desired direction, enchaining profitability, prudence and elements of running such a business or entity as a going concern.
* Abraham Shilomboleni holds a Bachelor’s Degree in Accountancy, of which Micro and Macro-Economics has formed an integral part of his studies and career. He’s pursuing an Honours Degree in Business Management. Shilomboleni is an author and a knowledgeable financial and economic expert.