Vincia Cloete
The now unfolding story of the National Petroleum Corporation of Namibia is a further perpetuation of the strife between board and management relationships, now familiar at this entity, and in some other organisations.
The swift development of the story that started as an inquiry into the alleged unscrupulous dealings of the managing director and developed into the arrest of the board chairperson for purported dealing in illegal substances, has rightly focussed attention on poor governance of organisations, particularly in the area of the board-management relationship.
By and large, an unwholesome board-management relationship is spurred by numerous factors which can be resolved in ways articulated in one of my earlier articles, titled 'Dysfunctional board-management relationship' (The Namibian, 8 May 2018). These factors include out of control management, the CEO
dominating the board, micromanagement by the board, lack of trust, and lack of respect. The dynamics of each noxious relationship varies, therefore without speculating on the intricacies of the Namcor saga,
as well as in honouring the sub judice principle of law not to discuss matters under judicial consideration; this paper, in the main, laments the adverse effects of such a relationship and suggests a cardinal way
to fix the relationship.
Fundamentally, an unsavoury relationship detracts focus from the primary purpose upon which the relationship is premised. In this scenario, the primary purpose, the governance of natural resources for the benefit of Namibia, is attenuated by unwarranted focus on possibly individual agendas. Toivo Ndjebela said “oil is not even out of the ground yet”.
Flippant as it may sound, this and many relevant sentiments should compel us to consider the principal thing as principal. In addition to diverted focus from the primary purpose of the organisation and compromised corporate governance, the very existence of the
organisation comes into question.
This detraction imperils the country‘s new opportunities, such as the recent oil and gas discoveries and purported green hydrogen solutions, to possibly transfigure its economy.
The rise and fall of good governance is on leadership on all levels - poor governance demoralises ethical leadership in the same way that unethical leadership denigrates good governance. Ethical leadership is the cornerstone of governance, and ethical leaders consider themselves complementary to the cause. In any boardroom or decision-making platform, those tasked with governance should fundamentally advance the interests of the organisation and ultimately the country, rather than advancing self-serving agendas. When leaders subscribe to private agendas at the cost of public good, poor governance is fostered. The additional ripple effect to compromised ethical behaviour, is that poor governance dissuades able, prospective leaders from assuming leadership positions, thus diluting quality leadership in key positions.
The quality of the board-management relationship is crucial to every organisation’s success. Pulling in different strategic directions creates a lacuna in the overall governance ecosystem of the organisation; exposing the business to, for example, break down in employee confidence, divided employee relationships, uncertain decision-making, and stunted or destabilised growth of the organisation.
A further unfortunate consequence of this misaligned relationship is that it creates a crisis that ultimately taints the reputation of the organisation with its key stakeholders, easily resulting in forfeited opportunities and lost profits. Resources are now focused on effort to manage public perception, and restore stakeholder relationships. Reconstructing goodwill is yet another costly exercise at the expense of and / or in addition to efforts to rebuilding the commercial stature of the organisation.
Perhaps stating the obvious, the relationship between the board and management is an important element of effective governance, successful corporate leadership and indeed organisational performance. Thus the main thing this Namcor saga conjures is not the effects of a misaligned relationship as much as it obliges the shareholder to find ways to fix the same for the greater good of corporate governance. The first and cardinal step in addressing defective board-management relationships is to conduct a detailed and objective assessment of it.
In a far-gone relationship, impartiality and objectivity should be achieved by the shareholder. Of pivotal consideration would be the temporal replacement of a governing body and the relevant executive in order to re-enact impartial oversight of the organisation. Similarly, an independent body should be recruited to conduct the assessment. The results of such an assessment will present more permanent solutions; which should involve clear delineation of roles and responsibilities, improved and structured communication between board and management, and stimulate mutual trust and respect.
The residual issue of board culture or consistent patterns of behaviour, values and mind-sets in the boardroom, has a powerful influence on the relationship a board develops with management and its approach to governance decision-making and warrants further deliberation.
Vincia Cloete is the executive director of the Namibia Institute of Corporate Governance and an admitted legal practitioner of the High Court of Namibia. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Vincia can be reached at vincia@nicg.org.na