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Opinion: SOEs executive leadership governance challenges

2021-06-25  Staff Reporter

Opinion: SOEs executive leadership governance challenges
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In Namibia, it is often reported of the board being fired by the shareholder or nominee shareholder and the board of directors firing the top management. Does this mean the board of directors does not understand their expectations and responsibilities to the shareholders and that the top management does not know what is expected of them from the board members? Does it matter if the company has performed or not performed, or does it have to do with something else? 

There have been reports that the Minister of Public Enterprises mentioned that “Out of 24 commercial SOEs, only nine have governance and performance agreements; only 10 have up-to-date annual reports, and only 11 have approved Integrated Strategic Business Plans (ISBPs), which equates to a compliance level of 42%. Out of the 42 non-commercial SOEs, only 17 have performance and governance agreements in place; only 10 have up-to-date annual reports, and a mere six have approved ISBPs, Leon Jooste, Minister of Public Enterprises”. 

Meaning, 38 non-commercial enterprises do not have an approved five-year operational and financial plan. The question is how are they functioning and what are they supposed to report? If the public enterprises do not have signed performance agreements, it merely means those leaders do not agree with the agreements and they cannot be measured at the end of the financial year. Yet, these top leaders are comfortable in their positions.

In the past, before the formation of the Public Enterprises Ministry in 2016, there have been a number of board members and CEOs being forcefully removed from their positions for non-performance. However, since the formation of the Public Enterprises Ministry, the forced removal of leaders has subsided, but there is still non-compliance. Instead of the top leaders being forcefully removed, their terms are renewed – even for those leaders leading the organisations, which are non-compliant. This is a clear bad picture to the SOE leaders whose organisations are compliant.

In 2012, the entire board of the Road Fund Administration was forcefully removed with immediate effect; the chief executive of Road Fund Administration (RFA) was suspended. The RFA board suspended the CEO and some top managers at the time because the board was not happy with the collection of cross-border charges –and in addition, the CEO increased his salary from 1.6 million to 2.1 million.  

In 2013, RFA board members were removed from the board of directors because they were unable to perform their duties as directors. In 2012, Air Namibia›s board of directors’ failure to address pertinent issues to rescue the company from its financial problems and to operate on sound business principles caused board dismissal. The board was dismissed due to their failure to appoint a managing director for the company, thus neglecting their judiciary duties and responsibilities towards the enterprise.

In 2021, there have been reports of governance failure at the National Housing Enterprise. The managers, who are responsible for ensuring that the organisation has financial statements, have petitioned against the CEO and the board. Some top leaders, feel that they are immune to force removal performance-based, as a result of lack of leadership from the CEO and the board; top and middle managers failed to do their work, and this reflect badly on the organisation and its top leadership. 

Instead, of the managers petitioning the leadership failure of the CEO and the board, they should think of how they have contributed to the supposed failure at NHE. However, there have not been any reports of forced dismissal of top leaders, executives, or managers, but reports of renewal of contracts.

There is not much written on the corporate governance in Namibia, and fiduciary responsibilities of the board of directors and management, therefore, the knowledge is limited. However, Namibia has corporate governance country-specific guidelines, in a form of an Act.

Can it be that management skills, leadership skills, leadership styles, motivation, planning, attitude, personality, time management, emotional intelligence? are essential for leaders, but are these skills taken into account when the boards are appointed, to avoid wrong appointments, which seem right at the time of appointment.

If organisations and firms practice good corporate governance this can improve the image and reputation of the organisation to attract more stakeholders involved in the organisation when corporate governance is present organisational performance will also be good. The governance state the Government expectation in regard to the public enterprises business scope, operational efficiency, financial performance, and achievement of objectives; The relevant ministers powers and authority in relation to that state-owned enterprise (SOE).

Boards of directors are elected or appointed by the shareholders, which are the company owners. The boards of directors are there to look after the interest of the shareholders and to look after the organisation well. The board needs to create trust-based corporate governance that will enable the board of directors to advise top management and not them trying to manage the organisation or the company. 

The board needs to create trust-based corporate governance, which will enable the board of directors to advise top management and not the board trying to manage the organisation or the company. 

Therefore, it is important that the relationship grows and strengthens to a point where goal alignment, cooperation, and unity discourage criticism behaviour by the board of directors. The board members are the most valuable tool for overseeing practical corporate governance implementation and are responsible for increasing shareholder wealth through proper monitoring and control systems of top management teams. The board is there to take care of the external dependencies and to eradicate outside uncertainty.

Board and top organisational leadership leading should be viewed as an important responsibility; that requires providing equilibrium, excellent service during good times and during challenging times.  Leaders need to be on the lookout for changes and should want to be the first to embrace change because with the world moving at a fast pace and Covid-19, change or adaptation is the only constant thing.

2021-06-25  Staff Reporter

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