How Board members are killing institutions

It is time to count gains and losses, as we have to pay for the choices we make. Some shareholders of companies have been smiling all the way to the bank for the last many years while others have not received a single penny from their investment. Who is to blame? Analysts believe the blame goes to the Board of Directors –the folks responsible for making the much needed strategic decisions to chart the future of organizations. The problem is some board members don’t deserve being there.

When you get the opportunity of being a board member, you realize how boardroom politics is the number one killer of businesses. Many organizations in Uganda have board members just for window dressing. They want to project a picture of being ‘well governed’ to access funds. A colleague once wondered whether there was any newspaper that runs adverts for applications to the position of a board member. He had never seen any such advert and given his impeccable qualifications and experience, he would like to give it a shot should the opportunity present itself.

The truth is, the adverts never run. The biggest joke is the fact that most CEOs and managing directors handpick most board members. In this era of political patronage, you too can become a board member. The catch is, you cannot find the opportunity; it will just find you.

Big perks

Most, if not, all board members are ‘handpicked’ by managing director(s). Although these positions attract no salary, they come with lots of perks. For example, there is certain organization that pays a sitting allowance of up to Ugx 3,500,000 per hour of sitting per person! With that kind of allowance, does one really need a job? This is modern-day corporate politics by the top honcho. Give good allowances to the board members so that they shut up. That is why, in many cases the company secretary will give out the allowance money in cash (usually after approval by the managing director) at the end of every sitting.

Some public entities will provide freebies like mobile phones, airtime and fuel to the board chairman or any chair of any of the committees of the main board. Whether one is rich or not, freebies remain gold. Plus the reputation that comes with being a board member of the company, one will want to remain in good books with the CEO. The tendency of being loyal to the CEO, instead of the shareholders, makes majority of boards ineffective. If no one can raise any tough question to the CEO, who will?

One eyed-man

Another biggest governance joke is having one person sit on different boards. It is so bad in Uganda that it is common to find one person sitting on over 10 different boards entirely engaged in different activities altogether. How can such companies get fresh ideas from the same individuals? Yes, we need a member of the board that can speak the ‘politics’ of business, fix ‘strategic challenges’ and bring big business. But you need to mix them for long-term sustainability.

These people, many in their retirement, or nearing there, don’t have time for business sustainability. They are more focused on ‘harvesting’ or retiring their investments than ‘growing’ the business. They are more focused on the present than the future success of the business.

Plus the top business drivers are information technology, information security, human resources, and fraud management. All these are things that change often and need fresh insights from people who read a lot of current stuff. For best results, regardless of your business or industry, the average age of your board of directors should be 35 at minimum. This ensures mentorship and business sustainability. Otherwise, seemingly easy decisions will take time, as some folks on the board may not comprehend the concepts well.

Look forward to reduced influence of the CEO on the board. This can come if the folks on your board are young, dynamic, financially stable and very ambitious in their own right.

One man’s experience

Below is an experience with one of the board members this magazine had a chat with. He says, in the past he thought all board members were very intelligent and successful, only to learn later that was not always true. Most board members of top institutions are yes men and women:

“I sit on the board of a certain institution. I was appointed about two years ago. Looking back, I don’t see the value I have added. This board can drive you nuts. Seemingly easy decisions will take ages to get through.’’

‘‘We are 15 board members, of whom 10 are non-executive directors. I am also the company’s audit committee chair. Of the 10 NEDs, I am the only one below 35 years. All of these folks are 58 years plus. There are simple things that have made my life difficult, and I don’t see them being fixed soon.’’ he said

‘‘Although internal audit reports show the company is losing over US $8,000 (Ugx 20,000,000- monthly) average to fraud, there is no clear strategy to mitigate the problem. Internal audit is not resourced and provided with the right tools and skills to undertake independent review of the institution’s ICT security posture. And the IT guys know that Internal Audit does not know anything IT.

Considering that majority of the reported frauds are IT- related, the problem could be more internal than they think! A suggestion that the company empowers the internal audit team with tools and practical training got resistance saying they can outsource. And so you’ve an outsourced firm being paid over the roof for a one off job which your internal audit would do monthly if you invested the same money is critical training and investigation tools. How can an internal audit of this day and age ask “for a print out of an audit log?” After the external firm has done the job, you later learn that in some cases, “it is a way of saying thank you to that firm. How else will the firm keep quiet about the – ‘“key findings”’ -during an annual audit, if you don’t keep ‘oiling’ the firm with jobs like that during the year?”

Brainstorming sessions?

Many of board meetings are heated ‘brain-storming sessions’ instead of decision meetings. These people will not give you the options available and the decision they need the board to take. They want you to think for them. That will be another day of hearing everyone’s commentary on the issue and it becomes so boring other folks will say things that reveal their stupidity and lack of attention to detail.

Lots of tea and eats

Lots of tea and eats. These days the meetings are increasing, and it is becoming a party instead of a board meeting. You’ll spend a lot of time in breakfast and then lunch. Other members will sleep off, and at the most recent meeting a member began snoring.

I am just realizing that the MD makes it intentional to delay contentious issues later in the meeting after these guys have had a heavy lunch. By the time the issues come up, everyone is tired and wants to go. They just say, pass!

The general conclusion is that most boards are not effective. And there is no accountability on the board, other than reporting on their attendance. There is need for better evaluation methods to assess the effectiveness of each board member in terms of their key deliverables. Hiding behind the cover of risk management and oversight is not enough. There should be something concrete. Otherwise, it is another window dressing project. Credit to members whose time and contribution has seen the companies grow and grow.

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