King IV recommends that the board, through strategic planning, should take responsibility for the company’s performance and steer the company in a direction to achieve the company’s core purpose and values. This duty is linked to section 66(1) of the Companies Act, No 71 of 2008 (“the Companies Act”), which states that a company’s business and affairs must be controlled by or under the control of its board, and cannot be outsourced to a third party.
The Covid-19 pandemic quickly developed, to the detriment of many businesses, into a financial and economic dilemma. The tough lessons of Covid-19 forced boards to play a more hands-on role in developing a strategy for sustainability and to determine whether they have received the vital support and guidance during this period.
King IV recommends that the board should evaluate its own performance and that of its committees, chair, and members for continued support and improvement in its performance and effectiveness. The Board evaluations have proven benefits including, but not limited to:
- Identifying weaknesses and skills gaps
- Suggesting remedies
- Providing responsibility for the governance of risk
- Providing comfort concerning board processes
- Providing accountability and performance expectations
- Strengthening leadership and capability
- Refining strategic focus and sharpen role clarity
- Improving decision-making skills and process
- Improving governance structures
Not only are board evaluations recommended by the King IV code, but it is also required by JSE listings requirements to manage the risks of being a director, by improving board effectiveness, ensuring that the board is left more dedicated, and ultimately more capable of discharging their fiduciary duties.
Accordingly, board evaluations are more fundamental now than ever to equip them with fundamental capabilities to effectively tackle these Covid-19 concerns. When preparing for the next round of board evaluations, make sure that the assessments are carried out in such a way as to enhance decision-making proficiency during a crisis and assessing the skills to lead in the aftereffect of Covid-19.