Shareholder Activism - the Activist Revolt

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SHAREHOLDER ACTIVISM - THE ACTIVIST REVOLT

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6 16 24 22 Better ways to manage and monitor relationships | Neil Morris 24 A view from... Simo Lushaba 26 Opening doors leading to the boardroom table | Michelé Serfontein Secure Board Portal for the Paperless Boardroom 28 Chairman, Chairwoman or Chair? | Michael Judin 30 IoDSA FAQs - Director Due Diligence | Parmi Natesan, Tanya Nassif & Vikeshni Vandayar • Content segregation • eSignaeSignaturestures 32 Profiling CD(SA)s • Online-oﬄ ine syncing • SecurSecuree email 34 IoDSA events • Annotation sharing • VVotingoting 36 Member profile: Ingrid Goodspeed 38 Book reviews 39 Wine: Fakes, robbers and worse | Jeremy Sampson boardvantage.com 40 Road test: Formulating the Fusion | Wynter Murdoch 42 Travel: 4 hours in Guangzhou | Kate Kennedy 4th FloorFloor,, The Firs, Cradock AAvenue,venue, RRosebank,osebank, 44 Last word: In search of stationery’s Holy Grail | Jeremy Maggs JohannesburJohannesburg,g, SouthAfrica | 011 759 4060 [email protected] Publisher: Richard Lendrum Editor: Jeremy Maggs Managing Editor: Debbie Bassa [email protected] Layout: Buyisiwe Dlamini Production Manager: Mabel Ramafoko

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The courage of a director

Office Bearers

Patron Basil Hersov President Reuel Khoza First Vice-President Mervyn King Vice Presidents Roy Andersen, David Brink, Bertram Lubner

Non-Executive Directors Venete Klein (Chairman), Prieur du Plessis (Deputy-Chairman), John Burke, Yolan Friedmann, nais Nin, author and novelist is quoted or unpopular viewpoints, courage to stand Ingrid Goodspeed, Sathie Gounden, as saying, ‘Life shrinks or expands in firmly by one’s own values or hold others to Khutso Mampeule, proportion to one’s courage’. I had the their organisational value; courage to admit great privilege of participating in our when one is on unfamiliar ground by saying, Marichen Mortimer, Pumla Radebe, Afirst Directors’ Circle group mentoring session ‘I don’t understand, please explain’; courage Muhammad Seedat. for 2015 in February and Courage was our first to innovate and change. In the face of the topic for discussion. It is neither an easy nor pressure for short-term profit, it takes courage Executive Director comfortable topic, but I was encouraged to raise the deep ecological and social crises Angela Oosthuizen (Chief Executive by the openness of the group to fill in the facing us as being pertinent to business Officer) following statement in relation to their roles performance and long-term viability. as directors or executives: ‘I really want to Directors are human, and have to manage Regional Chairmen (do something) but (this is what I perceive is the same fears as others, including the risks Sonny Ako-Nai (KwaZulu-Natal), preventing me from doing so)’. The apparently of not fitting in. The added pressure of power George Zacharias (Western Cape) simple expression of these limiting beliefs in and responsibility can heighten those fears. the company of strangers was itself an act of Directors are furthermore accountable to a Offices courage by the participants. variety of stakeholders and may feel pulled National Office It was acknowledged that the underlying in many – at times, opposing – directions. emotion relating to the limiting beliefs was I encourage directors to invest time in [email protected] fear. Fear of exposure, ridicule, reputation themselves to build courage, not least in Tel (011) 035 3000 or job loss, or the consequence being worse developing the supportive skill of raising than the current situation. In a practical way, difficult issues constructively. Great leaders the Directors’ Circle elicited the very definition know what they consistently stand for. Western Cape Branch of courage. Courage is not the opposite Growing your competencies and cultivating [email protected] of fear; courage is acting despite the fear. your understanding of the business will Tel (021) 715 3757 How one develops that courage is based in enhance your confidence and courage in a Fax (021) 715 3762 deepening awareness of one’s non-negotiable mutually bolstering positive cycle. values, and improving both one’s knowledge Having opened with a poignant quote, let KwaZulu-Natal Branch of the business and one’s competence as me close with one by a career officer in the [email protected] a director. Simplistically stated, acting Canadian Army, Peter Voyer, who wrote in Tel 082 495 9596 from a ‘blueprint’ of values + knowledge + an article titled Courage in Leadership: From competence equals courage. the Battlefield to the Boardroom – ‘Survive, and Fax (031) 266 5196 Directorship requires courage, and not only you’re likely agile, decisive, quick thinking and Website: www.iodsa.co.za as a dissenting director. Courage is perhaps – above all – courageous’. My only suggestion Connect with the IoDSA on a foundational characteristic of effective would be to replace survive with THRIVE. C social media directors, and is explored further as one of the five moral duties in King III. It is a trait Angela Oosthuizen Institute of Directors in Southern Africa that will be called upon and tested in many Chief Executive Officer instances in any directors’ career. Courage to @The_IoDSA @angelao28 ask the difficult questions and raise alternate #DirectorshipMag Editor’s note 5

Future planning and future proofing

fter arguably the toughest state budget in 20 years III, and work is currently underway on the next iteration, which is of democracy, the business community is hunkering due by mid-2016. If you’re playing the board A-game you need to down for a 2015 that will see growth targets challenged, know what the current thinking in this respect is. power capacity constrained, and what promises to be We hope this edition of Directorship plays some role in helping a bitterA round of public service wage negotiations. If you thought you strike the right strategic path – you don’t want to be like the last year was tough, you ain’t seen nothing yet. balloonist in this old joke: To that end all stakeholders in business will be asking tougher questions this year, and company boards will be even more A man is flying in a hot-air balloon and realizes he is lost. He reduces exposed as they are scrutinised and held to even higher standards height and spots a man down below. He lowers the balloon further and of accountability. The age of stepping over the line or indulging shouts, “Excuse me, can you tell me where I am?” in any form of maverick behaviour is long gone. So, we take a close look in this edition at shareholder activism. Writer Rodney The man below says: “Yes. You’re in a hot air balloon, hovering 30 Weidemann tells us the idea of shareholder activism is, and has feet above this field.” always been, a divisive one, but whether positive or negative, “You must work in Information Technology,” says the balloonist. there is no doubt shareholder activism is becoming far more “I do,” replies the man. “How did you know?” commonplace. It’s a useful piece for board members to engage with as there will be more and more awkward encounters and “Well,” says the balloonist, “Everything you have told me is tricky questions. Part of effective corporate leadership is having technically correct, but it’s no use to anyone.” a strategic vision. If board meetings are not devoting a good The man below says, “You must work in business.” percentage of their time to future-planning and future-proofing, “I do,” replies the balloonist, “but how did you know?” then the job is not being done. In a second important article, James van den Heever tells us “Well,” says the man, “You don’t know where you are, or where you’re boards have the ultimate responsibility for ensuring the company going, but you expect me to be able to help. You’re in the same position or organisation is on the right strategic track. That means they you were before we met, but now it’s my fault.” C need to be agents of change. Once you’ve read the article, ask yourself what value you are adding to the board in terms of Jeremy Maggs long-term ideas, as well as risk mitigation. Part of that strategic Editor thinking process will be getting ready for King IV, and in a special take-out Donovan Jackson speaks to Ansie Ramalho, King IV @maggsonmedia Project Lead. Five years have passed since the introduction of King Shareholder activism 6

The activist revolt Rodney Weidemann

Shareholder activism is a feature of US corporate life, and is beginning to take hold in SA too – but what does it mean for public-listed companies?

7 We don’t want a situation“ where we give the shareholders so much say in the organisation “that it then tips the balance of power in the governance structure.

he idea of shareholder activism is, and has always been, can just as easily be seen as the company’s unlikely saviours. a divisive one. It is no real surprise to hear that those The Economist points out that this is because activists fill a who purchase shares in a company and then take on governance void that afflicts many modern public companies. the management tend to be ostracised and referred This void is created because large portions of the stock market Tto by board members as corporate raiders and ‘greenmailers’. sit in the hands of so-called ‘lazy investors’. These include index Simultaneously, however, the principle of shareholder activism funds and exchange-traded funds that mimic the market’s is applauded by no less a person than the head of the US’s movements, but typically take little interest in how firms are run, main financial markets regulator, the Securities and Exchange or conventional mutual funds and pension funds that oversee Commission, which claims that shareholder activism has lost its diversified portfolios and dislike becoming too deeply involved in distinctly negative connotation. firms’ management. Whether positive or negative, there is no doubt that However, activists by their very nature antagonise boards and shareholder activism is becoming far more commonplace. And it interrogate investments more closely, thereby making it harder is not only in the US either, with the concept gaining in popularity for investors to stay on the sidelines. Business advisory firm FTI in places such as Japan and continental Europe and, of course, Consulting points out that this is even true in South Africa, with a here in South Africa too. growing number of shareholders becoming more concerned about everything from corporate governance issues - such as executive The rise of activism pay and board selection – to whether shareholders will get value for The public company is a concept that has been lauded as one of their investment in mergers and acquisitions (M&A) activity. capitalism’s greatest inventions, although the past 15 years may The public company may still be one of capitalism’s best have cast long shadows over such entities. The huge corporate inventions, but only when one realises that these entities were fiascos that were the Enron and Lehman Brothers debacles never meant to be a bureaucracy run by distant managers, and demonstrate that there appears to be a distinct lack of scrutiny accountable to funds run by computers. These public entities are amongst shareholders. crying out for a new lease on life, and the activist revolt is what Moreover, governance has been weakened by the rise of passive may well supply it. index funds, which tend to be controlled not by people, but by software programmes. At the same time, a growing number of Increased shareholder involvement institutional investors prefer to sell at the first sign of trouble, Parmi Natesan, Executive: Centre for Corporate Governance at rather than manage problems. the Institute of Directors of SA (IoDSA), is quick to point out that According to The Economist, the above issues have contributed while there are benefits to shareholders being more involved in dramatically to the rise in activist hedge funds, which take small the company, through attending AGMs and voting for directors, stakes in firms and then broker deals with other shareholders, care must also be taken. to gain support for their demands. These demands include “We don’t want a situation where we give the shareholders representation on company boards, cost-cutting, spin-offs and so much say in the organisation that it then tips the balance of returning cash to shareholders. power in the governance structure,” she says. While such activists tend to be, on the whole, viewed in a “Shareholders are effectively the owners of a company’s shares, negative light by public company managers and bosses, activists who invest their money to provide capital to the company. Shareholder activism 8

After all, the board of directors would ultimately bear the liability for something going“ “wrong, not the shareholders. It therefore stands to reason that the board of directors should be able to make some decisions without effectively being told what to do by the shareholders.

Therefore, shareholders’ rights are enshrined in law and the aspects of activism will be central moving forward. It is, he adds, incorporation documents of the company. These rights include important for organisations and shareholders to know what setting the objectives of the company in the memorandum the companies they invest in are doing in this regard. After all, of incorporation and appointing the directors. However, organisations shouldn’t produce profit at the expense of either shareholders do not have the right to be directing, overseeing or people or the environment. implementing the business of the company.” “A case in point is mining companies that walk away from the She says that the fact is that the shareholders appoint a board environmental damage caused by acid mine drainage. Nobody of directors to oversee and direct the operations of the company seems to be addressing this issue properly, so perhaps it needs an on their behalf. It then becomes the board’s role to be concerned activist to get involved?” with issues like directing and controlling the company and Robert Lewenson, Governance and Engagement Manager at appointing, overseeing and removing management. Old Mutual Investment Group points out that his organisation “After all, the board of directors would ultimately bear the placed sound governance and long-term sustainability values on liability for something going wrong, not the shareholders. It its agenda some four years ago under the aim to be the leading therefore stands to reason that the board of directors should be responsible investment manager in Africa. able to make some decisions without effectively being told what “We have this embedded in our environmental social to do by the shareholders.” governance (ESG) policies, which form part of our decision- The rules are clear too. “Section 7(i) of the Companies Act states, making process. This is not just because it is only a good cause; as one of its purposes, the balancing of the rights and obligations empirical research indicates that organisations that reduce of shareholders and directors within companies,” says Natesan. ESG risk are more likely to outperform in the long term. In other words, it seems shareholder returns can be improved through the The morality of activism implementation of sound ESG practices.” The modern era is characterised by ‘environmental’ issues, such as pollution and sustainability, not to mention ‘people’ issues like A different approach that of equal opportunities, or even human rights issues. Lewenson is quick to point out that Old Mutual Investment Group There is an aspect of shareholder activism that focuses less does not consider itself to be an activist investor in the ordinary on improving the company on behalf of the shareholders and sense. Instead, he says, the company approaches its engagement more on corporate policies around such issues. In the US, for with its investee companies on a ‘behind the scenes’ basis. example, organisations such as Ceres and the Interfaith Centre on “We focus on issues we believe present material risk and aim Corporate Responsibility (ICCR) use shareholder resolutions, and to achieve an outcome in our clients’ best interests. We believe other means of pressure, to address the issues of sustainability in engagement and collaboration and prefer not to take the and human rights. public route like activists often do. Rather, we work with the Theo Botha is probably South Africa’s most well-known management and board behind the scenes to drive any change.” shareholder activist, and says that although he understands why Lewenson says his view is that the way Old Mutual Investment some activists go down this route, he believes it is better to steer Group approaches these engagements works better. He adds that away from the legal and political aspects of activism. boards are readily available to discuss issues and even sometimes On the other hand, Botha says that the environmental seek out advice for further insight. Untitled-1.pdf 1 2014/08/21 10:24:37 AM

Asked about the future of activism in SA, he suggests that any such strategy would depend on who is adopting it and how they approach it. Shareholder activism is on the rise globally and we should expect to see a greater level of activism in the SA markets. However, we must be cautious that activism and/or engagement must seek to balance the interests of organisation and shareholder with long-term sustainability issues.”

The activist’s view Botha explains that as an activist, his view of what he does is far removed from the large enterprise’s notion that activists are belligerent and opportunistic. “For me, it is not about breaking the company apart, but about making it perform better. In this country, most asset managers can do a lot more than they are doing at GOVERNANCE, RISK, COMPLIANCE the present moment. These players need to take on a more important role; the asset C management industry needs a complete shakeup, because at the moment very few & AUDIT SOFTWARE [asset managers] are properly holding organisations to account.” M Generally, if an asset manager is unhappy with an organisation and finds the board Y unresponsive to an engagement, then they simply move their investments to another organisation, continues Botha. “That not only doesn’t solve the problem, but it isn’t CM RISK MANAGEMENT very socially responsible either.” MY Of course, he adds, shareholder activism remains virtually non-existent in South Africa. He believes more shareholders should take organisations to task on numerous CY issues, such as good governance, financials, and lack of disclosure during corporate CMY activities. Asset managers, too, need to hold themselves to account, while also holding to K account those businesses in which they have invested their clients’ money. COMPLIANCE “Personally, I reckon the asset management industry in this country is going to radically change in next decade or so. We are going to see a new generation of asset managers who will be more assertive, more closely involved, and they will distinguish themselves through more than merely their returns. I believe activism is a way they can achieve this,” concludes Botha.

What is shareholder activism? AUDIT It seems likely that, with the world generally facing a slower economy in 2015, more large companies will have trouble when it comes to growth. This is an issue that clearly opens the door for increased activist campaigns. Shareholder activism is defined as being a way in which shareholders can influence a corporation’s behaviour by exercising their rights as owners. Although shareholders EMBEDS BEST PRACTICE do not run a company, there are ways for them to influence the board of directors and management. In fact, Activist Insight and Schulte recently released a report that suggests that FLEXIBILITY WITHOUT in the past year, nearly half of all activist investors (47%) pushed for board-related COMPLEXITY changes at the companies they engaged. The second most common demand among 2014 activist investors focused on mergers and acquisitions, with 21% of all campaigns dealing with M&A in one way or another. LOCALLY DEVELOPED AND The report also notes that some of the largest corporations in America, previously SUPPORTED thought invulnerable due to their size, were targets of activists last year. The list includes such venerable corporate entities as Apple, Microsoft, eBay, Pepsico, Yahoo and DuPont. C Call: +27 11 540 9100 [email protected] www.barnowl.co.za Board decisions 10

Agents of change James van den Heever

Boards have the ultimate responsibility for ensuring that the company or organisation is on the right strategic track. That can mean they need to be agents of change if necessary.

oards are elected by shareholders or the members of an which, during the tenure of Steve Ballmer, failed to spot some key organisation to oversee their interests by ensuring, amongst trends, such as mobility. In a perfect world, it was the board who other things, that the company or organisation is following should have taken the decision to change direction; instead, the the right strategy and that it is being run on sound principles. company did not change direction until too late. BThe whole notion of oversight is a complex one, and includes So how do boards ensure that they do not sink into ensuring that the executive team has developed a credible complacency, and are able to take bold decisions when necessary? strategy and has put in place the team to execute it. But the board’s role is broader than this—it also has to judge the strategic It all starts with skills direction and execution plan and, if necessary, take far-reaching Venete Klein, chairperson of the IoDSA’s board, says that the first decisions that could see the company change direction, or replace step is to ensure that the board has the right skills. “That’s best a member of the executive team. practice, and it’s obviously what we try to do at IoDSA,” she says. In other words, then, boards’ oversight role has to be However, she adds, some boards still tend to overlook the need complemented by the ability to initiate change. Such moves by to build the right skills profile, adding new skills as the industry in boards are usually not obvious to outsiders because the change is which the company operates changes. typically publicly ‘owned’ by the company’s CEO—unless he or she The IoDSA has developed a Director Competency Framework is not convinced and there is a messy exit—but one can surmise (available on its website) to help directors and would-be the actions of boards behind many of the decisive actions that directors develop the right skillset to discharge their duties have changed or are changing companies. In this vein, one might optimally. It is also launching a Leadership Development conclude that the sweeping changes that are repositioning Telkom Programme that will help directors address the social and in the telecommunications and IT markets owe something to personal competencies included in the Framework. (For more the actions of its board. The same might be true of the dramatic on the Directory Competency Framework, see Why competent changes announced recently in the strategic direction of GE. directors are invaluable on page 12.) But perhaps more obvious still is the case of organisations that Having the right skills around the board table can help ensure a have persisted in incorrect strategies or practices. The boards of board has the ability to make bold decisions when necessary. But, such organisations must bear the ultimate responsibility because says Parmi Natesan, Executive: Centre for Corporate Governance it is they who had the mandate to identify the need for change, at the IoDSA, what’s also needed is board members with the and to ensure it happened. An example here might be Microsoft courage to champion new ideas, especially given human loyalty 11

Board members will be better able to make

decisions that are both timeous and good if they “are well prepared. It’s“ important that boards trust the information they get from management and other governance role-players and that they debate vigorously.

to the status quo. Some board members may also unconsciously conditions are met, it can happen that a particular board still fails tend towards maintaining course because of lingering concerns to act with the necessary decisiveness. about the liability they may incur if a wrong decision is taken. Boards, like any other group of people, develop their own group Clearly, though, not changing course remains a decision, even dynamic and culture, which could in certain instances discourage the if it’s an implicit one. There’s no avoiding the fact that being on a notion of change. Too, the notion of board unity or collegiality could board is all about making decisions; it’s important, therefore, to be a barrier to an individual board member speaking his or her mind. ensure that board members understand the risks and ensure that All of this serves to emphasise the importance of the their risks are mitigated. chairperson’s role. Klein says that chairs need to understand Klein agrees about the need for courage, adding tenacity, as clearly their leadership role. “If the chair is effective, then it’s less another key characteristic. “As a board member, you need to likely that the board will be complacent, or that decisions won’t speak up clearly and put your point of view across. Then, if after get taken,” she says. debate the decision does not go your way, it’s important that your Natesan is at pains to highlight the differing dynamics between differing view is recorded in the minutes. That way, you will have public- and private-sector boards. She points out that parastatals played a valuable role in the process of collective decision-making,” have to balance strictly commercial decision-making with political she says. “This is good advice from Warren Buffet that has stood considerations—something that is just a fact of life. This conflict me in good stead over the years!” can paralyse decision-making, something that’s very obvious Natesan cautions, though, that it is important to distinguish from even a brief scan of South African parastatals. The apparent between a quick decision and a good one. “Board members will inability of these boards to make decisions should, therefore, not be better able to make decisions that are both timeous and good be automatically put down to a lack of competencies or vision; in if they are well prepared. It’s important that boards trust the fact, it’s clear that many public-sector boards are working hard to information they get from management and other governance understand what skills are needed and to obtain them. role-players and that they debate vigorously,” she points out. “These In the end, though, it remains true that every board member has are the foundations for a board decision that stands up to criticism.” to see him- or herself as an agent of change. Angela Oosthuizen, She also believes that boards should facilitate their ability to CEO of the IoDSA, sums it up well: “I would encourage boards to make decisions by dealing with issues as they arise via electronic look at themselves with a critical eye. Everybody needs to look at communication where feasible. This would help shorten the the impact they are making, and be open to change and prepared time taken to make decisions, and to build a culture of decision- to act. Everybody is responsible for change.” making. Building such a culture entails ensuring that boards receive interim communications from management about Red flags important developments. Signs that a board might tend towards complacency, and to shy away from taking the hard decisions include: Leadership quality • The time taken to make decisions lags the average for People with the right skills and competencies—and the personal the industry sector. qualities of courage and tenacity—around the table are essential • Some members of the board and executive to create boards that have the vision to identify the need for management feel frustrated that decisions are not change, and then to take the big decisions. But even if these being made quickly enough. C Board competency 12

Why competent directors are invaluable Lynley Main

A company director fulfils many roles and responsibilities in an organisation, and as such the competency profile is made up of a wide range of knowledge, capabilities and experience.

he role of a company director is a multi-faceted and chief operating officer or other full-time employed executive complex one, comprising a number of essential skills and who serves on the board of an organisation. An executive responsibilities, such as ensuring sound management director’s main role is the day-to-day operation of the business, practices are in place and looking after the interests of the as well as to design, develop and implement strategic plans Tshareholders – making competence in carrying out these tasks a for the company as cost-effectively and timeously as possible. vital trait. Being involved in the daily running of the business means that an “The competency profile for directors is made up of the values, executive director is further responsible for motivating staff and knowledge, skills and experience that a director draws on driving the organisation’s culture. when fulfilling their roles and responsibilities as part of a board, A non-executive director, on the other hand, is not part of the performing their duties as direction giver and applying their executive management team and is, in fact, not an employee or knowledge of the legislative, business and ethical environment affiliated with it in any way other than serving as a director. They when making decisions,” outlines the Institute of Directors in are not involved in the day-to-day running of the organisation, but Southern Africa’s (IoDSA) Director Competency Framework. rather function as custodians of the governance process, direct It is effectively the combination of these traits that are the and monitor executive activity and performance of management, hallmark of capable and professional directors. However, being contribute to the development and implementation of strategy an effective director also calls for sound independent judgement, and ensure that risk management systems and financial controls maturity, a sound knowledge of the business environment, as are robust. well as the ability to work in a collegial manner with other board “To this day there remains confusion between the roles members, notes leadership advisor and partner at Heidrick and of executive management and non-executive governance,” Struggles, Johann Redelinghuys. Redelinghuys reveals. “One of the most common problems of Solid independent judgement is perhaps one of the most non-executive board members is that they don’t understand important traits for directors to have, Redelinghuys points out, as the business of the company. However, more attention given to the board of directors have the task of providing both governance induction of new board members and ongoing education would and mature balanced guidance to the organisation’s management. ensure a productive contribution. A non-executive director must be able to maintain an arms-length relationship with the Clarifying roles of executives and non-executives company’s operations and not be tempted to interfere directly.” In order to understand and enhance a director’s performance, it is necessary to understand the difference between the roles and Core competencies and responsibilities functions of executive and non-executive directors. While there Compliance with the relevant legislation, regulations and codes is is no legal distinction between the two, their roles and functions a fundamental obligation of both an executive and non-executive do differ. director, explains the IoDSA’s Executive of the Centre for Corporate An executive director, as the name suggests, is the chief Governance Parmi Natesan. A core responsibility for directors executive officer (CEO), managing director, chief financial officer, is to abide by regulations and codes, including the Companies 13

Five moral duties, in particular, have been

identified in the King III report that every director“ – be they executive or non-executive“ - needs to possess as a steward of the company: namely conscience, inclusivity of stakeholders, competence, commitment and courage.

Act, the JSE Listings Requirements (should the organisation be directors to stand up against these practices in the best interests listed on the stock exchange), the King III Code of and Report of both the business and its stakeholders. on Governance Principles in South Africa, and the company’s The roles and responsibilities of directors further include founding documents and charters. contributing meaningfully to the setting and implementation King III remains highly regarded as governance best practice, of strategy. The ability to oversee a range of management points out Natesan. According to the report all directors should be activities at board level – such as risk management policy individuals of courage and integrity to bring effective judgement formation and the oversight of its implementation, to bear on the decisions of the company and ethically lead the information technology (IT) policy formation and oversight of company in the long-term interests of all of its stakeholders. implementation, compliance management policy formation, Five moral duties, in particular, have been identified in the stakeholder policy formation, integrated reporting, the King III report that every director – be they executive or non- management of ethics and remuneration policy – are also a executive - needs to possess as a steward of the company: namely core part of a director’s functions. conscience, inclusivity of stakeholders, competence, commitment Central to performing as a competent director is the ability to and courage. Intellectual honesty and independence are adopt creative and constructive solutions to business challenges cornerstones of conscience and working within the best interests by analysing business information in a logical manner, as well of the company and its shareholders, while inclusivity is regarded as adapting to environmental needs by understanding other as essential to achieving sustainability. Competence involves staff and clients’ perspectives and building relationships through having the relevant knowledge and skills, and continually conflict management. developing and building on those skills; commitment refers to Confidence, self-awareness and self-control are, therefore, diligence and devoting sufficient time to company affairs and vital for directors when carrying out their tasks. “A fearless and compliance, while courage includes taking risks associated with independent director can alert shareholders and management controlling a successful business, as well as acting with integrity when problems are detected and bring them to the attention of in all decisions and activities. the Board,” Redelinghuys acknowledges.

Personal attributes Continuous developement “My own feeling is that it is about finding the right combination Even the most competent directors can benefit from the of knowledge, skills and experience,” points out Natesan. “Apart continuous development of skills and knowledge to improve from this, certain personal attributes are very important, some performance and productivity and there is a variety of means of them being integrity, curiosity and courage, the ability to ask through which directors can build professional skills, according tough questions, and interpersonal skills. Genuine interest in to Natesan. The most effective methods, she recommends, are the organisation and its business, as well as good instinct and that all newly appointed directors should undergo an induction judgement are also critical.” programme to ensure that they are properly equipped for their Natesan concurs with Redelinghuys that the ability to work role on the board and to familiarise them with the governance in a collegial and reciprocal team is a necessity. Courage is the environment within which they will be working; ongoing training most important trait, she reflects, particularly with the rise of should be sought in order to build a deeper understanding of corruption and unethical behaviour – making it necessary for the environment they work in and serve as a director; new and

Board competency 14 A fearless“ and independent director can alert shareholders and management when problems “are detected and bring them to the attention of the Board

inexperienced directors should be mentored by veteran directors, Characteristics of a good Board Chairman and directors should become members of a professional body Parmi Natesan, Executive: Centre for Corporate Governance such as the IoDSA to take advantage of growth opportunities, In addition to having the competencies required for a director governance and leadership papers, and attend industry and on the board, the Board Chairman would need to display governance-related events to deepen knowledge. certain unique characteristics including: By equipping themselves with deeper knowledge and • A high level of independence, objectivity and courage understanding of their roles as directors, it is possible to positively • The ability to critically analyse situations influence the company’s overall performance, as well as the • The ability to make sound judgment calls performance of staff members. “Board composition – and by • Strong display of vision and imagination implication individual directors’ competence – has the biggest • The ability to drive strategic direction impact on board performance and, ultimately, company • Being results-oriented performance. Finding the people with the right skills, experience • The ability to empower and develop the board and personalities to drive the company forward is absolutely • Excellent communication skills crucial. This ties in strongly with the Institute of Directors in • The ability to manage people, meetings and resources Southern Africa’s vision of ‘Better directors, better boards, better • A high level of emotional resilience business,’” she concludes. • A high level of intuitiveness • The ability to influence others • The ability to motivate others Board competency 15

The Director 10 Point Self-Assessment Vikeshni Vandayar, Governance and Legal Specialist, IoDSA

Am I truly independent? Do I demonstrate an Do I display courage and understanding of the company, its constructively challenge strategy and business as well management? as the industry in which it operates?

Do my communication and Do I understand and fulfil my interpersonal skills contribute role and responsibilities as a director towards a positive board (such as acting in the best dynamic and board chemistry? interests of the company)?

Do I have the necessary knowledge Do I follow through on and skills in order to fulfil my role commitments timeously, i.e. am I as a director and contribute to reliable and trustworthy? the board/board committees on which I serve?

Do I attend sufficient meetings Do I display adequate commitment and do I participate and contribute to corporate governance? actively to meeting agendas, even if I am not in attendance?

Do I keep up to date with key Have I dedicated sufficienttime to developments that affect the company, perform my duties? Do I prepare the industry and the skills and adequately for meetings? knowledge required of me? Have I undergone training in areas where I needed development?

Note: These questions serve as a general guide to consider whether you are displaying some of the core competencies of a director and are being effective in your role. These questions should not be viewed as an exhaustive checklist or complete self -evaluation form for a director. Legal 16

Navigating the client lawyer relationship Samantha du Chenne

In the current business climate with a maze of regulatory requirements to contend with, building a solid relationship with a law firm is no longer a ‘nice to have’ for a business – it’s become an absolute necessity.

ith compliance implications that can arise in almost The benefit of having an internal legal resource is, of course, any area of business – from the environment to their in-depth knowledge of how the business works, which gives competition, consumer protection and securities laws, them the ability to see the bigger picture and - when working businesses would be well advised to have some sort of with external legal practices - to reconcile all the information Wlegal counsel on board. There are two main purposes for this: on into a consistent whole. According to Khoboso Tsike, Group Legal one level, your legal counsel is able to advise and educate you on and Compliance Manager at Adcock Ingram, an internal lawyer various aspects of compliance as a preventative measure, while will consult with external legal counsel when it comes to specific on another, they’re also around to advise you should any breaches matters such as regulatory advice, drawing up complex contracts, occur. In addition, legal advice may be required for specific commercial advice, compliance and litigation. transactions, such as proposed takeover offers, acquisitions and the drafting of agreements. Building relationships In some cases, a business will have its own in-house legal With the role of lawyers in business changing over the past 20 counsel, while smaller businesses usually utilise the services of a years, and with businesses themselves becoming ever more aware law firm. In either case, the relationship between a business and of their legal rights and obligations, the role of a lawyer in today’s its law firm is one built on trust and should be carefully managed business world has become increasingly significant – in fact they from both sides. are central to every deal and strategic decision. To this end, building a relationship based on trust is vital to the General vs specialist knowledge provision of sound legal advice. “Rapport between a business and An internal legal resource within a business has a general knowledge its legal counsel is crucial and should focus on integrity, loyalty of the law and will manage day-to-day legal issues. However, as and an understanding of your business. You want to reach a point is often the case, an internal lawyer will turn to a law firm when with your lawyer where you can pick up the phone and ask for specialist knowledge is required on a particular matter. To this end, their advice on a matter or seek his opinion, which will ultimately the internal lawyer will work closely with the law firm and manage cost you less than a formal appointment – however this type of the relationship in terms of sharing his knowledge of the company, as relationship only comes with time,” Tsike advises. well as its needs, objectives, structure and strategies. It’s important Michael Katz, Chairman of ENS Africa, concurs. “In the to note that law firms work on a basis of billable hours, which must client/ lawyer relationship, trust is invaluable and from a legal be closely managed, as they can become costly. perspective, it’s vital to know your client’s business. Not only 17

In the client/lawyer relationship, trust is

invaluable and from a legal perspective, it’s vital “to know your client’s business. Not only will“ your clients seek your advice on your technical knowledge of the law, they also value and depend on your expertise, skill and experience...

will your clients seek your advice on your technical knowledge on one firm for all their legal requirements and may use various of the law, they also value and depend on your expertise, skill firms for mitigation of risk. “There is a trend today of using ‘horses and experience in terms of applying that technical knowledge for courses’ when it comes to legal advice,” Katz explains. He within their particular circumstances and, most importantly, adds that many firms, including ENS Africa, will house a variety they respect and trust your advice. Ultimately, a good working of legal specialisations under one roof. relationship yields optimal results.” Katz points out that the legal relationship between client This is also true of the relationship between an internal and and law firm has evolved, and law firms today are cognisant of external legal counsel, who both have valuable input on a business’s the complexity of this new relationship. “Not only are clients legal issues. “The internal lawyer will have a better knowledge of the under financial pressure, there is also a lot of competition in client’s business, as well as its needs, concerns and expectations. the industry, with alternative service providers stepping into That said, external counsel is likely to have a more up-to-date the arena. Moreover, the digital world has changed how legal understanding of the technical aspects as well as the practical services are provided,” he says. application of the law. An external law firm will depend on the fact Today’s firms are well aware of – and prepared - to service their that internal legal counsel has done due diligence and has all the clients’ needs, including adding value in the form of additional facts up to date. This ultimately results in a cost saving for the client services such as educational workshops for clients, secondments and a more efficient legal process,” Katz continues. to clients’ premises, and value billing. An important element of this relationship involves understanding how a law firm bills a client. “It’s vital to understand Three A’s of the lawyer-client relationship how legal counsel will bill,” Tsike stresses. “You have a right to Katz, referencing US business author, speaker and consultant know and understand the billing procedure to avoid conflict down David Maister, describes ‘Three A’s that should characterise the the line. Often, working on a retainer basis with a law firm is the lawyer-client relationship: best way to negotiate legal fees.” 1. Ability: this refers to technical knowledge and While there’s no question that contracting the services of a law communication, as well as the wisdom and experience to firm can be a costly exercise, Tsike maintains it’s an unavoidable apply the technical knowledge. one. “All too often, smaller businesses don’t understand that legal 2. Accessibility: you should be able to contact your lawyer with services are an integral part of running a business. You need a ease, and delivery should be quick and efficient. ‘go-to’ person who is able to advise you knowledgeably on issues 3. Affability: the experience should be a pleasant one and around liability, compliance, corporate governance and the like. the chemistry between lawyer and client is fundamental, It’s quite simply a service businesses need to have,” she stresses. producing the trust which is so central to the relationship. Lawyers should strive to realise the distinction between Using multiple law firms quality and service, with service being the desired outcome, Often, one business will make use of multiple law firms. There and adding value that goes above and beyond expectations. are various reasons for this. The most obvious one would be To these, Katz adds resourcefulness: this is about providing the specialisation, and companies will use law firms that specialise right solution to a problem. Ultimately, clients don’t want to in the area in which they most need advice. There are benefits be impressed by a law firm’s extensive legal ability, but want to to this practice, including that one is able to avoid a conflict of be blown away by the solutions the firm provides. C interests. In addition, many clients don’t want to be dependent King IV 18

Get ready for Donovan Jackson

Five years have passed since the introduction of King III; and work is currently underway on the next iteration, which is due by mid-2016.

ime is inexorable, and with its passage comes rapid development in the world of business. It is this development, together with extending the ease of applicability to more organisations, which is cited as Tnecessitating the revision of South Africa’s King Report on Corporate Governance. Some five years have passed since the introduction of King III; with work already underway, the next iteration is due by mid-2016 at the earliest. We spoke with Ansie Ramalho, leader of the review task team convened by the King Committee on Corporate Governance, to find out more about the forthcoming King IV Report. “Probably most important with the next version of the Report is that the basic content and philosophies of King III will remain in place. The predominant focus of the review will be enhancement, with the intention to assist with accessibility and implementation for all types of entities,” she says.

Why update king III? Notably, Ramalho points out that purpose of the King III update is not to present a compliance hurdle, but rather to equip directors and other officials charged with governance duties to become more nimble in an increasingly complex and unpredictable environment. That purpose, she notes, should extend to all organisations. “From the vantage point of the IoDSA, it is clear that not all organisations are implementing and benefiting from King III. For example, public entities tend to refer to a Protocol on Governance, based on an earlier version of the King report rather than King III, while some organisations in the non-profit sector deem King III wholly unachievable owing to a lack of resources necessary for compliance with perceived expensive and complicated structures,” she says. That’s not all: small and medium-sized firms generally take a view that corporate governance is simply not applicable to them. Furthermore, Ramalho notes that there have been significant corporate governance and regulatory developments, locally and internationally, since King III was issued in 2009. “These 19

Probably most important with the next

version of the Report is that the basic content and philosophies of King III will remain in place. “ “ The predominant focus of the review will be enhancement, with the intention to assist with accessibility and implementation, for all types of entities.

developments will be taken into account as the latest version of and integrated reporting. “It’s also clear that we need to assist the Report is prepared for release.” users to better align the principles in King III with the changing She points out that IoDSA plays a pivotal role in the international thinking on responsible investing, and with the promulgation of the King reports, as it is the custodian and holder Code for Responsible Investing in South Africa,” she adds. of the copyrights to the work. Other areas of focus for King IV include the evolving role of social and ethics committees; mandated audit firm rotation and Broader appeal and a technological update tendering; information security and protection; strategic risks and In broadening the appeal of King IV, the revised Report is expected dependencies; group governance; board diversity and combined to provide similar guidance but with fewer principles and more assurance. specific practice recommendations. Ramalho says another difference that will be evident with King IV Principles will be stated as higher order objectives, for example: is an expanded consultative process. “With this iteration, the intent ‘The board should be constituted so that power is balanced and is for the drafting process to be widely consultative so that the decision-making is objective’; meanwhile, a practice to achieve resultant product is truly for South Africans and by South Africans. this goal is constitution of a board with a majority of independent That means the drafting process will go beyond the submission of directors. “This is a recommended practice for listed companies written comments; therefore, all constituents - and particularly in King III, but due to the associated cost it may be prohibitive corporations across all sectors - are invited to participate in King IV for smaller entities, and therefore different practices will be to move us faster towards our goals as a nation.” appropriate. This approach puts the emphasis on the outcome While the expected completion date is anticipated to be envisaged by the principle and allows for flexibility of application,” somewhere in the second half of 2016, and with a further year’s Ramalho explains. grace period to allow organisations to implement it, King IV is This focus on greater succinctness and streamlining is also likely to become effective around mid-2017. expected to be invaluable in positioning the King Report for the digital and mobile ages, allowing the King framework to be To keep up-to-date with the latest developments on King IV, accessible on mobile and tablet devices. “This aligns with the visit: http://www.iodsa.co.za/?page=KingIV increasing trend towards paperless and boundaryless workplaces,” Ramalho adds. Mervyn King SC, chairman of the King Committee, says the newest version will also be easier to implement and access, More regulation? No, better regulation thanks to technology. “Corporate governance is a journey, With the process of revision once again underway for King III not a destination, so it’s absolutely right that as we consider and which will result in King IV, Ramalho says it is worthwhile enhancement regarding implementation, that we take new to reflect on the value of regulations for business. “Governance developments here and internationally into account,” he notes. is an indispensible prerequisite for flourishing corporations. We need better regulation, not more. As a result, there won’t be a A multifaceted approach to governance – and a consultative process significant departure from the solid foundations and philosophy Continuing, Ramalho says examples of key issues that will set by King III, and companies need not prepare for a host of define corporate governance into the future are remuneration additional principles and practice recommendations.”. C Financial reporting 20

The impact of the new auditor’s report Linda de Beer, Chairman - Consultative Advisory Group, IAASB, CA (SA), Chartered Director (SA)

The lack of early warning from auditor’s reports in the financial crisis begged the question as to the information value of the auditor’s report and hence the relevance of the audit.

uditors play an important role in the financial reporting Boards, their audit committees and entity CFOs need to know chain as an independent assurance provider to investors. what is changing, as these changes will affect us. The two most Despite auditors having significant insight into the audited pertinent changes are as follows. entity, the auditor’s report is written in boiler-plate Alanguage which does not share such knowledge beyond a binary Reporting on key audit matters (KAM) pass/fail audit opinion. Regulators and investors alike expressed a In future, effective for auditors of financial statements for periods need to be able to learn more about the entity by peeking through ending on or after 15 December 2016, the auditor’s report of listed the eyes of the auditor. entities will include a section on key audit matters (KAM). As a result, international regulators such as the Public KAM is defined as those matters that, in the auditor’s Company Accounting Oversight Board in the United States and professional judgement, were of most significance in the audit the European Commission undertook auditor reform projects, of the financial statements of the current period. In determining one element thereof being to consider enhancements to the KAM the auditor will consider the areas of higher assessed risk auditor’s report. The International Auditor and Assurance of material misstatement, areas that require significant auditor Standards Board (IAASB) followed suite and recently issued its and management judgement (for instance where accounting final standards to improve the auditor’s report issued under estimates are used), as well as the effect of significant events or International Auditing Standards (ISA). transactions that occurred during the year on the audit. 21

Note that the KAM disclosure is only required for listed existed that may cast significant doubt on the entity’s entities. Auditors of other entities can disclose KAM on a ability to continue as a going concern, and that the financial voluntary basis, but interaction at a planning stage with the statements do not adequately disclose such matters. audit committee is important. • Where a material uncertainty exists, which has been adequately disclosed by the entity, the auditor’s report How will the KAMs affect audit committees and CFOs? must include a paragraph to this effect. First, audit committee members should remember that the KAMs that the auditor will be reporting will be selected from the Before these enhancements, it was virtually inconceivable that list of matters that the auditor will be discussing with the audit an auditor would flag a going concern issue, even though a vehicle committee. So there should be no surprises. for this existed under the previous auditor reporting standards KAMs are intended, though, to focus on the audit and give regime. Even when an auditor flagged a going concern (the further useful information in respect thereof to assist the reader occurrence of which can only be described by directly translating to better understand the entity. KAM is not intended to supply from Afrikaans, as being ‘as scarce as chicken teeth’), the ‘clean’ original information about the entity. It is the role of management audit opinion was unaffected by the going concern flag. to provide adequate and transparent disclosure in the financial It is important to note that the going concern requirements are statements on the entity, its activities and transactions. not just applicable to the audit of listed entities, but on all audits However, instances can arise where the auditor believes that performed in terms of ISA. a matter relating to the audit (for example, consideration of the possible impairment of a business unit, ultimately resulting in How will the going concern requirements affect audit committees and CFOs? no impairment write-off), is one of the most significant matters In instances where an entity’s going concern status is that he experienced during the audit and should be disclosed as questionable due to material uncertainties that exist, extensive a KAM, but the entity holds a different view. To expand on the discussion would always have taken place between the auditor, example, the decision to impair or not could be an important CFO and audit committee. Such discussions will most likely area where the audit identified the risk of material misstatement intensify in future due to the requirement for auditors to modify in the financial statements. Management, on the other hand, in the audit opinion in this regard. light of the fact that the auditor was ultimately comfortable with This is an important enhancement to the auditor’s report which the decision not to impair, might prefer to provide no disclosure dovetails with the Companies’ Act requirement applicable to in the financial statements in this regard. The auditor disclosing directors in so far as their fiduciary duties are concerned, relating to the matter as a KAM could result in investors questioning why the going concern and the application of the solvency and liquidity test. financial statements did not provide transparency on the matter. Herein lies the crux of the difficult debates that could take Benefits of the auditor reporting changes place between auditors, CFOs and audit committees. The ethics The overarching benefit intended by these changes to the and attitude of the entity’s decision-making and governance auditor’s report is the enhancement of communication between structures towards transparency will play a key role in auditors, investors, audit committees and boards. determining how easy or difficult these discussions will be. The article has already explored the envisaged improvement in A consequential benefit of KAM disclosures might, therefore, both auditor- and entity-behaviour. Auditors will have a renewed be that a preparer of financial statements with a low appetite focus on matters to be reported as KAM, which should increase for transparent and honest disclosure might be encouraged to their levels of professional scepticism. Preparers of financial increase this appetite, knowing that his independently minded statements, on the other hand, should give stronger attention auditor, in exercising his professional judgement in making to matters that auditors will be highlighting in KAM in cross- KAM disclosure decisions, will act in the best interest of the reference to financial statement disclosure, which will enhance shareholders who appointed him. the transparency of financial statements as a whole. These changes also serve investor and, hence, the public Going concern disclosures in the auditor’s report interest, as the enhanced transparency, higher audit quality and As part of the changes to the auditing standards, the auditor will an improved informative value of both the financial statements have to raise certain going concerns flags in the auditor’s report in and the auditor’s report can only increase market confidence. future. These are in the following instances: The benefits of the changes clearly outweigh the teething • If management used the going concern basis of accounting problems that auditors, audit committees and CFOs will have inappropriately in preparing the financial statements, the to go through to streamline the implementation thereof. It will auditor should express an adverse audit opinion. serve all of these parties well, however, to pro-actively consider • Also, if management did not adequately disclose the impact of the new requirement and, ideally, to do a dry run of information about material uncertainties, the auditor KAMs, in the run-up to the effective date. should express a qualified or adverse option and state in the basis for the qualification that material uncertainties Business relationships 22

Better ways to manage and monitor relationships Neil Morris, Director, KPMG

Relationships are the foundation of any good business, and companies need to find ways of measuring and monitoring their relationships. Here’s one way to do it.

ing III, and now the new Companies Act, both highlight entailed walking off to a meeting room—a far cry from sticking the legitimate interests and expectations of a broad group one’s head through an open office door to ask a quick question! of stakeholders that includes more than just shareholders. Where one party rates the relationship on the positive side of the This emphasis derives from the realisation that long-term spectrum and the other on the negative, this is a clear indication of Kcorporate sustainability is dependent on the cooperation of these “relationship distance”—and that the relationship is in trouble. groups, which is based on sound relationships. Another component of this dynamic is that each party may have Trust is perhaps the most important, albeit intangible, types different desired outcomes, something that obviously impacts the of capital on which a business depends; others are customer nature of the relationship. loyalty and employee engagement; all of these are relational issues. Businesses that take relationships with their internal and A solution for audit committees? external stakeholders seriously are more likely to be successful The challenge in this context is how to provide audit committees over the long term. with an easy and accurate way to measure and monitor the It therefore follows, I would argue, that the extent and important relationships that impact the company’s sustainability? health of a company’s relationships fall squarely into the overall I have been working for some time with the Relational Proximity governance framework, and thus become the responsibility of the FrameworkTM, which offers a structured methodology both for audit committee or the social and ethics committee. A company providing credible metrics of the status of all the company’s might report on its relationships with various stakeholders in its important relationships, and thus for remedying issues. integrated report (though not necessarily); what is really needed, Developed by Relationships Global, the Framework measures though, is insight into the quality of these relationship as well. performance along five dimensions of Relational ProximityTM— This is a particularly complex area because relationships are, directness, continuity, multiplexity, parity and commonality—by by their very nature, two-way streets. It’s thus very important to using a range of questions in each area. When each party’s understand not only what the company believes the status of its answers are compared, not only is the overall quality of important relationships is, but what the other parties think as well. relationship obvious but also the areas of relational distance. On a personal level, I remember when one of our business units Without wanting to downplay the value and importance of EQ, moved into an open-plan configuration. The senior people felt that or emotional intuition, a methodology like this is valuable because the new environment was much more open and collegial, and that it is auditable and it provides actionable insights. It’s a tool provides collaboration would be enhanced. Junior staff, however, found that a genuine picture of the state of a company’s relationships. their access to seniors was curtailed. The senior executives were all In today’s business world, that’s not a nice-to-have; placed together in one section of the office, so a junior would have relationships matter and learning how to measure and monitor to approach this group and request a word with one, which in turn them makes sound business sense. C Advertorial 23

A need to address skills shortage in the short-term insurance industry

t’s about time companies fine-tune their strategic priorities limited experience and gaps in knowledge. This hurdle is with regard to skills development. For Sasria SOC Limited exacerbated by a culture of entitlement among job seekers (Sasria), the company has taken note of the fact that with who expect high salaries, rapid promotion as well as status. regards to addressing critical skills shortages, the sector is not The short-term insurance industry in South Africa particularly is Ialways perceived as leading growth initiatives. dealing with the shortage of much needed skill set and socio- political pressure for transformation by promoting employees It’s a fact, quality from the universities is deteriorating and much more rapidly compared to other developed economies. students have an image of knowledge but when interviewed As a result, managers are lacking the experience and life skills to their basic business and language skills are lacking, confirms handle their responsibilities well. And many lack the strategic Cedric Masondo, MD at Sasria. He continues to say that management and decision-making skills that are crucial to be a higher level skills such as managers, actuaries, strategists, great manager! claims specialists and the like require specific interventions such as mentoring and coaching programmes that need In conclusion, Masondo says that there is a need for an careful planning, more commitment from management and industry accord to create an environment in which industry incumbents and resources. players can work together to increase the pool of skills and prevent the ongoing poaching of skills. He believes that if all In this case, Sasria believes that mentoring programmes will companies and associations work together, such an accord could encourage the mature employees to transfer skills. However, benefit the entire industry. there are serious limitations for in-house training, especially mentoring and coaching. Having established a South African Actuaries Development Program in 2003 that has successfully produced 177 graduates by 2014 18 of We can blame industry consolidation, which has eliminated whom have qualified as actuaries, Sasria deems it important for a couple of traditional large insurers that previously offered the industry to join arms and establish a management development apprenticeship opportunities. Today, skills development is program that will nurture and grow future leaders within the short largely the responsibility of partially trained managers with term insurance industry. A view from 24

Operational oversight and effective strategic leadership

Simo Lushaba spoke to Directorship and shared Do you have a particular style of leadership? some of his views on operational oversight and My experience leans towards transformational leadership but effective strategic leadership. my leadership philosophy is rooted in the concepts of servant leadership. However, I do apply other leadership styles if the situation requires it; in my opinion one’s leadership style is a tool to achieve effective leadership.

From a business perspective, was there a single moment, or challenge, that defined your career? My career has been shaped by different events. One such event took place in my first year after university. My mentor and supervisor tried to deny me an opportunity to sit for an international exam on the basis that I had received Bantu education and had attended a black university. In his view, external overseas examiners would not understand my ‘English’ and therefore he needed to protect the good name of the company by preventing me from writing, as I was surely going to fail. This taught me to stand up and fight for myself and my beliefs, and also to be assertive. Needless to say, I sat for the exam and passed.

Who are the business leaders who really catch your eye, and why? I follow and interact with a number of business leaders. I am inspired by Dr Reuel Khoza; his African leadership and servant leadership teachings make a lot of sense. In my view, he is ahead of his time in terms of the impact that is required from business leaders to develop Africa. I am also inspired by Patrice Motsepe. His entrepreneurial leadership is rooted in making a difference at grassroots level through his philanthropic programmes. I am very inspired by Prof Ihron Rensburg, the Vice-Chancellor of the University of Johannesburg. He is a visionary who understands the importance of implementation to achieve results.

There is great pressure on senior executives to deliver – but also great pressure in terms of not being excessively rewarded. Do you think we achieved the right balance? No, I do not think that we achieve the right balance but neither do I think we should. For me this is a mute argument that is blind to the call to leadership. Great legendary leaders like Dr Nelson Mandela, Dr Martin Luther-King (Jnr), Mahatma Gandhi and Mother Teresa achieved greatness through leadership without being rewarded anywhere close to what we contemplate for our executives nowadays. I agree that people should be rewarded fairly in the context of the times that we live in, but to strive for an 25

absolute balance is chasing the wrong goal in terms of the results Have boards become too focused on operational issues, losing sight of their that we expect them to deliver. The ultimate reward for great strategic role? leadership lies in the positive difference that the leader makes for Boards are struggling to balance operational oversight and his/her followers and humankind in the interest of greater good. effective strategic leadership. This, in my experience, is largely In my view we need to challenge our executives to rise to these due to the number of operators that find themselves in boards levels of effective leadership. We must recognize and reward them without fully understanding the roles and responsibilities of for the difference that they make, and not for what we expect board members from those of management. They interfere from them, but for what we enjoy because of their leadership! with management, mistrust management and fail to create constructive relationships that allow space for management You recently received the Chartered Director (SA) designation. How does the to operate and grow. In some cases I have come across board designation enhance directorship as a profession? members that even envy management - they often see This designation ensures that we can test the quality of those themselves in those operational roles of management, and end that we designate as directors. At the moment, anyone can be up using their directorship to manage. a director – it largely depends on who you know! This has led to a situation where there are directors in organisations that What is the strategic role of the board in an organisation? do not have proper grounding to achieve effective directorship. Boards maintain a helicopter view of the organisation. They The quality of directors that we appoint positively correlates give strategic direction because they have this helicopter view. to the performance of the organisations that they direct. If we They control and monitor operations through effective policies want organisations that perform then we must empower them and reports that provide quality information at strategic level. with excellence in directorship. This designation creates such a They direct organisational performance to positively impact level of excellence. all six capitals of the organisation. They lead the organisation to achieve sustainable performance beyond their own tenure What is the value of the CD (SA) designation as a standard for measuring in the organisation, ensuring that it continuously improves director competence? its competitive edge. They understand and enhance the value Its value is very high in my experience. Charted Directors proposition of the organisation to its stakeholders. go through a very robust process that ensures professional quality. The fact that the designation can be withdrawn due to Are you a family person – and, if so, how do you balance the stresses of being a unacceptable behaviour of the individual strengthens their quality senior business leader with the pressures of family? and behaviour. Competence is derived from skills, knowledge and Personally I do not stress about balance. I focus on effectiveness. behaviour and this designation caters for all of these elements. I therefore strive to be effective at all levels. I have a problem of It is a great stride in the direction that will give us competent timing with balance. I always ask myself if it is an hourly, daily, directors that will, hopefully, lead to achieve great results and not weekly or monthly measure. I then realize that it is a virtue. great allegiance as we experience today. What is important is how effective am I in all aspects of my life. I therefore seek and use opportunities to be effective in all that I do. In your opinion, how does the CD (SA) designation further promote corporate governance in South Africa? What do you do to relax? Directors that hold this designation are experienced in corporate I achieve my goals with distinction! I find that achieving my goals governance and know what it entails. This designation goes fulfils me and enables me to pause without guilt. I go out with beyond the professional outlook of directorship; it provides a pool friends, engage in constructive discussions on various elements of dynamic people that are engaged in furthering our knowledge of our lives. I read books and magazines and enjoy African music, and application of good corporate governance. especially Maskandi. I work with 10 groups of artists that create and record African music; I write a drama series for a musical show A business can have great technology, people or operations and still fail to – Africa Lethumusic and compose poetry for it. I am a published poet produce results. What are your thoughts on this challenge? and novelist from a very young age. I did creative writing to relax This is the essence of the need for effective leadership. After all from my school work, and I still find it therapeutic for me. When I is said and done, the quality of people that companies engage am relaxed, I become very creative and productive. with differentiates them from their competitors. Leaders play a crucial role in selecting, shaping and directing people. Without What books are waiting to be read – either beside your bed or in your study? such leadership, companies find themselves trailing behind and I have a book by an old friend of mine since high school - Kaizer ultimately wiped out. We must align people, technology and Mabhilidi Nyatsumba: Incomplete without my brother Adonis, Askari operations in order to achieve sustained performance. Corporate by Jacob Dlamini, 23 Things they don’t tell you about Capitalism governance addresses the challenges of non-performance by by Ha-Joon Chang that I still need to read. I am reading The aligning people and resources. Arrogance of Power by Xolela Mangcu and I have just finished two inspiring books Nothing left to steal by Mzilikazi wa Afrika and Beyond the Horizon by my former colleague from Rand Water, Keith Naicker, that I also reviewed. C Director development 26

Opening doors leading to the boardroom table Dr Michelé Serfontein, Senior Manager: Director Development, IoDSA

The IoDSA offers a number of opportunities that members can take advantage of in order develop their career paths as a director.

irectors are leaders in their companies. It’s perhaps the one Part 1: TIDES of 28 assumption we make without really thinking about it. We Change May often assume that directors have been upskilled as leaders and they have all the competences required to fulfil this Part 2: Bringing out 19 30 Drole at the highest level within a business. the best in others March June As part of our Director Competency Framework (DCF), the Part 3: Change 23 23 IoDSA includes four competences that are not about technical Resilience April July competence, namely: • Act in a manner that demonstrates self-knowledge and Part 4: First Lead 21 19 self-awareness Yourself May Aug • Manage self in a manner that contributes to the activities of the board We have partnered with leading experts in the field of Leadership • Adapt to environmental needs Development through TomorrowToday and Tumi Frazier • Interact with fellow board members and management in a Consulting to deliver a dynamic programme directed at equipping manner that is beneficial to the company directors with the leadership skills required to fulfil their task. The launch of the CD (SA) certification programme in 2013 All the competencies in the DCF are included in our assessment of supported the notion that directors should deliberately plan their Chartered Director (SA). However, we have not, up until this point, career path, aligned to the DCF and aimed at ultimately gaining delivered training that addresses these four competences. Thus, the Chartered Director status. This deliberate career planning is one introduction of the IoDSA’s Leadership Development Programme of the ways in which you, as an individual, are able to increase the for Directors. This four-part programme was launched in February opportunity to be appointed as director. 2015 and is being presented during the first half of this year:

27 Four things“ come not back: the spoken word, the sped arrow, the past life, the neglected opportunity.“

The Director Development Offerings wheel is aimed at • Director’s Circles – our group mentoring sessions – to afford presented a holistic suite of offerings that can be used to craft aspiring directors the opportunity to gain insights and your career path. guidance from more experienced directors; • Board Simulation Programme and assessment points - offering a controlled, simulated board room experience to aspiring and experienced directors wanting to gain confidence in Snapshot CD(SA) their boardroom tactics through the Board Simulation Sessions Certification Programme; and Programme • Chartered Director (SA) certification programme - establishing a peer-driven certification programme that culminates in the awarding of the Chartered Director (SA) professional Events designation. Director Director’s Members are also able to upload their CVs to our database of Circles potential directors – this searchable database is used by the IoDSA Development to identify possible candidates qualifying to fill non-executive offerings directors (NED) positions that are advertised through our website. We also offer companies the opportunity toadvertise NED positions In-House through our website – the demand for this service is growing as Programmes our members respond to the call for interest. Assessment Checkpoints The IoDSA understands that in our current connected world we are spoilt for choice – business schools and universities in Director Development South Africa and internationally offer many other opportunities Programmes for you as an individual to grow and develop in terms of your requirements. But, as a professional body, we do believe that our responsibility is to ensure that you as an aspiring or experienced We have by no means exhausted all the possibilities, but we director should have a home – somewhere that you are able to at have put various offerings in place that are steadily growing as our least start or complement your developmental choices. members make use of these opportunities: “Four things come not back: the spoken word, the sped arrow, • Director Development training initiatives – half-day, one-, two- the past life, the neglected opportunity” - Arabian Proverb or four-day workshops – aimed at upskilling directors in accordance with the Director Competency Framework; We have put in place various opportunities. It is really up • Events – such as speed networking, forum events and to you as an individual, crafting your career path towards member cocktails - that facilitate the networking of attaining Chartered Director (SA) status, to use the likeminded professionals – allowing aspiring directors the opportunity. And, as mentioned a few times in this issue of opportunity to interact with experienced directors; Directorship, that will take courage. C Opinion 28

Chairman, Chairwoman or Chair? Michael Judin, Goldman Judin Inc.

or years, the use of Chairman, Chairwoman or Chair has to refer exclusively to males, although ‘man’ is derived from the fascinated me. I have had countless discussions on this with Anglo Saxon term ‘mann’ which simply referred to a human being, captains of industry around the world and locally. regardless of sex. Whenever this issue comes to mind, I am reminded of Robert’s Rules of Order written - for those of you who have Fthe famous words of Derek Walcott (the Saint Lucian poet and forgotten - by Brig. Gen. Henry Martyn Robert, containing rules playwright and current Professor of Poetry at the University of of order intended to be adopted as a Parliamentary authority for Essex) who wrote that, ‘the English language is nobody’s special Deliberative Assemblies, states that, in meetings, your presiding property. It is the property of the imagination: it is the property of officer should be addressed by title, such as ‘Madam Chairman’ or the language itself.’ ‘Mr President’. Robert’s Rules provides that an officer’s title should Imagine my joy when the article under the above rubric, by US be used as defined in the bylaws, or the rules of order. In Robert’s Attorney Keith Paul Bishop, landed on my desk! Rules, ‘Chairman’ is considered as gender neutral as ‘Director’ or In the article, Bishop writes that to someone who is not familiar ‘Governor’. (Not many female members of a board of directors or with the English language, many words must seem bizarre. One a board of governors want to be called a ‘Directrix’ or a ‘Governess’, such word is ‘chairman’. Does this refer to a chair made into a man the traditional feminine forms of ‘Director’ and ‘Governor’.) But or a man made from a chair? What should be made of a law that courtesy demands that a person’s preference as to the usage of solemnly proclaims, ‘All references in this division to “chairman” their title be honoured. Accordingly, ‘Madam Chair’ or ‘Madam shall be deemed to refer to “chair”?’ After explaining that a Chairperson’ is not incorrect if it is the preference of a woman ‘chairman’ refers to someone who officiates at a meeting, a non- holding the position of presiding officer. English speaker might ask what has that to do with being a chair. And so the debate continues. I remember once being told by a Bishop goes on to say that, etymologically, the word is a gentleman company director that he strongly objected to the use combination of ‘chair’ and ‘man’. The word ‘chair’ ultimately comes of ‘Chairwoman’, as ‘Chairman’ was a combination of the word, to us from the Greek (καθὲδρα) by way of Latin (cathedra) and Old ‘Chair’ and ‘manager’ French (chaire). Despite the changes in alphabet and spelling, (abbreviated to ‘man’) and the word has always meant essentially the same thing – a seat, that the chairman is the something on which one rested his or her tokhes. When the ancient Chair Manager, the person Romans held a public meeting or trial indoors, they usually did so managing the meeting in a building known as a basilica. Typically, this was a structure from the Chair. And containing a long, high-ceilinged room with a curved end known another suggestion that as an apse. When a trial was being held, the judicial magistrate, I once received was that known as a praetor would sit on a special chair in the middle of the the debate could be ended apse. (See, e.g., William Shakespeare, Macbeth Act I, Sc. 3 (‘And by definitively setting out look you lay it in the praetor’s chair’). Hence the man (in ancient the title to be used in the Rome the praetor was always a male) sitting on the chair was in Company’s memorandum charge of the proceedings. After Constantine became emperor of incorporation. in 306 CE, many existing basilicas were converted into churches, So I conclude with the and new churches were built following the design of pre-Christian famous words of Doug Roman basilicas. Perhaps the most famous basilica today is St. Larsen, the well-known Peter’s Basilica in the Vatican City, the current version of which was US columnist and editor, completed in the 17th century. The word ‘basilica’ is derived from the who said that if the Greek word for king, βασιλεύσ. The word ‘cathedral’ is derived from English language made the Greek words, κατά (down) and ἒδρα (seat). any sense, lackadaisical As Bishop points out, in modern times there has been greater would have something to awareness of gender neutrality and, concomitantly, an aversion do with the shortage of to gender-specific terminology. ‘Chairman’ is usually considered flowers. 29 FCB10016919JB/E

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10016919JB-OM DIRECTOSHIP NEWS 270X210.indd 1 2015/03/05 4:30 PM IoDSA FAQs 30

Director Due Diligence

What should an individual consider before accepting a board appointment?

Why undertake a due diligence of the company prior to accepting an What should be considered during the Consideration Phase? appointment? Below is a brief list of questions to consider before accepting an It is our recommended best practice that, as a prospective non- appointment as a non-executive director of a company. Please keep executive director of a company, it is critical to perform your in mind that this list is not exhaustive and is merely a guideline. own thorough examination of the company before accepting • What are the main risks the company faces and how are such a position on the company’s board. Such an investigation these risks being managed? and enquiry into the company is pertinent in order to satisfy • Does the company have sound and effective systems of yourself that the company is aligned and suited to your internal controls? perspectives, values and strategic thinking, as well ensuring • What are the key issues facing the Board? that you are capable to serve the board of the company you are • What is the company’s current financial position? considering sitting on. • What has the company’s financial position been over the Furthermore, a proper and thorough investigation allows you previous three years? to access the company’s risks and financial management, as well • Has the company achieved unqualified audits over the as identify alignment with its strategic vision and objectives at the previous years? outset in order to avoid major surprises during your appointment. • Are the non-executive directors paid? If so, how much, how often, and in line with what policy or structure? What is required in order to be a director? • Have you considered the tax implications of receiving a non- The Companies Act, 2008 (‘the Act’) section 69 clearly sets out who executive director salary? is ineligible or disqualified from serving as a director. These persons • What is the current Board composition? cannot accept an appointment as a director of a company. • Who are the executive and non-executive directors? What is Apart from this, there are currently no further statutory their background? requirements (in terms of skills, qualifications and experience • Is the skillset of the directors of the Board aligned with the requirements) to being appointed as a non-executive director of strategic objectives of the company? a company. • What is the CEO’s relationship with the Board? From an individual’s perspective, after being appointed to serve • Is there a suitably qualified company secretary supporting as a non-executive director of a company, said individual would the Board? need to deliver a his/her written consent to serve. • Are the non-executive directors kept up to date with significant happenings between board meetings? When should a due diligence be undertaken? • What are the internal protocols for a non-executive director A due diligence of the company should be undertaken during to obtain access to information? the ‘Consideration Phase’ when considering whether to accept • Is there anything relating to the nature and business of the an appointment or not, as well as during the ‘Subsequent company that would bring into question your personal Appointment Phase’ which is when an individual has accepted an ethical consideration? appointment as non-executive director of the company and needs • If the company is not performing well, is there potential to to familiarise and acquire further knowledge on the company. turn it around? 31

• Is this a good career move? As can be seen from the above questions there are many • Are you being brought into the Board to bolster an existing factors and questions to consider in order to effectively conclude group, or to bring something new to the Board? a thorough due diligence of a company before accepting an • What is the total time commitment, and are you able to appointment, as well as a subsequent appointment. provide same? This should factor in Board meetings, reading time and site visits, etc. The aforesaid list is not a complete recommendation and was drawn in substance from a paper issued by the Corporate What should be considered during the Subsequent Appointment Phase? Governance Network forum. This paper in its complete version Below is a brief list of questions to consider after accepting an can be found on this link http://c.ymcdn.com/sites/www. appointment as a non-executive director of a company, in order to iodsa.co.za/resource/collection/05E93ACB-10BE-4507-9601- familiarise yourself with the company. Again, please keep in mind 307A66F34BD8/IoD_Due_Diligence_Brochure.pdf. that the below stated list is not exhaustive and is merely a guide. The paper does provide further insight into the rationale behind • What is the legal status of the company? each of the considerations, as well as suggested methods of • What is the company’s history? finding the information.C • What is the company’s vision mission, values, as set by the Board? • Who are the company’s major stakeholders? • Who are the company’s major competitors? • What is the company’s competitive position and market share in its main business area? • Has the company issued an integrated report? • Who are the company’s auditors? How long have they served the company? • Does the company apply any governance guidelines, or King III? • Have you reviewed the Board policies? Inclusive in this is the Board charter, the Board code of conduct, conflicts of interest policy, induction policy, director development Parmi Natesan Tanya Nassif Vikeshni Vandayar policy, Board effectiveness evaluation policy, and the Executive: Centre for Governance & Legal Governance & Legal delegation of authority. Corporate Governance Specialist Specialist [email protected] [email protected] [email protected] IoDSA Governance Cartoon Series Chartered Directors (SA) 32

Profiling of CD(SA)

uch interest has been shown in gaining the Chartered Director (SA) professional designation through the IoDSA. To this end, we are profiling groups of certified CD(SA)s to provide you with an overview of the designees. There are currently 34 CD(SA)’s listed on the IoDSA CD(SA) National Register (http://www.iodsa.co.za/?page=CDSARegister). Here we profile ten of the Mcurrent designees. Professor Linda de Beer Godfrey Gomwe Independent Non-Executive Director Chairman, Anglo Zimele (Anglo American SA) Linda de Beer is a Chartered Accountant Godfrey Gomwe is currently the SA, a Chartered Director SA, and holds Executive Director of Anglo American a Master’s degree in taxation. She is an South Africa, a role that sees him acting independent non-executive director, as Anglo American’s key representative reporting and governance advisor, and in South Africa, working together with visiting professor in Accounting and Anglo American’s Business Unit CEOs Auditing at the School of Accountancy to deliver the Group’s strategy in the at the University of the Witwatersrand. region. Godfrey was recently Head of She serves as an independent non-executive director on the Group Business Development, Africa for Anglo American, and boards of three JSE listed companies, chairing the audit and has previously been Finance Director and Chief Operating risk committees of two, and is on the board of a not-for-profit Officer of Anglo American South Africa. He is Chairman of company in the tourism industry. In addition, she facilitates Anglo Zimele and the Transformation Committee of Anglo training for the JSE and the IoDSA on topics such as the American South Africa. Companies Act, corporate governance, King III, finance and the JSE Listings Requirements.

Dennis Zietsman Simo Lushaba Group Deputy Chairman, Servest Independent Non-Executive Director Dennis Zietsman co-founded the Servest Dr Lushaba started his career at SA Group 17 years ago. Initially he was the Breweries as a brewer. He later became Financial Director, became the Managing General Manager at National Sorghum Director, and then finally the CEO, a Breweries. He worked at various position he held for five years before being senior management levels in Spoornet appointed Group Deputy Chairman. (now trading as Transnet Freight Rail) Dennis was initially with the Nedbank including being a General Manager: Group prior to starting a boutique Operations, before becoming Chief corporate finance consultancy with two other partners, called Executive and Managing Director of Rand Water in 2002. Vector Financial Services. After selling his shares in the business Dr Lushaba then accepted the position of Vice-President he joined PWC Corporate Finance in Mergers and Acquisitions. Shared Business Services at Lonmin Platinum, and held this After he left PWC Corporate Finance, he spent some time with position until March 2007. He is presently consulting as an Anglo Platinum managing the Group’s restructuring, capital independent, and is a facilitator of corporate governance raising and foreign ADR listing programme. programmes for the IoDSA.

Anton Giani Executive Director Tito Mboweni Anton Giani has been an executive Independent Non-Executive Chairman, Nampak director for the last 19 years. From Tito Mboweni is the Independent Non- 2005 to 2006 he served on the board Executive Chairman of Nampak. He of Nicro Enterprise Foundation as a previously served as Governor of the South non-executive, and was the Chairperson African Reserve bank as well as Minister before it was sold. In 2007 he was of the Department of Labour. Mboweni appointed to the Board of the Lesotho also served as a Professor in Economics Highlands Development Authority as at Stellenbosch University. He stepped a non-executive, with the added responsibility of being the down as chairperson of AngloGold Ashanti Chairperson of the Audit and Risk management committee. Limited in February 2014. He served on the IoDSA Council from 2009 to 2010. Chartered Directors (SA) 33

Enjoying Directorship?

Hixonia Nyasulu Why not explore the rest of the Non-Executive Director, Unilever Future Group’s products and Hixonia Nyasulu is the Founder and Executive Chairman of Ayavuna Women’s services? Investments. She is also a Non-Executive Director of Unilever. Nyasulu holds B.A. Hons in Psychology (Hons) and a B.A. in Social Work.

Allen Morgan Non-Executive Chairman, Bio Therm Energy Allen Morgan is the Non-Executive Chairman of Bio Therm Energy Limited. He is also an Advisor on the Advisory Board of Alexander Proudfoot South Africa, serves as Director of Imalivest Limited, and as Non-Executive Director of Lomold Limited.

Mutle Mogase Executive Chairman, Vantage Capital Group Mutle Mogase is the Director of Incwala Resources. He also serves as an Independent Non-Executive Director of African Bank Investments Limited.

We think about your business www.thefuturegroup.co.za IoDSA events 34

Leadership Developement Programme launch The IoDSA continuously strives to offer training that will lay the knowledge foundation underpinning the competencies contained in the Director Competency Framework. To this end, on 10th of February, we hosted an event to launch our Leadership Development Programme for directors.

Business Speed Networking event Our business speed networking sessions are for directors wanting to increase their business contacts and get exposure to new markets. We recently hosted one on the 12th of February. 35 Would you Budget Breakfast Presentation with Dawie Roodt Economist Dawie Roodt unpacked the Budget, identifying jump the challenges, highlighting some recklessness and analysed the current state of the country’s finances at a function in Cape Town off a cliff for your company? No one would ever jump off a cliff into the roaring ocean if the motivation for doing so was not securely rooted in a high-value proposition. This just means that you have to know what it is that you are taking the risk for, and it must be worth it. We all take calculated risks to achieve the goals we set for ourselves, but what about the risks you are not aware of. Sharks might be circling, while you are busy worrying about water temperature.

This analogy can be translated directly to the world of business if corporate governance is not properly implemented. So, what should you know: 1. Corporate governance is as much a part of healthy business as a well- maintained balance sheet. 2. Any director and manager of a business that has any decision making power that affects other people inside and/or outside the company has a lawful obligation toward those people 3. The companies act has given governing bodies the teeth to act on non- compliance in this regard, and it will hurt your business. 4. Good governance involves strategic decision making that can not only take away the risk of being pursued, but also help you achieve your goals. 5. Good governance also required a lot of administration and legal footwork that 80% of SA businesses are not geared to handle inhouse. 6. We can do the work for you and assist you to get the reward, without the risk.

So, take the plunge and contact us, so that we can help you with all your corporate governance needs, from company registrations and estate planning to prescribed ofﬁ cer induction training.

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1197_Directorship Magazine(270X105)Rep.indd 1 2015/02/26 12:38 PM Member profile 36

Without financial education, consumers

are unable to evaluate the appropriateness “of financial products in“ relation to personal circumstances – they are exposed to predatory lending, pyramid schemes, financial scams and high penalty fees.

Ingrid Goodspeed Chief Director: Financial Sector Development, National Treasury

ngrid Goodspeed is the Chief Director of Financial Sector position as Chief Director of Financial Sector Development in the Development in the National Treasury and has a wealth of Treasury in September 2010. experience in the banking and financial market industry, “My role involves taking responsibility for the design and with nearly 30 years specialised knowledge in the areas of legislative framework of the financial sector as a whole, and Itreasury, risk management, compliance, investment, analysis, working alongside regulatory agencies such as the Financial economic research, internal audit, information technology and Services Board, Banking Supervision and Exchange Control – now management information. referred to as Financial Surveillance – departments of the Reserve Goodspeed has numerous degrees from the University of Bank and the Financial Intelligence Centre,” Goodspeed explains. South Africa (UNISA), including a Bachelor of Commerce in She also serves as a dissertation supervisor for post-graduate Accounting and Economics, Honours in Economics, a Master students of the Master of Business Administration (MBA) degree at of Business Leadership (MBL) – graduating cum laude – and a De Montfort University in Leicester, England and sits on the Board Bachelor of Laws (LLB). of Governors of the South African Institute of Financial Markets. “I began my career in the banking sector, specialising in Treasury Financial education is an issue close to Goodspeed’s heart, and and international banking systems,” she reveals. She gained she is an advocate for the need to educate South Africans at all experience as risk and compliance manager at micro-finance levels. “Without financial education, consumers are unable to institution for the mining sector and lower-income workers, Teba evaluate the appropriateness of financial products in relation to Bank, as well as serving as an associate director in the financial personal circumstances – they are exposed to predatory lending, services team at Deloitte and Touche. pyramid schemes, financial scams and high penalty fees,” she In 2006 she moved to Nedbank, where she worked as head says. “All financial sector stakeholders, including government, of market risk framework, enterprise risk manager and head of regulators, banks, insurers and labour have a role to play in market and operational risk audit. From there, she headed the financial literacy – but their efforts should be co-ordinated and operational risk department at Absa Wealth, before taking up the focused where they are needed most.” C 37 Lifestyle 38

Book reviews

The Naked CEO The Hard Thing About Hard Things The Truth You Need to Build a Big Life Building a Business When There Are No Alex Malley Easy Answers Wiley, 2014 Ben Horowitz HarperBusiness, 2014 Business leader Alex Malley, the CEO of CPA Australia, offers basic training Ben Horowitz guided Loudcloud for young people at the start of their through life-or-death struggles before careers. Malley shares worthy advice selling it to Hewlett-Packard for $1.65 on networking, writing a résumé, billion. He argues that no formula interviewing, finding your passion, can promise entrepreneurial success. learning to cope with failure and Horowitz is a first-rate storyteller and becoming a leader. Some of his tips a refreshingly irreverent teacher who are generic: Be yourself; have a firm uses allusions ranging from Jay Z to Clint handshake; set goals. But his underlying Eastwood to Dr Seuss. Any business message is much more individualised and provocative: “Nothing leader will find worthy guidance in this exhortation to persist great comes easily,” he says. Growth – stretching yourself – is the through ‘the Struggle’. getAbstract recommends Horowitz’s part true goal of a business career, and you grow through struggles autobiography, part tip sheet to anyone building a company. and challenges. Malley argues that when you like your job and your co-workers, and you reach a certain comfort level, it’s time to look elsewhere. Unfortunately, he presents most of his advice as abstract instructions, though readers may wish he’d offered more war stories from his experiences to illustrate his concepts. Nevertheless, getAbstract warmly recommends this wide- ranging compendium of career wisdom to young professionals starting or changing their careers.

Executive Presence Tomorrow’s Lawyers The Missing Link Between Merit and An Introduction to Your Future Success Richard Susskind Sylvia Ann Hewlett Oxford UP, 2013 HarperBusiness, 2014 The legal profession is usually pretty In the words of one Wall Street CEO, stable. For decades now, young “I can’t describe it, but I sure know it attorneys could make reliable when I see it.” Most people intuitively assumptions about their futures at law recognize ‘executive presence’ (EP). It’s firms or in-house legal departments. a rare combination of vision, charisma, But, according to legal futurist Richard drive and intelligence that marks Susskind, the profession of law is about great leaders. Workplace expert Sylvia to change fundamentally. During the Ann Hewlett breaks EP into its three past 25 years, Susskind’s legal industry parts – ‘gravitas, communication and predictions have been proved accurate, appearance’ – and reveals the secrets to attaining all three. so his description of likely dramatic future changes for lawyers Hewlett’s guide is chock-full of examples set by impressive is credible. getAbstract recommends Susskind’s analysis (some of leaders, and she outlines blunders to avoid and strategies to which is more current diagnosis than future prognostication) to get ahead. getAbstract recommends her insights and tactics to young lawyers, partners, and anyone with ambitions in the field anyone aspiring to or currently holding a leadership position. of law. Older attorneys and leaders of law firms and in-house legal departments will benefit by considering Susskind’s predictions and making the operational changes needed to stay current.

The IoDSA partners with getAbstract getAbstract is a service that summarises the most influential business books published throughout the world and is included as part of the IoDSA membership.

To access your account, follow these steps: Log on at: www.getabstract.com/re/iod Essential business reading brought to you by the Username: Please use your email address provided to the IoDSA IoDSA from getAbstract. Password: Please use your IoDSA membership number 39

WINE - Fakes, robbers and worse

ome see the world of wine as dull and boring, yet nothing something I have written about previously. Is there another could be further from the truth. Intrigue, counterfeiting, name, or secondary name, e.g. Meerlust and Rubicon? What is robbery and even murder are all prevalent. After all, as the cultivar or blend? What is the vintage, if indeed it is relevant; wine becomes increasingly valuable, so it becomes more and finally, where is the wine from, or does it matter? Depending Ssought after and a target for criminality. How do you know when where in the world the wine originates, there may well be strict something is the real thing and totally genuine? In the world of protocols to be followed. wine that might not be too easy for most of us. Blind tasting is a The back label, if I get that far, often exhibits some of the worst challenge. copywriting ever. As Jancis Robinson of the Financial Times asked While there are some members of the international wine recently, so what if the wine is described as flinty, with mineral cognoscenti who belittle the entire relevance of branding, in the notes? There is no direct relationship between a wine and the world of vinous matters, I still argue their logic is tainted. Brands, geology of a vineyard. That’s a debate in itself! She goes on to after all, generally act as proof of the supplier, the provenance - point out that while Chateau Lafite has no back label, Blossom ‘signposts’ as we go about our lives continually making decisions Hill Moscato will deliver ‘ripe aromas of freshly crushed grape and about the brands we consume, associate with and trust. The tangerine with soft melon and lime fruit and a clean crisp finish’. choices can be very confusing. The concept of a brand came about Locally, we see terms such as best value; 20% more; limited to indicate the origin of something, and sometimes to show edition; barrel-fermented; export quality; meticulously blended; ownership, as with cattle, but over time as goods proliferated, the classic; reserve… which often may be of little or no relevance. brand became a trust mark and an experience. But I do have to ask, how many of us really know what we are If you are prepared to make a considerable investment in a good drinking? Keeping it fairly simple, just knowing a Chenin Blanc bottle of wine, you want to ensure it is genuine and will deliver on from Semillon, Sauvignon Blanc, Chardonnay, Sauternes or its promise. And I am not necessarily talking about paying R1 000, Pinotage from Syrah, Merlot, Cabernet Sauvignon, Cabernet Franc R10 000 or even R100 000 a bottle. For some, even around R100 and, say Malbac, would be challenging for some. Today, many is a stretch. For total peace of mind, its best to go to the cellar new cultivars are being introduced as South Africa continues to door or your local wine merchant. join the global scramble. Looking at some labels, I am totally bemused by those who Space doesn’t allow me to talk in detail of fakes – although make the cultivar the most prominent item. Mind you, someone beware of auctioneers. And remember some 20% of the wine tried to pour me some ‘sweet red’ the other day. In my student consumed in the UK is not what it seems; that robbers are days, perhaps, but not today, thank you. After all to say ‘Red’ or targeting top restaurants and estates; 5,000 bottles were stolen ‘White’ or ‘Merlot’ or ‘Chardonnay’ is only the first stage of taking a from Bolney in the UK, and with murder most foul of a Chinese customer, consumer or buyer (and all three have different nuanced businessman in France just as he was buying up a local estate. needs) through the purchase process. They are commodities at Boring, it is not. More in the next issue. C the lowest price point. When looking at a label what is the first thing you notice? I Jeremy Sampson start by dissecting the front label. What is the name of the estate, [email protected] farm, winemaker, parent – and here I may be given visual cues, Leading corporates choose us to structure their BEE Ownership transactions. You should too. PARTNER SELECTION | EMPLOYEE & BROAD-BASED OWNERSHIP | EQUITY EQUIVALENTS

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Formulating the Fusion Wynter Murdoch

Ford has incorporated in its just-released Fusion line-up a selection of enticing, high-tech features and options that it hopes will help it to break the Audi-BMW-Mercedes-Benz stranglehold on the premium class, family car sector.

ord’s Fusion – billed as a replacement for the Mondeo accommodate up to 453 litres of luggage – with elongated, in South Africa – is a coupé-like, five-door family-sized wraparound tail lamp units on either side stacked with bright red, sedan that aims at taking the fight for market share to the orange and white LEDs. segment’s leaders – premium class models such as Audi’s A4, Similarly, LEDs are used in the laser-cut headlights, Ford’s FBMW’s 3-Series and Mercedes-Benz’s C-Class. spokesmen being particularly proud of the fact that, on top-line Though other significant rivals include Honda’s Accord, Titanium models, the units feature adaptive technology to help Volkswagen’s Passat and Mazda’s 6, Ford has incorporated in drivers to see around corners when driving at night. On lesser- the Fusion line-up a selection of enticing, high-tech features specified Trend derivatives – which are equipped with Halogen and options that help to elevate the model above its station – in projector lamps – static cornering lights are used to illuminate the process making it a tempting proposition for premium class sections of the road when the steering wheel is turned. consumers looking for what could be perceived as a bargain buy. Certainly, on the road the car feels cultivated and is whisper-quiet First thing to know is that, in the metal, the Ford appears larger at speeds of up to 120km/h, measures to counter noise, vibration than a BMW 3-Series – more akin in size to a 5-Series model. and harshness falling into the superior category no matter which Styling lines are sharp, and help to emphasise length, lending derivative is under scrutiny – baseline 1,5-litre Ecoboost Trend; sleekness to a body that’s about 120mm wider than that of the 2,0-litre Ecoboost Trend; 2,0-litre Ecoboost Titanium, or the top-of- previous generation Mondeo’s. the-line, diesel-powered, 2,0-litre TDCi Titanium. The stretched bonnet – traditionally the symbolic preserve Of the engines – all of which sport four cylinders and which drive of upper-crust brands – is made more noticeable by a bulging through six-speed automatic transmissions – the 1,5-litre plant power dome, and is fronted by an imposingly large trapezoidal surprises for its levels of spritely responsiveness. With 132kW and grille that is either silver-slatted or honeycombed, depending on 240Nm on tap, it’s capable of delivering a 0 to 100km/h time of 9,2 model specification. seconds and a top speed of 218km/h, according to Ford’s figures. Like many up-market coupés, the rear end is set high – the Comparatively, the more muscled 2,0-litre plant delivers 149kW boot-lid hiding a deep and wide cargo compartment that can and 300Nm when fitted to Trend derivatives, and 177kW and 41

While the model’s driveability factor is rewarding, benefits linked to a well-designed, quality-styled cabin enhanced by an array of assistance systems are equally appealing. The list of features includes Pre-Collision Assist which detects a potential collision and automatically applies the brakes if the driver does not respond to warnings, the information processed from a windshield-mounted camera and radar located in the bumper. Also, automatic braking is utilised by Active City Stop which operates at speeds of up to 40km/h, while Adaptive Cruise Control automatically maintains a chosen distance from a vehicle ahead. Lane Keeping Aid is designed to keep the Fusion in its designated lane, with Traffic Sign Recognition providing the driver with the latest detected speed limit, cancellation signs and overtaking restrictions via the instrument cluster display. Other enhancements include an advanced version of Active Park Assist which features perpendicular parking to enable drivers to detect suitably-sized parallel and perpendicular parking spaces and reverse hands-free into spaces. The technology is supported by Park-Out Assist, which helps drivers to exit parallel parking spaces safely by issuing warnings of obstacles to the sides of the vehicle, as well as to the front and rear. From a family-car perspective, at least as important to consumers is the spaciousness of the interior – especially in the rear. While not quite limousine-like, Ford quotes 973mm of legroom and 960mm of headroom at the back – enough for a good stretch-out even for tall passengers. On the downside, the spare wheel mounted in the copious boot is of the space-saver variety. And Trend derivatives are fitted with steel wheels rather than alloys, the latter available only as extras. Built on Ford’s new global CD-segment platform, the Fusion is said to utilise sophisticated materials and production techniques in chassis and body shell to deliver greater strength and improved safety with reduced weight. Comfort and convenience features in Titanium derivatives include a power-adjustable, memory-equipped steering column, multi-contour seats with a massage function and Ford’s voice- activated SYNC 2 connectivity system. MyKey technology – which enables a secondary ignition key to be programmed to restrict particular vehicle functions, including top speed, incoming phone calls and the maximum volume of the audio system – is available across the range. While it’s too soon to judge whether or not the Fusion will succeed in denting the popularity of the German triumvirate, the model is certainly a contender for top-six status in the mid-size- 340Nm when bolted into models bearing Titanium badges. sedan class, thanks to its convincing impression of premium-class Though the first-mentioned unit cuts the baseline model’s sprint sophistication. While its steering isn’t as sharp as that of some of time by half a second, the gain is hardly noticeable from a behind its rivals and its transmission isn’t as snappy, it offers good levels the steering wheel perspective. of comfort and composure, and represents an improvement over The more powerful 2,0-litre plant responds better from a the Mondeo it replaces. C performance point of view, lopping more than a second off the 1,5-litre derivative’s time and taking top speed to 240km/h. However, the unit lacks the punch of a V6 such as that favoured by Honda for its Accord, the aim in the Fusion application PRICES AUDI A8 appearing to be to contain fuel consumption, with Ford quoting Fusion 1,5 EcoBoost Trend R349 900 the combined cycle figure at 8,5 litres/100km. Fusion 2,0 EcoBoost Trend R369 900 If it’s fuel-saving you’re after, however, the flagship Fusion’s Fusion 2,0 EcoBoost Titanium R424 900 turbocharged diesel engine is the unit to consider. The 2,0-litre Fusion 2,0 TDCi Titanium R449 900 plant is purported to sip just 5,1 litres/100km in the combined cycle, combining frugality with responsive performance from Service intervals for petrol-fuelled derivatives are set at 20 000km and, for the diesel variant, 15 000km. All models carry its 132kW/400Nm output, the high level of torque contributing a four-year/120 000km warranty and a four-year/80 000km to the vehicle’s ease in maintaining good momentum whether service plan with three years of roadside assistance moving in traffic or on the open road. Lifestyle 42

TRAVELTravel – 4 hours - Four in Guangzhou hours in Casablanca

Sun Yat-sen Memorial Hall Sun Yat-sen Memorial Hall, situated on the southern slope of Yuexiu Hill, was constructed between 1929 and 1931 as a monument to the forerunner of the Chinese democratic revolution, Dr Sun Yat-sen. The hall, an octagon in the typical Chinese architectural style, contains a span of 71 metres without any supporting pillars, and offers significant outlooks and delicate interior designs. The oldest ceiba tree in Guangzhou grows in the hall, as do two of the city’s largest white jade orchid trees. A bronze statue of Dr Sun Yat-sen was erected in front of the memorial hall in 1956. Sitting slightly inland from China’s fractured southern coastline, Guangzhou is one of mainland China’s leading commercial and manufacturing regions. Its long history has assembled a city with both traditional Chinese structures and modern Western architecture. If you find yourself in the city with a few hours to spare, Kate Kennedy has some ideas of how to pass the time.

Zhenhai Tower The five-storey Zhenhai Tower, at the top of Yuexiu Mountain, is home to the Guangzhou Museum. It is also known among the locals as the Five- Dong Bei Ren Restaurant Storey Tower. It is reputed to be one of the best Bringing flavours from the north-east of China to Guangzhou, preserved examples of Chinese architecture. The this is a very popular restaurant and is always busy, noisy, museum shows the changes and development of and crowded. Don’t let that put you off though, as the food Guangzhou’s culture, customs and the city itself is delicious – it’s full of dark, rich tastes that contrast sharply through the display of ten thousand cultural with subtle Cantonese food. Although the menu is not in English there relics, pictures and historical data. A visit here are lots of pictures, and although staff can’t speak any English, it is still will impart a deep understanding of the city’s frequented by many non-Chinese. There are plenty of choices on the culture and history. menu for vegetarians, too.

Temple of Six Banyan Trees With a long history of nearly 1,400 years, the Temple of the Six Banyan Trees is one of the best Buddhist temples in the city. It houses a rich collection of cultural relics. Originally built in 537AD, the temple has been rebuilt several times. After entering by the mountain gate, visitors are greeted in the Tianwang Hall by the Laughing Buddha. Inside, there is a pagoda known as Six Banyan Ba Shu Xuan Restaurant Pagoda or Flowery Pagoda, Ba Shu Xuan is a ‘Hot Pot’ restaurant where Buddhist relics are placed. serving Chinese hot pots – a popular To the west of the Six Banyan Northern Chinese dish cooked in a small Pagoda is the Daxiong Baodian stove in the middle of a round table with. Hall, where three large copper A large dish of spicy soup is placed on the stove Buddhist statues are on display; and diners receive a selection of raw meats and they represent the past, present vegetables to cook in the soup. and future. 43

Canton Tower Yuexiu Park The Canton Tower serves as both a facility The park covers 928,000 square metres and includes three for radio and television transmission and artificial lakes, a sports playground, natatorium and art a tourist attraction. The stout of heart can gallery. Visit the Five Ram Statue, the Haiyuan Pavilion, the enjoy a ride in the highest horizontal Ferris Ming dynasty city wall ruins, Sifang Batteries, and memorial wheel on the periphery of the platform, which offers a stone archways. Across Jiefang Road is the Guangzhou Orchid Garden, bird’s eye view of the City. The revolving restaurant, at where you can enjoy a cup of tea, brewed the traditional Chinese way. 424 metres, can seat 400 guests and serves gourmet food from around the world. At the base of the tower is a display of information about the city, including history, culture, economy and tourist attractions. At night, the tower glows and emits light rather than being uplit. Every node in the lighting design is individually controllable to allow for animations and colour changes across the entire height of the tower.

Made in Kitchen Made in Kitchen is a fusion restaurant, serving many types of food including Japanese, Cantonese, Thai, and other Asian cuisines. The large, open-plan kitchen allows diners to watch the chefs at work. The design of the restaurant is elegant, simple and modern. There are two sections; one is a big lobby for the Asian fusion food, and is very noisy, while the other is for Western food and is very quiet.

Sacred Heart Cathedral The Sacred Heart Cathedral is one of the oldest churches in Guangzhou, and the largest Gothic-style Roman Catholic Church in Southern China. Located on the north bank of the Pearl River, the church stands in the heart of the busy old town. It was consecrated in 1888 after 25 years of challenging construction – none of the Chinese workers at that time had seen a western cathedral before, let alone built one, and it was also tough for them to communicate with the French clergy who commissioned the building. Last word 44 In search of stationery’s Holy Grail Jeremy Maggs

n spite of what many of you think, I do actually work in an ballpoint. She examines the old one with microscopic intensity, office. Not, as one angry reader suggested, under a palm tree chews you out for chewing the top, and sometimes says you have on the island of Bora-Bora working my way thought buckets 200 words more ink left. And often she’s absolutely right, as you of cocktails served by comely island ladies who also transcribe shamefacedly shuffle off. Imy astute observations on the business community. Notebooks are also closely audited, and should you have left a No, I have a little desk in the corner of an uncarpeted open- single page blank, your request is instantly denied. And don’t even plan office where I, too, am driven to distraction by colleagues think of the fun stationary. Ink pads and stamps which you can bellowing shallow inanities into the phone and creating use in a pretend game of passport control officer during a lunch atmospheric discomfort as they unpack their garlic, egg break are reserved for senior managers only, and preferably ones mayonnaise and well-worn-sock sandwiches. I hate them all, but with a good war record. Paper clips, the plasma of any good office, just smile and get on with it. How right Henry David Thoreau was are doled out in clusters of three, and never the brightly coloured when he said: ‘Most men lead lives of quiet desperation and go to ones - the sensible silver ones only. the grave with the song still in them’. Most recently she’s been put in charge of new office technology, Every third Tuesday that hidden song of hope turns into a and trying to sign out a phone or tablet charger or a cable for a silent scream in my heart as I join the queue for my allocation of laptop is much like a Dan Brown novel where a search for the Holy stationary. That’s, of course, if you are lucky to get it. Grail is long, arduous and tortured. Most of us now buy our own The Hauptwachtmeister of pens, Post-Its and paperclips is one stationary these days, which enabled her department to realise Bruhnhilde Messerschmitt, a formidable big-bosomed woman savings of R200-million last year. who is also in charge of debt collection. She has never failed to Hence the reason why Frau Messerschmitt is able to afford a collect money in her 60 years of calling and chasing. She stands, yearly cruise on the Rhine, and her own sauerkraut farm. C arms-akimbo, in front of the treble-locked cupboard and, like a distant Gestapo forebear, interrogates your need for a new 45 Do you want to stand out from the rest?

The IoDSA’s Leadership Development Programme for Directors The IoDSA is partnering with TomorrowToday and Tumi Frazier to present our own Leadership Development Programme. The main purpose of introducing this programme is to address the social competencies (SC) and personal competencies (PC) included in our Director Competency Framework.

The four part series includes four carefully selected topics, namely: • Part 1: TIDES of change • Part 2: Change Resilience • Part 3: Bringing out the best in others • Part 4: First Lead Yourself

To book email [email protected] ENSafricaLTFIadA4Feb2014