Today, there is a demand for greater transparency, accountability and responsible governance.
Board members holding multiple directorships introduce tangible risks, as these "connections" increase the likelihood of a conflict of interest. This was the word from Andr'e St"urmer, CEO of data and information services provider Inoxico, who unpacked the findings of Inoxico's Director Singularity Index (DSI) report at an event in Illovo yesterday.
The DSI report highlights the possible divided allegiances that can emerge when executives hold multiple directorships of JSE-listed companies, with board size, the age of board members and gender cited as factors that increase conflict of interest risk.
"There is empirical evidence that our DNA does not allow us to be objective when we are conflicted," said St"urmer, quoting Michael Judin, of Goldman Judin Attorneys. "Transparency is critical here," he added.
According to St"urmer, Inoxico's research into the board memberships of various JSE-listed companies has been endorsed by EY and the Gordon Institute of Business Science (GIBS). He noted that the company will be working with the two parties on future projects.
In 2014, Inoxico, in collaboration with EY and GIBS, will be undertaking a longitudinal study of how board composition has changed over the past 20 years. As well as looking at a broader range of executive positions, Inoxico also plans to apply the DSI to some of the largest state-owned enterprises and unlisted companies, with plans to extend the research across Africa.
"Good governance practices require companies to proactively understand and manage risks associated with operating in complex national and international regulatory and legislative environments," said Jeremy Grist, director of climate change and sustainability services for EY Africa.
"The value of information lies in its ability to provide relevant, actionable intelligence. This will help you to know what kind of risks you are exposed to. As soon as you are conflicted, you cannot be objective anymore," St"urmer concluded. "While trust is good, knowing is better."
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