During a recent visit to a neighbouring East African country, a colleague recollected his nerve-jangling experience as the company secretary for a parastatal. As with all parastatals, the board of directors is made up of appointments emanating from the line ministry. Depending on what the line minister ate for breakfast that morning, recommendations on board director appointments can be anywhere from sensibly appropriate to downright bizarre. In the case of this parastatal, which for purposes of this piece we shall call EACB, a number of the directors fell into the latter category, top of which was Director Mary.
Mary sent an email to the company secretary, attaching a brochure for a training event that was to be held in the United States. The training was on sustainable mining practices in the 21st century. The company secretary scratched his thinning hair. The parastatal was in the agricultural industry and therefore the subject matter of the proposed training was completely irrelevant.
But as he scrolled down the screen, his fingers nearly slipped off the mouse in shock. The cost of the training was an eye watering $68,000 (Sh6.8 million) for one participant, and this was before flights and accommodation. The entire training budget for directors that financial year was the princely amount of $32,000 or Sh3.2 million. He stood up and took a walk around the building, just to compose himself and the staccato fire of thoughts that were ricocheting around his mind.
When he got back to his desk, he consulted the CEO of the organisation who was as dumbfounded as him when she heard not only the cost, but also the irrelevance. She supported his view that they should decline the request.
The company secretary then sent a polite email to Mary telling her that it was not possible to send her for that training due to the cost being above budget, as well as irrelevance of the course to the institution. Mary fired off a series of emails back to the company secretary, using many less-than-flattering choice words that described him as incompetent and petty. By this time, word had reached the company secretary that Mary was angling for a position as a permanent secretary to the ministry in charge of mining.
The purpose of the course was to give her a leg up in demonstrating that she had the professional qualifications to do the role. Having got support from the board chairman, the company secretary stuck to her guns.
At the next board meeting, once the opening protocols had been dispensed with, Mary fired the first salvo: “The company secretary is inept and should be fired for disrespecting a director.” The chairman, who was clearly a card carrying member of the I-got-your-back club, stepped in and managed to nip that inane discussion in the bud.
A few months later, Mary was indeed appointed to the mining ministry and she stepped off the parastatal board. Within nine months of her senior ministry appointment, she was fired. For wanton, brazen corruption. The end.
We got to talking with this company secretary about his experience as he described the difference between private and public sector corporate governance. “Public sector directors have a sense of entitlement in this country,” he mused. “They view the resources of the parastatal as being theirs to use.” As he was now in the private sector, he marvelled at how the directors of his current board were focused on ensuring that the organisation’s mandate was delivered in as cost efficient and profitable a manner as possible.
“Why do you think that is the case?” I probed. “Pedigree,” was his singular response. According to the company secretary, the pedigree of who was selecting the public sector directors as well as the pedigree of those selected determined the outcome of what would happen to the organisations on whose boards these individuals would sit.
Pedigree in this case went outside of biological breeding. It was a function of education, motivation, exposure and the ubiquitous and, quite frankly, over-mentioned quality of integrity. Perhaps because of the proximity of the shareholder to the board of directors, poor director selections can be dealt with swiftly and unapologetically. Let me hasten to add, in most cases.
However, in the public sector, the shareholder is represented by a multiplicity of interests, is amorphous, shifts and changes according to the political wind blowing on that day and, finally, can be prevailed upon to tolerate mediocrity in the boardroom by using the very same multiplicity of interests.
Which then opens up an interesting subject for debate: should public sector directors be appointed or should they apply for the roles competitively? More on this next week.