LETTER: Diversity is unlikely to fix conflicts of interest on corrupt boards
The roles of directors and informed shareholders are inseparable in too many governance environments
The spotlight has fallen on the role of boards, especially regarding poor and sometimes corrupt decision-making and practices in a number of diverse companies.
The editorial (“Rush Offshore Wreaks Havoc”, March 12) stated it properly saying that the value destruction “ultimately boils down to poor decision-making by well-paid management and boards”.
In an article written by Munya Gwanzura, it is suggested that diversity holds the answer to effective boards (“Board Diversity Is the Bedrock of Good Corporate Governance”, March 13).
While diversity at all levels in the workplace is well-advised and needed to ensure proper social and economic transformation, we should be careful not to think that diversity will necessarily resolve the greatest flaw that face boards — conflicts of interest. In too many governance environments the roles of directors and informed shareholders are inseparable and we all know when faced with that choice, self comes first.
Often the shareholding is not direct, but is represented by a network of patronage that stretches over decades (hence perhaps a look in the direction of diversity, as a break from the old boys' school tradition).
But ultimately we need to recognise that good governance relies on the relationship between three roleplayers — directors, the management and shareholders. In almost all cases of failure, some of these boundaries were allowed to become blurred and created the climate for value destruction and corporate delinquency, otherwise known as grand-scale corruption.
The history of boards shows that they were originally established to protect citizens against exploitation from monarchies and governments. Nowadays, many boards have shown scant regard for individual investors who trusted them for greater oversight.
Corporate governance, despite all the tick-box codes of practice, is more diseased now than ever before.