With the financial and governance issues that have affected the reputation and financial health of companies such as Eskom and Oakbay Resources and Energy (Oakbay), questions arises as to how a director exercises his/her fiduciary duties towards a deteriorating company.
Directors need to step back and see which issues he/she should consider before joining a board. A good start could be for a director to understand his/her own motives for wanting to join a specific board.
An aspiring director should also consider the financial and governance health of a company in assessing whether it is wise to join the board. If these check out and the director has the relevant skills to make a contribution to that board, then it is an easy decision to accept the appointment.
The decision becomes more complex if you are dealing with a dysfunctional board or a company facing financial issues, particularly if it is due to a governance failure.
Exercising directors’ fiduciary duties and acting with due care and skill has become arduous in recent years, partly due to the increasing requirements encapsulated in the Companies Act 71 of 2008 and partly because of the ever-increasing governance requirements directors must meet. Also, directors’ liability has become more onerous, as in some instances a director may be liable where matters go wrong in a company.
So, what should a director do if approached to sit on a troubled board? After doing a…
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Read this article by Joanne Matisonn, Head: Corporate Governance TMF Group South Africa, as well as a host of other topical management articles written by professionals, consultants and academics in the October/November 2017 edition of BusinessBrief.
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