Board and Shareholder Powers in State-Owned Companies

Recently, an incident raised questions about the legal powers of a board and a shareholder in the affairs of a state-owned enterprise (SOE).

Corporate law identifies two key organs in any company, including public enterprises: the shareholder and the board. This discussion focuses on the nature of powers and their legal boundaries for each organ, not political considerations.

Let’s separate politics from governance. Politics should not control or manage companies – unless we want them to collapse swiftly. What is often termed ‘political interference’ is in reality self-interest – nothing more.

I now turn to a well-known excerpt from the Delaware Code. The American state of Delaware is renowned for its robust corporate laws. The phrasing I reference has been adopted in many statutes, including those governing public enterprises in Namibia and the Companies Act of South Africa.

In summary: “the business affairs of a company must be managed by or under the direction of its board of directors . . . ”

Corporate law holds that shareholders exercise their powers at general meetings, where they make decisions collectively and retain reserve powers, which must be exercised carefully. There are rare occasions when a board may be unwilling to act or decide on a matter. If a board is objectively adjudged to be wrong, shareholders may exercise powers instead, though this is uncommon.

A board possesses broad powers and is accountable not to individual shareholders but to the company as a legal entity. Shareholders have no legal authority to interfere with or compel a board to make or implement a decision, even if a decision appears irregular or illegal.

In South Africa, a former minister of communications was successfully sued for interfering in the business affairs of the SABC, having acted beyond her powers. Corporate law establishes that directors occupy a unique position: They are accountable solely to the law and owe loyalty to the company, not to any individual. This principle applies equally to SOEs and all similarly structured public entities.

The lesson is clear: Boards of Namibia’s public enterprises should turn to the courts to challenge wrongful actions by those who overstep their authority. Boards cannot, and must not, make decisions under pressure or implement directives imposed externally.

Such actions constitute poor corporate governance. For SEOs in Namibia to progress, boards must fully exercise their powers and resist pressure or self-interest disguised as political interference.

– Ntelamo Ntelamo

In an age of information overload, Sunrise is The Namibian’s morning briefing, delivered at 6h00 from Monday to Friday. It offers a curated rundown of the most important stories from the past 24 hours – occasionally with a light, witty touch. It’s an essential way to stay informed. Subscribe and join our newsletter community.