Do state-owned enterprises have what it takes?

Do state-owned enterprises have what it takes?

Over the years, I have been wondering whether state-owned enterprises (SOEs) have what it takes?

I myself also served on a number of SOE boards, and it is my conviction that some SOE boards are just there for window dressing and to please their appointing principals.

When one looks at how some SOE board members are appointed, it leaves much to be desired.

It is very regrettable that although the Public Enterprise Act is very clear on how a board of directors is to be appointed, there are still conflicting interpretations on certain provisions of the Public Enterprises Governance Act, when it comes to the appointment of a board of directors.

This misinterpretation allows appointing authorities to nominate and appoint their cronies to advance their political agendas.

It is no secret that some SOEs are underperforming and expect constant bailouts from treasury, while directors are receiving enormous emoluments for serving such underperforming SOEs.

Questions that need to be answered are whether directors are appointed on merit or not? Do the directors have the requisite qualifications, skills, experience and expertise to serve on such SOE boards? Do the directors understand their fiduciary responsibilities while serving on such boards?

I believe a proper audit needs to be done to provide answers to the above questions.

It is no secret that many boards of SOEs are not taken to task if they fail to discharge their fiduciary responsibilities.

The Public Enterprises Act is very clear that directors are to sign performance agreements immediately after their appointments.

If they do sign such performance agreements, are there mechanisms in place to monitor the performance of such boards?
I personally have my doubts as to whether performance monitoring mechanisms are in place.

If there are, why do some SOEs still underperform and need constant bailouts from treasury?

In my view, some of these institutions are headed by incompetent boards and management cadres.

If one looks at some of these boards, some board members are serving on two if not more than three boards at any given time. Another observation is the recycling of board members from one board to the other.

Is this an element of good corporate governance?

Boards are more often used as cash cows to enrich directors, not to serve the interests of the organisation.

In a recent High Court judgement delivered in a civil case that stretched over many years between an axed chief executive officer (CEO) and one SOE, the latter is ordered to pay the axed CEO millions of Namibia dollars.

In her judgement, the judge concluded the following: ‘I find that the plaintiff has proven his case on a balance of probabilities and should succeed in his claim in the amount set out.

The defendant, on the contrary, did not prove its counterclaim on a balance of probabilities and stands to be dismissed. The costs must follow the result.’

Having read the judgement myself it is evident that the witnesses in this matter on the part of the SOE made a mockery out of this case. No wonder the matter was dismissed with costs.

The question is, will this board be held accountable for wasting state resources?

If this matter could have been settled out of court at an earlier stage, the organisation could have saved millions, rather than opting for a legal battle that cost the state a lot of money.

One wonders why the organisation opted to enter into a legal battle with the axed CEO, when they knew they didn’t have legal recourse on the matter.

This is how state funds are put to waste. It leaves much to be desired if ever there is any action to be taken against the directors of this organisation to account for the mess and wasted resources.

I don’t want to generalise the issue of SOEs.

It is common course that some SOE boards are trying their level best in discharging their responsibilities, while in some cases, there are serious reservations in the performance of their fiduciary responsibilities.

It does not require rocket science to turn around underperforming SOEs.

If one is serious about turning around the underperforming SOEs, the first thing to do is to appoint board members and management cadres on merit, with the requisite qualifications, skills, experience and expertise.

Secondly, directors should be subjected to rigorous training to understand their fiduciary responsibilities.

Thirdly, directors should be held accountable for their actions while serving on such boards.

Fourthly, there should be performance agreements in place between the board and appointing authorities.

Such performance agreements should be monitored on a frequent basis.

Fifth, boards are to ensure that they recruit the right management cadres to run such organisations.

Directors should guard against manipulation by appointing authorities to recruit and appoint incompetent management cadres.

Appointing authorities should guard against appointing their cronies to push for their personal and individual agendas.

There is no reason for any of the SOEs to underperform if they have the requisite skills, qualifications, experience and expertise.

Also, what should be ensured is that such boards sign performance agreements which should regularly be monitored.

Political interference must be avoided at all costs when it comes to the appointment of boards of directors. Appointments should be based on merit.

Also, when board terms expire, such boards should be replaced immediately.

I am aware of some institutions where it took more than a year to appoint directors, which is a poor corporate governance principle.

Failure to adhere to the above is a good recipe for disaster for many SOEs.

  • Raimo Naanda, is a retired technical and vocational education and training expert.

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