Key Corporate Dynamics in the Namcor Saga

Unfolding events at the National Petroleum Corporation (Namcor) are a perpetuation of strife between board and management, now familiar at this entity and some other organisations.

The swift development of the story has rightly focused attention on poor governance at organisations, particularly board-management relationships.

By and large, unhealthy board-management relationships are spurred by numerous factors. These can be resolved in various ways.

Factors can include an out-of-control management, a chief executive officer dominating the board, micromanagement by boards, lack of trust, and lack of respect.

The dynamics vary. Without speculating on the intricacies of the Namcor saga, as well as respecting the legal principle of sub judice, let’s look at the adverse effects and cardinal ways to fix such relationships.

AGENDAS

Fundamentally, unhealthy board-management relationships detract from the primary purpose on which they are premised.

The main aim – the governance of natural resources for the benefit of Namibia – is attenuated by unwarranted focus on possible individual agendas.

Journalist Toivo Ndjebela said “oil is not even out of the ground yet”.

Flippant as it may sound, this and other relevant sentiments should compel us to consider the principal thing as principal.

In addition to diverting focus from an organisation’s primary purpose and compromised corporate governance, the very existence of the organisation comes into question.

This detraction imperils the country‘s new opportunities, such as the recent oil and gas discoveries and green hydrogen, to possibly transform the economy.

The rise and fall of good governance rests on leadership at all levels.

Poor governance demoralises ethical leadership in the same way unethical leadership denigrates good governance.

Ethical leadership is the cornerstone of governance, and ethical leaders consider themselves complementary to the cause.

In any boardroom or on decision-making platforms, those responsible for governance should fundamentally advance the interests of the organisation and ultimately the country, rather than self-serving agendas.

When leaders subscribe to private agendas at the cost of the public good, poor governance is fostered.

CONSEQUENCES

The ripple effect of compromised ethical behaviour is that it dissuades able, prospective leaders from assuming leadership positions, diluting quality leadership in key positions.

The quality of board-management relationships is crucial to every organisation’s success.

Pulling in different strategic directions creates a gap in the overall governance of an organisation’s ecosystem.

For example, it exposes businesses to a breakdown in employee confidence, divided relationships, uncertain decision-making and the stunted or destabilised growth of the organisation.

A further unfortunate consequence is it creates a crisis that ultimately taints the organisation’s reputation with key stakeholders, resulting in forfeited opportunities and lost profits.

Resources become focused on efforts to manage public perceptions, and restore stakeholder relationships.

The relationship between a board and management is an important element of effective governance, successful corporate leadership and organisational performance.

The main thing the Namcor saga conjures up is not the effects of a misaligned relationship as much as it obliges shareholders to find ways to fix it in the interest of the greater good.  

SOLUTIONS

The first and key step in addressing defective board-management relationships is to conduct a detailed and objective assessment.

In a far-gone relationship, impartiality and objectivity should be achieved by the shareholder via due process.

A pivotal consideration would be the temporal replacement of a governing body and the relevant executive so as to re-enact impartial oversight of the organisation.

Similarly, an independent body should be recruited to conduct the assessment. The results would present more permanent solutions.

These should involve a clear delineation of roles and responsibilities, improved and structured communication between board and management, and stimulating mutual trust and respect.

Board culture, or consistent patterns of behaviour, values and mindsets, have a powerful influence on a board’s relationship with management and its approach to governance decision-making, and warrants further deliberation.

• Vincia Cloete is executive director of the Namibia Institute of Corporate Governance and an admitted legal practitioner of the High Court. This article aims to provide a general guide on the subject matter. Specialist advice should be sought about your specific circumstances; vincia@nicg.org.na

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