Dr Michael Odongo, the former executive director of the Uganda Road Fund. PHOTO/Courtesy
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Poorly constituted boards drag down companies
What you need to know:
There are concerns over how some boards of entities [state enterprises, commissions and statutory authorities] are constituted and the impact of selected cases of conflict between management and such boards on their operations. Prosper magazine’s Racheal Nabisubi speaks to Dr Michael Odongo, a former executive director of the Uganda Road Fund, who explains the challenges linked to corporate governance. Excerpts...
What is your view on the structure of boards of directors in Uganda’s public institutions?
All Boards of Directors within departments and agencies of government are set up within a statutory mandate. There are Acts which govern these entities and the boards are meant to derive their mandate from the well laid out guidelines within the legal frameworks that support their establishment.
Are boards often appropriately structured in regard to skills and competencies connected to the institutions that they supervise?
Due to the ever-broadening need for diversity, the structure of representation of these boards sometimes might be wanting. You may find a case where interest groups just forwarding their representation even when the person has far less understanding and perhaps low qualification to provider oversight within such a board.
Across the world and in particular within developing economies, boards are supposed to be a hybrid of experts with diverse skills that are relevant to where they have been delegated to provide oversight. The absence of this, implies that the quality of the board’s input in relation to the outcomes that the organisation generates can be deficient.
We see cases of heads or leadership of these semi autonomous entities going through conflicts with their boards, how can this be ironed out?
Conflict between management and the board is something that should never ever escalate to such levels that we seem to see these days. It means that the disagreements are so fundamental that either management or the board itself ought to be reconstituted.
Nevertheless, it is within the public domain that some of these statutory institutions generate a lot of money by way of non-tax revenue and profit. Now, in ensuring separation of powers by way of day-to-day operations for management and purely oversight for the board, balancing this is no longer easy.
In some institutions, the management earns more than 10 times the retainer fees that board members get. But also attitude issues that some of the management team exhibit can be very difficult for some of the board members to stomach. Some of the ways of resolving such simmering conflict is to ensure that the Boards stick to their charters if they have any.
Such guiding tools can help in enhancing oversight within standard frameworks.
In a normal public sector entity, what should be the role of a Board of Directors?
The business, if any, of the public sector is to mainly provide services and in very limited cases, goods. Clear understanding of the mandates of these departments and agencies, including providing the statutory governance systems with forward and backward integration; should form the role of boards of directors in a public setting.
Don’t forget that these mandates are always very distinct within the context of the creation of each statutory entity. Most often they are created to extend services and generate revenues within such mandates.
It seems some boards are not well-constituted around mandate. Are they an avenue for stipends in some cases?
Some of the boards are politically inclined. You find loyalty is partly to an appointing authority and in most cases, a line minister. We have actually seen cases where former elected leaders who are not returned are placed on boards just to keep them busy. So, the global principle of corporate governance demands that there shall be a benchmark within which such boards not only within the public sector but also private sector operate and adhere to.
The public and private sector collectively operate in a global village and conduct business mutually. Weak or poorly constituted and operated boards have a net effect on performance of such organisations.
Does it imply that some of these board members could actually require some bit of training around ethics?
Yes, training for board members can be diverse by any international setting. Even mandates within which some of these boards are constituted in Uganda, need to be revised time-and-again because the business environment is evolving very fast. Consider the impact of technology.
There is no way a board, however, well and professionally constituted can become and remain effective without constant training and obtaining critical requisite skills that are required in ensuring oversight to a young, aggressive, well-educated and tech-say management team.
But how can the managing directors or executive directors of these state agencies, navigate such challenges?
It is in their interest to allow for smooth oversight functions of the boards. Some well-organised boards actually have sub-committees that over see different functions of management including, finance, procurement, human resource and operations, among others.
The management of these corporations or agencies, must actually know that it does not start and end with them. There are some cases where management deliberately blinds the board in order to get away with certain operational approaches and audit challenges. A strong board can never be a bad thing for the management of an organisation. They should be recruited to serve and move on.
