Boards gone rogue

“Is that your final decision, Mr. CEO?” the Chairman of the Board asked as he leaned back in his seat and crossed his legs. The CEO looked around the room. Before him sat a board of directors that had completely lost sight of their oversight role. At the last board meeting, they had requested for management to buy each director an iPad. The CEO had refused citing both lack of budget and non-existence of an iPad policy for non-executive directors. In today’s meeting, they had spoken about amending the delegation of authority for the day-to-day management of the institution. The CEO had reminded them that such amendment could not take place without the knowledge of the majority shareholder. Words were exchanged, with the directors alluding to insubordination on the part of the CEO. As he looked round the room, he could not see a single sign of support from any of the board members. They were united in their stand that more administrative power should be put in the hands of the board, through the office of the Chairman. The board had, minutes earlier, resolved that the signing mandates for all purchases in the organization were to be given to the Chairman and the resolution was defined to start retroactively by a month. The CEO realized, with a cold shudder, that his board had gone completely rogue.

“Yes, it is Mr. Chairman,” responded the CEO. “What you are asking me to do is not only illegal, but is also impossible to implement. I will not agree to implement this resolution to give signing mandates for all purchases to you, Mr. Chairman.” “Then I will have to ask you to step out of the room, Mr. CEO, as the board deliberates this issue.” The CEO stood up quickly, gathering his board papers in an untidy pile. He started to speak, as if to make a last minute appeal to the last vestiges of sanity that might exist on the Board. But the stony glares that he received from the directors around the room made him still his tongue. He walked out of the room, with his back ramrod straight and head held high. He was on the right side of the ethical battle lines that had been drawn and he would be damned before he let them think that they had defeated him. The meeting ended without any update given to the CEO, but the very next day he received a letter suspending him from office for alleged “insubordination, disobedience and related acts of misconduct as well as refusal to execute resolutions of the board of commissioners, failure to “acknowledge or recognise” the board at a public event and alleged disrespectful behaviour towards the board members”.
This Nollywood drama is not a fiction of imagination. It is a dramatized version of a true story of a parastatal board in Namibia. The CEO subsequently fought a disciplinary hearing held to verify the reasons for the suspension. In what took almost a year to resolve, his stand on integrity finally earned him a vindication. The issue was highly publicized in the Namibian media for no other reason than the very salacious headline that it produced: “CEO suspended for refusing to buy board members iPads.”

The line minister eventually fired the board and took over their role as the disciplinary process over the suspended CEO took place, chaired by an independent lawyer. The line minister later quoted a figure of approximately US$300,000 as the cost of the whole debacle, citing board sitting allowances during the hearings, legal fees paid on behalf of the beleaguered CEO as well as fees for the independent chairperson for the hearing. A key finding of the independent chairperson, after recommending the reinstatement of the CEO, was that communication between the board and the CEO had irretrievably broken down – a situation that could well have been rectified through the appointment of a mediator. “In my opinion, relying on the evidence presented at the enquiry, all the issues formulated in the six charges broadly described as ‘gross insubordination’ could have been resolved by the Board and the executive officer, preferably with the assistance of a third party,” said the independent chair of the enquiry.
It is incomprehensible that a Board would collectively decide to usurp the role of the CEO by taking on management duties simply because the CEO has refused to breach company policy and budget. It is even more inconceivable that this would occur in the 21st century, in the year 2012 to be precise. It makes our own sordid parastatal scandals look like child’s play. One point is crystal clear: the most basic requirement of communication was clearly absent between the Board and the CEO. But given the less than noble intentions of the directors, it is inconceivable that any level of communication would have resolved this issue, nor would a third party mediator have helped the situation. Was this board doomed to fail from its inception? Was the CEO the stumbling block to what looked like an initial attempt to slowly start fleecing the organization? The CEO could have agreed to the board’s ridiculous demands, and set the organization on a course of ridiculously numerous director demands that might have led to the collapse of the parastatal. After all, a fish rots from the head.
The Namibians were lucky. They had a CEO of a parastatal who had the gumption to stand up on the right side of ethical leadership. They had a line minister who was ready to fight the good fight to get rid of the board and face the political fall out that was bound to follow. Scandals are still rocking the Namibian parastatal landscape, but a great precedent has been set with this particular case that has helped to generate widespread conversations on what good governance at parastatal level should look like.
Twitter: @carolmusyoka