Many years ago, I sat on the board of a state owned entity (SOE) which had been created by an act of parliament. Like most other SOEs, the appointment of board members was clearly stipulated by the act to fall squarely within the ambit of the line minister under whose ministry the entity reported into. Board members were required to serve for a three year term that was renewable once for a final, further term of three years. As the end of the first term approached, management alerted the line minister that a decision needed to be made in good time on whether to roll over the terms of the independent directors or to appoint new ones. Like vintage bureaucratic wine, the decision swirled its way around the ministry corridors finally landing on the desk of a senior official.

The senior official chose to read and interpret the act of parliament in an interesting way. According to him, board members were required to apply for their positions. The message was cascaded down to us: write a letter of application to be reappointed to the board. Once the howls of derisive laughter quietened into a silence of righteous indignation, a discussion was had amongst the directors as to what the next steps would be. The collective view was simple, the previous line minister had appointed board members based on their skills and experience and no one had gone to hunt for the position. If anything, the position had found individuals going about their own professional business up until they had found their names in the Kenya Gazzette as board appointees. We had all accepted to serve on the SOE board because it was at a time of very significant and impactful change in the lifecycle of the SOE. The message was sent back up the chain: “It’s been great. Thanks, but no thanks.”

In my corporate governance classes, I’m often asked whether board members should be selectively resourced by the appointing authority or asked to apply for the role through an open call for applications. My response is usually that it’s a bit of a hot potato. As boards are the apex decision making body, owners of the organization have to be very judicious in selecting the membership of the body that will be making decisions on their behalf.

Owners of organizations therefore want to ensure that whoever is appointed will always act in their best interests. This therefore provides a conundrum to directors, particularly of companies, who have the fiduciary duty to always act first in the best interests of the company and also to ensure that their loyalty is to the company and not their nominating authority. The frailty of the human is often tested in the board room when the needs of the nominating authority are divergent to what is best for the company at a particular time. Independence enhancing courage pills are often the bitter solution needed to be swallowed, but this can be difficult, again because of the frailty of the human condition.

On the flip side, a director who applied for the role may perhaps perceive her role as one of achievement. She applied amongst dozens or hundreds of others, made it to the shortlist and then floated to the top of the interview finalists. She presumably deserves her seat on the board table. She is not there to serve at the whim of the owners, thus should not have loyalty issues hanging over her head. Independence is her super power. But is it really? When her term comes to an end, her performance will be assessed as she reapplies for the position.  Who determines good performance and what does it take to keep them happy? Ahh, the frailty of the human condition rears its head again.

Performance aside, the truth of the matter is that even in employee recruitment, talented resources tend to be headhunted. Talent doesn’t have to prove that they can answer questions correctly in order to get the job, as their work speaks for itself. And this is where the hot potato emerges in my class discussions. Does it mean that only untalented people apply for directorships? Not exactly, is my response. It just means that if you want the best people for your board, you need to be deliberate and go out to get them yourself. You need to determine the skills you need and then look for the best people with those skills. The best people are busy being the best at what they do and may not be out there looking for something else to do. Yes, you can ask people to apply, but you cannot ensure that you will get what you are looking for.

How did the Mexican standoff at the SOE end? The top of the ministry chain had to save face from the rebuff we had sent about not applying for the director role. Consequently, half of us were reappointed for much-needed board continuity and half were not. The end.

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