IoDSA warns of governance red flags over minister's threat to dissolve SA Tourism board

The Institute of Directors in South Africa (IoDSA) has warned that the Minister of Tourism, Patricia de Lille’s reported threat to dissolve the board of South African Tourism raises governance red flags.

This comes after the SA Tourism board on Thursday placed CEO Nombulelo Guliwe on precautionary suspension effective immediately on Thursday following serious allegations of misconduct.

De Lille's office declared the board's decision null and void since it no longer has a chairperson following the resignation of Professor Gregory Davids last month.

As a result, De Lille declared that the board meeting was unlawful or ultra vires as only the chairperson of the board could convene a special board meeting in terms of the organisation's board charter. 

"This means, the board in its current form is not properly constituted to take such a resolution," De Lille said.

According to sources close to the matter, De Lille wrote to the board demanding an explanation why it should not be dissolved.

However, IoDSA CEO Parmi Natesan on Tuesday said the stability and proper functioning of a governing body was fundamental to good governance within any organisation.

Natesan said boards in general should not be put in a position where they are unable to act and fulfil their duties.

"When a chairperson steps down, continuity mechanisms should exist. The guiding policies and processes should provide for someone to act in this key leadership role so that the functioning of the board can continue seamlessly," Natesan said.

"In fact, King IV specifically recommends that governing bodies should designate a lead independent director to lead in the absence of the chair, amongst other duties."

Leadership instability at the national tourism agency responsible for marketing the country as a preferred tourist destination comes just a month before one of South Africa's biggest tourism conferences.

Tourism organisations have voiced serious concerns over the upheavals within the board of SA Tourism and the potential impact this might have in marketing the country as a tourist destination.

Natesan said while a board charter documents the role, responsibilities, membership requirements and procedural conduct of the board, it cannot override the board’s statutory and fiduciary duties in terms of the law.

She said a governing body must still be able to exercise its responsibilities to act in the best interests of the organisation, even if the chairperson is unavailable or no longer serving in the position.

In this instance, she said the interpretation of the charter appeared to be more form over substance.

Natesan said one must consider the intention of the provision in the board charter – surely it was never intended that the board’s ability to function would collapse simply because the chairperson stepped down.

Natesan said good governance required that continuity mechanisms are in place so that the board can continue to carry out its duties effectively.

"King IV is clear that the governing body should appoint the CEO, and that the CEO should be accountable to the governing body. It naturally follows that the board may also, in its discretion, suspend or remove a CEO, provided this is carried out in line with fair labour practices."

"In terms of King IV, the governing body should have primary responsibility for the removal of the company secretary. The company secretary should have a direct line of accountability to the board, typically via the chairperson.

"Therefore, while the CEO is an employee of the organisation, it stands to reason that decisions around the suspension or removal of the company secretary should involve the board, not the CEO acting alone."

On the reported ministerial threats to dissolve the board, Natesan cautioned that while ministers acts as shareholder representatives for government, shareholders appoint boards to provide oversight and act in the organisation’s best interests.

"It is concerning if any boards feel that fulfilling their statutory duties could lead to their own dissolution. Effective governance requires that boards be empowered and trusted to carry out their roles without fear."

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