Directors Sentiment IndexTM Report : 1st Edition

Transcription

1 Directors Sentiment IndexTM Report : 1st Edition

2 Table of contents 1. Foreward Executive overview Economic General perception on Economic conditions Economic factors impacting business Economic factors impacting industry Business General perception on Business conditions Business factors impacting business Business factors impacting industry Governance General perception on Governance conditions Governance factors impacting business Governance factors impacting industry Directorship General perception on Directorship conditions Factors influencing the willingness to serve on a board... 27

3 1. Foreward At the beginning of 2016, the Institute of Directors in Southern Africa ( IoDSA ) conducted its first South African Directors Sentiment Index research project, which will be conducted annually going forward. The research followed a quantitative approach, where data was obtained by means of an online survey that was circulated to the IoDSA member database as well as a specified sample of Non-IoDSA member directors drawn from a research company s national panel. The overall aim of the research is to survey, document and monitor the sentiment of our country s business leaders, by measuring their views on a variety of elements covering Economic, Business, Governance and Directorship conditions. Economic Business Sentiment Governance Directorship In the short term, the aim of the research is to establish the current perceptual position of South African directors on conditions impacting the execution of their duties as directors. From a long term perspective, the objective is to assess change in the sentiment of directors over time. We believe that this study provides valuable indicators of the challenges that are most affecting members of the IoDSA and the wider director community in the execution of their directorship duties. Parmi Natesan Executive: Centre for Corporate Governance 3

4 2. Executive overview The findings of this Report are reflective of the surveyed sentiment of a total of 441 South African directors, spanning both IoDSA members (338) and Non-IoDSA members (103) as depicted in Figure 1 below. The sample drawn from the IoDSA member base is reflective of its current membership profile 1. The Non-IoDSA member sample of directors included slightly greater representation from the SMME sector and in Other provinces, as well as greater representation of females and individuals in the age group thus providing a balance in the total assessment. GENDER AGE GROUP CAPACITY AS DIRECTOR 75% 25% % % % % 78% 22% Executive Director Non-executive Director BUSINESS SECTOR PROVINCE 65% 14% 59% Other Private SMME 13% 8% Public Non-Profit Gauteng 22% Western Cape 10% KwaZulu Natal 2% 2% 1% 2% 0% Eastern Cape North West MP Limpopo Northern Cape Figure 1: Total Sample Profile Overview. At a glance, South African directors felt as follows in respect of each of the areas covered: Economic Business Governance Directorship More negative than positive sentiment More negative than positive sentiment More positive than negative sentiment More positive than negative sentiment Particularly regarding expected health of the SA economy over the next 12 months and projected inflation rate. IoDSA members notably more concerned than Non-IoDSA members about skilled labour demands. Top concerns centre on uncertainty, followed by exchange rate fluctuations. Comparatively least negative about the projected health of 1 st world countries over the next 12 months, although balance of opinion remains pessimistic. Particularly regarding impact of government on business. IoDSA members notably less expectant of business conditions improving in the coming 12 months than Non-IoDSA members.non-iodsa members more inclined to express neutrality. Top business impact concerns centre on instability, poor conditions and reduced consumer confidence. Particularly amongst IoDSA members. Especially regarding good governance practices adding value to business. Top governance challenges seen to be unethical behaviour, lack of sustainable behaviour and understanding of benefits. Particularly regarding expected board impact of continuous professional development.iodsa members notably more positive overall than Non-IoDSA members. Some positivity noted as biased towards non executive directors. Main factors influencing directors decision to serve on a board are personal experience and competence, company reputation and ethical behaviour. IoDSA members however consider the competence of existing/fellow board members as the top influencing factor. Figure 2: Overview of South African directors sentiment on the four categories covered. 1 Detailed information on the profile of IoDSA members can be found in the latest IoDSA Integrated Report accessible via 4

5 Executive overview The conditions impacting South African directors are variably perceived by IoDSA members and Non-IoDSA members. South African directors are more cautious regarding and business conditions but more positive about governance and directorship conditions, as they are more optimistic about conditions over which they feel they have greater control. The following sections of this Report depict the general overall perception of South African directors on current Economic (section 3), Business (section 4), Governance (section 5) and Directorship (section 6) conditions as well as further detailed commentary where noticeable differences in sentiment were observed between IoDSA members and Non-IoDSA members; as well as different genders, ages and industry sectors. 5

6 3. Economic 3.1 General perception on Economic conditions How do you feel about each of the following? TOTAL SAMPLE (n=441) The projected health of 1st world countries over the next 12 months Commodity prices improving in the next 12 months The projected inflation rate over the next 12 months The projected health of the South African economy over the next 12 months Skilled labour and labour demands in South Africa over the next 12 months The projected interest rate over the next 12 months -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% I feel very negative about this I feel somewhat negative about this I feel slightly positive about this I feel very positive about this Figure 3: General Economic perceptions of total sample. South African directors feel more negative than positive on current conditions. Overall directors felt the most negative/concerned about the expected health of the South African economy and projected inflation rate over the next 12 months, whilst the sentiment towards the projected health of 1 st world countries over the next 12 months was far less of a concern. Interestingly, male respondents and respondents over the age of 55 feel more negative towards the projected health of the South African economy as well as skilled labour and related labour demands in South Africa over the next 12 months compared to female respondents and those respondents in the other age groups respectively. 6

7 Economic 3.2 Economic factors impacting business What do you consider to be the three main challenges currently facing your business? TOTAL SAMPLE (n=441) South South African African uncertainty Exchange rate fluctuations Effect Effect of BBBEE of BBEEE on business RSA RSA credit rate declining Lack skilled of skilled labour/personnel Social Social and and political unrest Wage Wage growth/wage demands Inadequate Inadequate government infrastructure spend Low Low consumer confidence Global Global uncertainty Low Low productivity growth Rising inflation rates Rising interest rates Tax Tax levels too high Cost Cost of energy/lack of thereof Cost Cost of fuel of fuel and and load shedding Water shortage Climate change Other, please specify... Other None. My business is not challenged by None. My business is not challenged by factors Figure 4: Economic factors impacting current business as perceived by total sample group. South African directors consider the following to be the top 3 challenges currently facing their business: 1 South African uncertainty 2 Exchange rate fluctuations 3 Effect of BBBEE on business The participants who felt that their business is not challenged by these factors were Non-IoDSA members from the Private and SMME sector. Some of the differences observed from the results obtained in respect to the following categories include 2 : IoDSA members vs Non-IoDSA members Both IoDSA members and Non-IoDSA members ranked South African uncertainty as the top challenge facing their business. However Non-IoDSA members felt that the rising interest rates and high tax levels were more of a challenge to them and ranked these as second and third top factors, whilst the effect of BBBEE on 2 The shaded boxes in the Sector and Age tables highlight the key differences in sentiment in those categories. 7

8 Economic business and exchange rate fluctuations followed thereafter. This difference in sentiment could be attributed to the larger representation of SMMEs in the Non-IoDSA member sample. In addition, IoDSA members feel noticeably more concerned about global uncertainty, whilst Non-IoDSA members are more concerned about the cost of load shedding. These differences could again be attributed to the fact that the Non-IoDSA member sample consisted of a larger SMME sector representation. Sector Ranking Private SMME Public Non-profit 1 South African uncertainty South African uncertainty South African uncertainty South African uncertainty 2 Exchange rate fluctuations Effect of BBBEE on business RSA credit rate declining skilled labour/personnel 3 Effect of BBBEE *Additional Notes: on business Exchange rate fluctuations Exchange rate fluctuations Wage growth/wage demands Additional notes on sector differences: The SMME sector felt that the impact of the cost of fuel and load shedding was more of challenge in comparison to the other sectors. Both the Public and the Non-profit sectors felt that the cost of energy or lack thereof was more of challenge in comparison to the other sectors. Gender Both male and female respondents felt that South African uncertainty and exchange rate fluctuations were the top two challenges facing business, however sentiment thereafter differed as follows: Female respondents were of the view that the RSA credit rate declining and tax levels being too high is more of a concern compared to their male counterparts who were in line with the overall ranking depicted under Figure 4 above; Male participants considered social and political unrest to be a great factor than females; and Females felt more strongly about rising interest rates in comparison to male participants. 8

9 Economic Age Ranking Ages Ages Ages Ages over 55 1 South African uncertainty South African uncertainty South African uncertainty South African uncertainty 2 Tax levels too high Exchange rate fluctuations Exchange rate fluctuations Exchange rate fluctuations 3 Rising inflation rate *Additional Notes: and rising interest rates RSA credit rate declining Effect of BBBEE on business Effect of BBBEE on business 9

10 Economic 3.3 Economic factors impacting industry What do you consider to be the three main challenges currently facing your industry in general? TOTAL SAMPLE (n=441) South South African African uncertainty Exchange rate fluctuations Lack skilled of skilled labour/ personnel Wage Wage growth/wage demands Social Social and and political unrest Low Low consumer confidence RSA RSA credit rate declining Effect Effect of BBBEE of BBEEE on business Global Global uncertainty Rising inflation rates Inadequate Inadequate government infrastructure spend Rising interest rates Low Low productivity growth Cost Cost of energy/lack of thereof Cost Cost of fuel of fuel and and load shedding Tax Tax levels too high Water shortage South African Climate uncertainty change Other, please specify... Other None. My industry None. is My not industry challenged is by not challenged factors. by factors Figure 5: Economic factors impacting industry as perceived by the total sample group. South African directors consider the following to be the top 3 challenges currently impacting their industry: 1 South African uncertainty 2 Exchange rate fluctuations 3 skilled labour/personnel It is evident from the results that South African uncertainty and exchange rate fluctuations are of top concern to South African directors as these factors both impact their business and the industry in which they operate. A difference however is that from an industry perspective, South African directors feel that the lack of skilled labour is more of concern. Once again, it was only Non-IoDSA members from the Private and SMME sectors who felt that their industry is not challenged by these factors. 10

11 Economic Some of the differences observed from the results obtained in respect to the following categories include 3 : IoDSA members vs Non-IoDSA members Both IoDSA members and Non-IoDSA members were in alignment with their views that South African uncertainty and exchange rate fluctuations are the top two factors/challenges that will impact the industry in which they operate. They however differed thereafter, with Non-IoDSA members feeling that the current wage growth/wage demands was the next area of concern compared to the others, whilst IoDSA members were of the view that the lack of skilled labour was of more concern. Given the representation of the respondents which formed part of the IoDSA member sample and the Non-IoDSA member sample, we once again found that IoDSA members felt a lot stronger about the impact of global uncertainty on the industry, whereas Non-IoDSA members felt stronger about the impact of high tax levels and the cost of fuel and load shedding on the industry. Sector Ranking Private SMME Public Non-profit 1 South African uncertainty South African uncertainty South African uncertainty South African uncertainty 2 Exchange rate fluctuations Exchange rate fluctuations Exchange rate fluctuations & skilled labour/personnel skilled labour/personnel 3 skilled labour/personnel skilled labour/personnel & Wage growth/wage demand & Low consumer confidence Social and political unrest Wage growth/wage demands Gender Both male and female respondents in this category ranked the same top 3 challenges they felt impacted their industry, albeit female respondents felt slightly stronger over the impact of the lack of skilled labour versus exchange rate fluctuations. Again we see a difference between male and female respondents in the ranking of the other factors listed, as female participants felt stronger about the impact of high tax levels in their industry compared to their male counterparts. Male participants on the other hand felt stronger about the impact of global uncertainty and water shortages than female participants. 3 The shaded boxes in the Sector and Age tables highlight the key differences in sentiment in those categories. 11

12 Economic Age Ranking Ages Ages Ages Ages over 55 1 South African uncertainty South African uncertainty South African uncertainty South African uncertainty 2 Exchange rate fluctuations Exchange rate fluctuations skilled labour/personnel Wage growth/wage demands 3 Rising inflation rates Wage growth/wage demands Exchange rate fluctuations skilled labour/personnel Additional notes on age differences: The and age groups felt significantly stronger about tax levels being too high compared to the other age groups. 12

13 4. Business 4.1 General perception on Business conditions The ability of your business investment returns increasing in the next 12 months Business prospects improving over the next 12 months The South African environment being viable or conducive for business and/or their growth in the next 12 months Efficiency and sufficiency of infrastructure in South Africa improving in the next 12 months Credit lending and availability improving in the next 12 months How do you feel about each of the following? TOTAL SAMPLE (n=441) The impact of government on business improving in the next 12 months The level of red tape and its impact on business decreasing in the next 12 months -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% I feel very negative about this I feel somewhat negative about this I feel slightly positive about this I feel very positive about this Figure 6: General Business perceptions of total sample. The South African directors sentiment on business appeared to be more negative than positive, particularly regarding the impact of government on business. IoDSA members are notably less positive about business conditions improving in the coming 12 months than Non-IoDSA members. The Private, SMME and Public Sectors have a very negative sentiment towards the impact of government on business improving in the next 12 months, while the Non-Profit Sector feels slightly less negative in this regard. Male respondents feel significantly more negative about business prospects improving over the next 12 months, the South African environment being viable or conducive for business and/or their growth in the next 12 months and the impact of government on business improving in the next 12 months, than female respondents. There was a strong sentiment of neutrality in the first three age groups (25-34; 35-44; 45-54) on the matter of the level of red tape and its impact on business decreasing in the next 12 months. The age group of showed a marked increase in neutral responses on factors that the remaining age groups felt significantly more negative sentiment towards i.e. business prospects improving over the next 12 months and the impact of government on business improving in the next 12 months. 13

14 Business 4.2 Business factors impacting business What do you consider to be the three main business growth/productivity impediments currently facing your business? TOTAL SAMPLE (n=441) Poor Poor conditions conditions and poor and consumer poor confidence consumer confidence Economic instability Compliance Compliance with with an over an over regulated environment Corruption Social Social and and political unrest BBBEE BBEEE Competitiveness in in the market Inability Inability to attract to attract and and retain skilled employees Difficulty obtaining funding/credit Difficulty collecting debts Lack ethical of ethical behaviour by by stakeholders Lack infrastructure of development Rising taxes Lack strategic of strategic leadership at at executive level Costs of of marketing Lack stakeholder of confidence High High costs costs of of IT IT infrastructure Other, please specify... Other None. My business is not challenged by these type None. My business is not challenged by these of type factors of Figure 7: Business growth/productivity impediments current facing business as perceived by total sample group. The top 3 business factors considered by South African directors as impacting business include: 1 Poor conditions and poor consumer confidence 2 Economic instability 3 Compliance with an over regulated environment The participants who indicated that their business is not challenged by these type of factors included both IoDSA members and Non-IoDSA members from the Private and Non-Profit Sectors. Some of the differences observed from the results obtained in respect to the following categories include 4 : IoDSA members vs Non-IoDSA members Both IoDSA members and Non-IoDSA members sentiment were aligned in respect to the business growth/ productivity impediments affecting their business, ranking the same top 3 challenges as mentioned above. 4 The shaded boxes in the Sector and Age tables highlight the key differences in sentiment in those categories. 14

15 Business Sector Ranking Private SMME Public Non-profit 1 Economic instability Poor conditions and poor consumer confidence Poor conditions and poor consumer confidence Poor conditions and poor consumer confidence 2 Poor conditions and poor consumer confidence Economic instability Corruption Economic instability 3 Compliance with an over regulated environment BBBEE Economic instability & Compliance with an over regulated environment Compliance with an over regulated environment Additional notes on sector differences: Both the Private and SMME sectors felt stronger about BBBEE in comparison to other sectors. The Public sector felt much stronger about the lack of ethical behavior by stakeholders and lack of stakeholder confidence in comparison to the other sectors. The Non-profit sector felt much stronger about lack of ethical behavior by stakeholders and lack of strategic leadership at executive level than the other sectors. Gender Both male and female respondents ranked the same top 3 challenges facing business, albeit female respondents felt that stability had more of an impact than poor conditions and poor consumer confidence. A noticeable difference with regards to the other factors listed is that male respondents felt stronger about BBBEE and the lack of infrastructure development than female respondents. 15

16 Business Age Ranking Ages Ages Ages Ages over 55 1 Poor conditions and poor consumer confidence Poor conditions and poor consumer confidence & Economic instability Poor conditions and poor consumer confidence Poor conditions and poor consumer confidence & Economic instability 2 Economic instability Social and political unrest Economic instability Compliance with an over regulated environment 3 BBBEE Compliance with an over regulated environment Compliance with an over regulated environment Corruption Additional notes on age differences: All age groups except for the over 55 age group, felt significantly stronger about competitiveness in the market. In addition, the age group felt significantly stronger about rising taxes and costs of marketing in relation to the alternate age groups. The age group felt significantly stronger about the costs of marketing in relation to the alternate age groups. 16

17 Business 4.3 Business factors impacting industry What do you consider to be the three main business growth/productivity impediments currently facing your general industry? TOTAL SAMPLE (n=441) Poor Poor conditions conditions and poor consumer and poor consumer confidence Economic instability Compliance Compliance with with an over an over regulated environment Corruption Social and political unrest Competitiveness in the market BBBEE BBEEE Inability Inability to attract to attract and and retain skilled employees Lack infrastructure of development Difficulty obtaining funding/credit Difficulty collecting debts Lack ethical of ethical behaviour by stakeholders Rising taxes Lack strategic of strategic leadership at at executive level Lack of stakeholder confidence High High costs of of IT IT infrastructure Costs of marketing Other, please specify... Other None. My None. industry My industry is not is challenged not by by these type of factors Figure 8: Business growth/productivity impediments currently facing industry as perceived by total sample group. Overall South African directors considered the following to be the top 3 business factors impacting the industry in which they operate: 1 1 Poor conditions and poor consumer confidence 2 Economic instability 3 Compliance with an over regulated environment The participants who felt that their industry was not challenged by these business impediments represented only Non-IoDSA members from the Private sector. Some of the differences observed from the results obtained in respect to the following categories include 5 : IoDSA members vs Non-IoDSA members Both IoDSA members and Non-IoDSA members felt that poor conditions and poor consumer confidence and stability where the top two factors impacting the industry in which they operate. However Non-IoDSA members felt that corruption impacted their industry more than compliance with an over regulated environment. 5 The shaded boxes in the Sector and Age tables highlight the key differences in sentiment in those categories. 17

18 Business Furthermore it was found that: IoDSA members felt a lot stronger about social and political unrest and the lack of ethical behavior by stakeholders as a factor affecting the industry than Non-IoDSA members. Non-IoDSA members felt a lot stronger about competitiveness in the market, rising taxes, difficulty obtaining funding/credit and difficulty collecting debts, and the costs of marketing as factors impacting them in the industry in which they operate, compared to IoDSA members. Sector Ranking Private SMME Public Non-profit 1 Poor conditions and poor consumer confidence Poor conditions and poor consumer confidence Poor conditions and poor consumer confidence Poor conditions and poor consumer confidence 2 Economic instability BBBEE Corruption Inability to attract and retain skilled employees *Additional 3 Notes: Compliance with an over regulated environment Economic instability Economic instability & Compliance with an over regulated environment Economic instability Additional notes on sector differences: Both the SMME and Non-profit sectors felt stronger about lack of strategic leadership at executive level than other sectors. The Public sector felt much stronger about the lack of ethical behavior by stakeholders than other sectors. Gender Both male and female respondents felt that poor conditions and poor consumer confidence and instability were the two top business impediments affecting their industries. Female respondents however, felt that corruption was more of an impediment than compliance with an over regulated environment compared to the male respondents. In addition, it was found that female respondents felt stronger about the difficulty of collecting debts than their male counter-parts. 18

19 Business Age Ranking Ages Ages Ages Ages over 55 1 Poor conditions and poor consumer confidence Poor conditions and poor consumer confidence Poor conditions and poor consumer confidence Poor conditions and poor consumer confidence 2 Economic instability Economic instability Economic instability Economic instability 3 Corruption *Additional Notes: Compliance with an over regulated environment Compliance with an over regulated environment Compliance with an over regulated environment 19

20 5. Governance 5.1 General perception on Governance conditions The application of good governance practices adding value to business How do you feel about each of the following? TOTAL SAMPLE (n=441) The Board adequately setting the tone of ethical conduct through their ethical leadership Board evaluations adding value and improving the performance of the board The implementation of good corporate governance practises improving in the next 12 months The impact of shareholder activism on the business Overall board composition diversity and balance improving in the next 12 months -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% I feel very negative about this I feel somewhat negative about this I feel slightly positive about this I feel very positive about this Figure 9: General Governance perceptions of total sample Compared to the Economic and Business sentiments above, we see a complete shift with South African directors having a more positive than negative sentiment on their perceptions of Governance. IoDSA members and Non-IoDSA members are fairly aligned in their positive sentiment towards the impact of Governance in South Africa. IoDSA members however felt more positive with regards to good governance practices adding value to business compared to Non-IoDSA members. The Public sector had a noticeably higher very positive sentiment towards board evaluations adding value and improving the performance of the board compared to the other sectors. Female respondents felt more negative about the application of good governance practices adding value to business and overall board composition, diversity and balance improving in the next 12 months, in comparison to the male respondents. While all age groups felt positive about the application of good governance practices adding value to business, there was a marked increase in the number of respondents in the 25-34; 35-44; and age groups who expressed a neutral sentiment on this perception, while there was an equally noticeable increase in a very positive sentiment from the 55 and over age group on this perception. There was also a significant number of neutral sentiment responses in the age groups of 25-34; 35-44; and for board evaluations adding value and improving the performance of the board. IoDSA members feel that good governance practices add value to business. The Public sector is very positive that board evaluations add value and improve the performance of the board. 20

21 Governance 5.2 Governance factors impacting business Figure 10: Governance challenges currently facing business as perceived by total sample group. South African directors consider the following to be the top 3 governance challenges impacting current business: 1. What do you consider to be the three main governance challenges currently facing your business? TOTAL SAMPLE (n=441) Lack understanding of understanding the the overall benefits Lack sustainable of thinking Too costly Too costly or the or perception the perception of of being too costly Too Too time time consuming Lack understanding of of (King King III) III Unethical Unethical behaviour behaviour (bribery (bribery and and corruption) Too Too cumbersome Lack of buy buy in in from the top top Not suitable Not suitable or applicable or applicable to to the business Other, please specify... Other None. None. My business My business is not challenged is not challenged by any governance by any factors. governance factors 1 understanding the overall benefits 2 sustainable thinking 3 Too costly or the perception of being too costly However a significant portion of the total sample did not think that their business is challenged by any governance factors. The participants who felt this way included both IoDSA and Non-IoDSA members and represented all sectors. Some of the differences observed from the results obtained in respect to the following categories include 6 : IoDSA members vs Non-IoDSA members IoDSA members and Non-IoDSA member differed in respect to the number one governance challenge they felt was currently facing business. IoDSA members felt that the lack of understanding of the overall benefits was the top challenge whereas Non-IoDSA members felt that unethical behavior (bribery and corruption) was the top challenge. Both IoDSA members and Non-IoDSA members ranked the same 2 nd and 3 rd challenges as per the general perception. 6 The shaded boxes in the Sector and Age tables highlight the key differences in sentiment in those categories. 21

22 Governance Sector Ranking Private SMME Public Non-profit 1 understanding the overall benefits & sustainable thinking Too time consuming understanding the overall benefits sustainable thinking 2 Too costly or the perception of being too costly sustainable thinking & lack of understanding of King III sustainable thinking understanding the overall benefits 3 Too time consuming understanding the overall benefits Too cumbersome Too costly or the perception of being too costly Additional Notes: 23% felt that their business is not challenged by any governance factors 30% felt that their business is not challenged by any governance factors 28% felt that their business is not challenged by any governance factors 22% felt that their business is not challenged by any governance factors Gender Both male and female respondents ranked the same top three governance challenges as indicated above, however male respondents felt that the lack of sustainable thinking was more of challenge than the lack of understanding the overall benefits. In addition, more female respondents felt that their business is not challenged by governance factors compared to male respondents. 22

23 Governance Age Ranking Ages Ages Ages Ages over 55 1 Too costly or the perception of being too costly understanding the overall benefits sustainable thinking understanding the overall benefits 2 Too time consuming sustainable thinking & Too time consuming understanding the overall benefits & too costly or the perception of being too costly sustainable thinking 3 understanding the overall benefits & sustainable thinking & understanding of King III Too cumbersome understanding of King III Too costly or the perception of being too costly Additional Notes: 20% felt that their business is not challenged by any governance factors 27% felt that their business is not challenged by any governance factors 27% felt that their business is not challenged by any governance factors 22% felt that their business is not challenged by governance factors 23

24 Governance 5.3 Governance factors impacting industry What do you consider to be the three main governance challenges currently facing your industry? TOTAL SAMPLE (n=441) Unethical behaviour Unethical behaviour (bribery (bribery and and corruption) sustainable thinking sustainable thinking understanding the overall benefits understanding the overall benefits Too costly or the perception of being too Too costly or the perception of being too costly understanding of (King III) Too Too time time consuming Too Too cumbersome Lack buy of buy in from in the top Not suitable Not or suitable applicable or applicable to the to the business Other, Other, please specify... None. My industry is not challenged by any governance factors. None. My industry is not challenged by any governance factors Figure 11: Governance challenges currently facing industry as perceived by total sample group. South African directors consider the following to be the top 3 governance challenges impacting their industry: 1 Unethical behavior (bribery and corruption) 2 sustainable thinking 3 understanding the overall benefits The participants who felt that their industry is not challenged by any governance factors, included both IoDSA members and Non-IoDSA members (of which were significantly more), the majority of whom were from the Public Sector. Some of the differences observed from the results obtained in respect to the following categories include 7 : IoDSA members vs Non-IoDSA members Both IoDSA members and Non-IoDSA members felt the same and ranked the same top 3 governance challenges facing their industry. 7 The shaded boxes in the Sector and Age tables highlight the key differences in sentiment in those categories. 24

25 Governance Sector Ranking Private SMME Public Non-profit 1 Unethical behavior (bribery and corruption) Unethical behavior (bribery and corruption) Unethical behavior (bribery and corruption) understanding the overall benefits 2 sustainable thinking sustainable thinking understanding the overall benefits sustainable thinking 3 understanding the overall benefits understanding the overall benefits sustainable thinking understanding of King III Additional Notes: 8% felt that their industry is not challenged by any governance factors 8% felt that their industry is not challenged by any governance factors 9% felt that their industry is not challenged by any governance factors 3% felt that their industry is not challenged by any governance factors Gender Both male and female respondents ranked the same top three governance challenges facing their industries, albeit male respondents significantly felt that the lack of sustainable thinking was more of an issue then females, whereas the female respondents felt that unethical behavior was more of a challenge to them. Furthermore, more female respondents felt that their industry was not faced with any governance challenges compared to their male counterparts. Age Ranking Ages Ages Ages Ages over 55 1 understanding the overall benefits Unethical behavior (bribery and corruption) Unethical behavior (bribery and corruption) sustainable thinking 2 Unethical behavior (bribery and corruption) sustainable thinking & understanding the overall benefits sustainable thinking Unethical behavior (bribery and corruption) 3 sustainable thinking Too costly or the perception of being too costly understanding the overall benefits understanding the overall benefits environment 25

26 6. Directorship 6.1 General perception on Directorship conditions How do you feel about each of the following? TOTAL SAMPLE (n=441) Continuous professional development impacting positively on board performance Directors showing the necessary values in the boardroom Directors effectively fulfilling their legal duties Directors being fairly remunerated for the services they provide The suitability of skills, experience and independence of individuals serving on the boards of directors The willingness of directors to take risks that will progress innovation and growth The D&O insurance adequately covering the inherent risks relative to directors in fulfilment of their legal duties -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% I feel very negative about this I feel somewhat negative about this I feel slightly positive about this I feel very positive about this Figure 12: General Directorship perceptions of total sample. The South African directors sentiment on Directorship in South Africa was more positive than negative, particularly with regards to the expected impact of continuous professional development on the board. IoDSA members are notably more positive in this section than Non-IoDSA-members. Although all Sectors felt positive about continuous professional development impacting positively on board performance, there was a marked increase in the responses from the Public Sector who felt very positive about this factor. The same stands true for the Non-Profit Sector who had a noticeably marked increase in slightly positive responses to the factor of D&O insurance adequately covering the inherent risks relative to directors in fulfillment of their legal duties. Female respondents showed a marked increase in "very positive sentiment, in comparison to male respondents, in the following areas: directors showing the necessary values in the boardroom; the willingness of directors to take risks that will progress innovation and growth; and D&O insurance adequately covering the inherent risks relative to directors in fulfillment of their legal duties. Male respondents had a greater number of neutral responses, in comparison to female respondents, on the perception of directors being fairly remunerated for the services they provide. There was also a higher number of neutral responses in the age groups of and on the perception of the suitability of skills, experience and independence of individuals serving on the board of directors, while the age group of over 55 had a more somewhat negative response to this area. IoDSA members feel that continuous professional development positively impacts board performance. 26

27 Directorship 6.2 Factors influencing the willingness to serve on a board What do you consider to be the five main factors influencing your willingness to serve on a board? TOTAL SAMPLE (n=441) Experience and and competence Ethical behaviour Company reputation Competence Competence of existing/fellow of board members Independence Time Time commitment Risk Risk and liability Governance frameworks Remuneration Career progression Stakeholder confidence Balance of of power Corruption Shareholder activism Other None Figure 13: Factors influencing willingness to serve on a board as perceived by total sample group. South African directors consider the following to be the top 3 factors influencing their decision to serve on a board: 1 Experience and competence 2 Ethical behavior 3 Company reputation A small percentage of the overall sample felt that none of the factors listed influenced their decision to serve on a board. From those participants more were Non-IoDSA members in comparison to IoDSA members, of which all but the NPO sector was represented. Some of the differences observed from the results obtained in respect to the following categories include 8 : IoDSA members vs Non-IoDSA members Both IoDSA and Non-IoDSA members felt that their personal experience and competence was a factor that influenced their decision as to whether to serve on a Board or not, however Non-IoDSA members felt this was the number one factor for them compared to IoDSA members who ranked it as 3 rd. In addition, Non-IoDSA members felt that ethical behavior and time commitment were the next two top factors which influenced their decisions. IoDSA members in comparison felt that the competence of existing/fellow board members is far more important when considering whether to serve on a board, and ranked this as their number one factor, closely followed by the company s reputation. 8 The shaded boxes in the Sector and Age tables highlight the key differences in sentiment in those categories. 27

28 Directorship Sector Ranking Private SMME Public Non-profit 1 Experience and competence Ethical behavior Company reputation Experience and competence & Company reputation 2 Ethical behavior & Competence of existing/fellow board members Experience and competence Ethical behavior Competence of existing/fellow board members 3 Company reputation *Additional Notes: Company reputation Competence of existing/fellow board members Ethical behavior Additional notes on sector differences: Gender Both male and female respondents listed the same top three factors that would influence their decision to serve on a board, however female respondents felt more strongly about ethical behavior and felt that the competence of existing/fellow board members was as equally important as their personal experience and competence. In addition, it was noted that male respondents felt stronger about the governance frameworks in place when making a decision compared to female respondents, whilst female respondents felt stronger with regards to time commitment required. Age 35% of the Private, SMME and Non-profit sectors felt strongly about risk and liability compared to the Public Sector. Ranking Ages Ages Ages Ages over 55 1 Experience and competence Experience and competence Experience and competence Competence of existing/fellow board members 2 Ethical behavior Ethical behavior Ethical behavior & Competence of existing/fellow board members Company reputation 3 Time commitment & Career progression Company reputation and Competence of existing/fellow board members Company reputation Ethical behavior 28

29 Notes

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32 Institute of Directors in Southern Africa National Office-Johannesburg PO Box 908 Parklands 2121 Johannesburg South Africa 144 Katherine Street Grayston Ridge Office Park Block B 1st Floor Sandown Sandton 2196 Tel: IoDSA@IoDSA.co.za Web :