The structure and composition of the board are determined by the characteristics of an organisation, its environment, and its information needs. If the role of the board is to advise and supervise, this then talks to the relationships that account for its composition so that it may carry out these duties. Boards of directors are now faced with a change in the priority of the functions that must be undertaken by them, with supervision and monitoring being more important than the usual function of administration. The chapter discusses the literature on board diversity, corporate governance, role of the boards of public entities, effectiveness of boards, role of board committees, strategic leadership theory, and the impact of board diversity on board effectiveness. In terms of practical implications, the chapter makes a unique and significant contribution to the functionality of board members in South Africa. The analysis may encourage board nomination committees to seek board diversity beyond the gender and ethnic characteristics of directors.
TopWhat Is Corporate Governance?
Corporate governance in simple words means the extent to which organisations are run in an open and honest manner. It is a broad term that defines the methods, structure and the processes of an organisation in which the business and affairs of an organisation are managed, controlled and directed (Gill, 2008). Corporate governance also enhances the long term shareholder value by the process of accountability of managers and by enhancing the firm’s performance (Khan, 2011).
Corporate governance is the way a corporation monitors and regulates itself. In short, it is a method of governing an organisation like a sovereign state, instating its own customs, policies and laws to its employees from the highest to the lowest levels (Sun, 2020). It is intended to increase the accountability of an organisation and to avoid massive disasters before they occur. Corporate governance is a cornerstone in improving economic efficiency and growth in order to attract investors and gain their confidence. In order for corporate governance to function efficiently, several dimensions might be taken into consideration including role and responsibilities of the board, board composition, management processes, relationship between board members, and duality of the chief executive officer and chairman (Zerban, Abdullah, Abdullateef, 2017).
The King IV Report on Corporate Governance for South Africa 2016 was released in November 2016 and advocates an outcomes based approach and defines corporate governance as the exercise of ethical and effective leadership towards the achievement of the following governance outcomes; namely ethical culture, good performance, effective control, and legitimacy (King IV Report on Corporate Governance for South Africa, 2016). Well-executed corporate governance means that an organisation can hold meetings with internal members, such as shareholders and debtholders, as well as suppliers, customers and community leaders, to address the requests and needs of the affected parties. Corporate governance is the set of policies that are created for deciding an organisation’s performance and direction. It is an overview of rules and regulations for the people in-charge of an incorporated firm. They are the ones who agree to take responsibility towards the shareholders (Kulkani and Maniam, 2014). The main function of corporate governance is to make agreements that describe the privileges and tasks of shareholders and the organisation.