Delinquency and its remedy
Breaking news over the past week has been the finding that Dudu Myeni, former Chairwoman of South African Airways has been declared delinquent for life. What exactly does this mean and what are the remedies for delinquency?
We must start with what the term delinquency means, and why we, as directors, should pay attention to its meaning and implications. In a nutshell delinquency means a neglect or dereliction of duty. This means that for us to understand the term delinquency we must first understand the requisite duties that are required of directors. These duties can also only be understood if we fully understand the position and role of directors in the overall running of a company.
If we begin with the position and role of directors, both individually and collectively (as a board), what is absolutely clear is that a director is required by law to act in the best interests of the company of which they are a director. This duty is primary and overrides any other connections to the company they serve as a director – whether this be as a shareholder, as part of the executive team or part of any other type of connectedness, or due to any other ‘connections’.
This duty also stands apart from their appointment to the board. What this means is that an appointment to the board of a company, by anyone authorised to do so, does not create any duty between the person being appointed and the appointing party. The appointment process simply places the director into the legal position of ‘director’ where they are obligated to act in the best interests of the company. This relationship is best summed up by the legal phrase ‘fiduciary duty’.
In this position of directing directors are guided by a handful of critical words that describe how they should act as they fulfil this governing role. These words are care, skill, and diligence. A director is always expected to direct these towards the company itself and towards no other party.
In this light delinquency of directors, their neglect or dereliction of duty is all the more focused and much clearer! Negligence is the opposite of diligence. Dereliction is an opposite of the concept of care. Both these words have within them the further meaning of a shameful failure to fulfil one’s duty. The origin of the word dereliction, and one that overflows into the concept of delinquency, is the abandonment or leaving of one’s post or position (either physically or simply by not being fully engaged in the role).
The best remedy for delinquency is improved knowledge and practical action. The challenge for all directors is therefore to better understand what this triad of words care, skill, diligence mean and what do they ‘look like’ in the boardroom. Now is not the time to sit back and only watch what is unfolding in the courts of law but to examine oneself and ask
- do I understand properly my position as a director?
- do I understand the role I play (together with the rest of my board) in governing my company?
- do I have the requisite skillset to direct my company into the future?
- Do I hold the best interests of the company front and centre in all my decision-making?
- Do I diligently fulfil my role as a director?
The Sirdar Applied Directorship Programme, and our other board level programmes, are designed to practically equip directors for better boardroom performance and as a result of this better company performance.