By Walter Nono
Recent events have highlighted critical questions concerning boards of directors in promoting good corporate governance.
In particular boards are being charged with ultimate irresponsibility in relation to the effectiveness of their organisations internal control systems and their knowledge of corporate governance issues.
Whistleblowers have had issues with the performance of, especially chairpersons of boards of directors, whom they have accused of mainly usurping the duties of management in their organisations. The actions of boards at the National Social Security Fund, National Water and Sewerage Corporation, Uganda Development Bank and Uganda Export Promotion Board among others have in the recent past been subject to investigations by the Inspectorate of Government (IGG).
Some board members have been dragged to court and others have been suspended or fired by the appointing authorities. The IGG report of March 17, 2014, on the chairperson of the Uganda National Examinations Board (UNEB) after whistleblowers accused the chairperson of flouting the recruitment process to replace the executive director indicated that he had “usurped the roles of the secretariat, which led to a recruitment process that was suspect due to the absence of transparency and proper record keeping”. The composition of membership of board of directors whether former politicians mainly those who failed to win elective office, accomplished former civil servants or distinguished academics have not negated the complains against them.
I am, however, worried that with the increased action of whistleblowers, another category of boards is being created, those who do not add value to their organisations. There is fear that some boards have now foregone their oversight responsibilities and have become subordinate to management lest they “rock the boat”.
I also have a feeling that many of the board members in public sector entities take their appointment to these boards as a form of reward and do not know exactly what is expected of them as board members. I, therefore, believe that the IGG’s advice to the chairperson of UNEB to educate himself about principles of corporate governance in order to better manage board affairs is one that should be taken up by all board members in public sector entities.
In addition, to board members educating themselves, I would like to propose that the Government takes on the issue of educating board members by setting up an Institute of directors. A framework should also be developed by the Government that requires board members, especially chairpersons in public sector entities, to undertake certain basic trainings in corporate governance.
However, amidst all the debate over corporate governance and boards performance, there is surprisingly little attention being given to the role of internal audit yet they can play a key role in supporting the board in ensuring adequate oversight of internal controls.
In attempting to adequately discharge their responsibilities, internal auditors often find themselves in an anomalous position. They report to senior management within the organisation, yet are expected to objectively review management’s conduct and effectiveness. The board can rectify this by strengthening and requiring internal audit to report directly to the board and its audit committee rather than to senior management.
With the coming into force of the Accountants Act, 2013, which requires that all heads of accounts, finance and internal audit in public and private sector entities, with public interest to be professional accountants, boards should be able to have strong internal audit departments in their organisations to rely on. The coordination with the internal audit function should limit the perceived interference with the management function by the board.
The various cases of whistleblowing should ensure that boards are more diligent but should not deter them from performing their expected oversight obligation
The writer is the head of Internal Audit National Council For Higher Education