Board configuration’s impact on company performance: A South African critical analysis.
Kamdom, Vickuy Blanche
Kamdom, Vickuy Blanche
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Abstract
The endurance and dominance of corporate governance remain topical due to perpetual occurrences of business collapses, scandals, non-compliance, unethical behaviors and dishonesty. These business debacles raise questions about the board's responsibility to protect corporate governance. Therefore, this study investigated the potential effects of the board’s configuration on company performance. Analysing the likely effects of the board’s configuration on the performance of the company in this study entails firstly an exploration of the possible effects of the board leadership, size, independence, diversity, activity and
committee on the company’s performance through a literature review, and secondly the practical contribution of the study on the underlined matter but with critical analysis of multiple cases in South Africa, namely Venda Buildings Society (VBS) Bank, Steinhoff and African Bank through a thematic analysis.
This study aimed to develop a preliminary guideline to assist role-players when appointing board members to ensure that the board’s configuration optimally supports the company’s performance. This study opted for the qualitative research approach, meaning it used only secondary sources, which consisted of reviewing documents and accessing unobservable phenomena through a content analysis method. It (study) further relied on a constructivist research paradigm focusing on the cases of VBS Mutual Bank, Steinhoff and African Bank, where the configuration of the board produced total collapse, business scandal, and
success, respectively. A total of 17 documents aligned with the selected companies used non-purposive sampling and criterion-based assessment to gather data, then reviewed and analysed with the aid of Atlas.ti 2023 version software facilitated the thematic analysis of all data using AI coding method. The thematic analysis was conducted through deductive coding to provide insight into corporate board structures and its relationship to companies ’performance. The findings from the practical contribution of the study in summary, showed that a strong board configuration is critical for enhanced company financial and non-financial
performance (case of African Bank). The results thus suggest that the board is responsible for the effective corporate governance of the companies and that its establishment should be maintained when seeking to improve the company's performance. The study further revealed that although the strong board configuration positively relates to company performance, the weakness of the board configuration negatively affects its link with the company performance (all three cases). Weaknesses within an internal corporate governance structure, such as the board, can lead to fraud, embezzlement, and inefficient and ineffective use of company resources, which may result in the company’s collapse and scandals, as demonstrated in the three cases. The findings of this study led to a guideline to assist role-players when appointing board members. This implies that those charged with governance (the board) should develop and implement policies and procedures designed to sustain high levels of integrity and ethical standards to make the best practices of corporate governance more accessible to the applicants. Further studies should improve the direction in which corporate governance is applied by developing a prototypical regulation that emphasises and simplifies the recording of the best corporate governance practices.
Description
Submitted for the degree of Master’s Degree in Business Studies in Finance in the Faculty of Economics and Finance at the Tshwane University of Technology.
Date
2024-10-02
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Tshwane University of Technology
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Keywords
Board configuration, Corporate governance, Company performance, Impact, South Africa