Sibanye Gold Ltd has just announced the appointment of Richard (Rick) Menell as the lead independent director (LID) of the board of directors. But what exactly does the LID do? Does the LID have any effect on the seven decision making levels prescribed by s 27 of the Employment Equity Act?
According to a useful and informative practice note issued by the Institute of Directors Southern Africa dated 22 September 2017 there were changes in approach from King 111 to King IV.
The purpose of this practice note is to:
- provide further governance guidance on the King IV recommended practice 31 of Principle 7 that states “the governing body should elect an independent non-executive member as chair to lead the governing body in the objective and effective discharge of its governance role and responsibilities”. This guidance was considered necessary to elaborate on the core functions of the chair; and
- provide clarity to the recommended practice 32 of Principle 7 that states “the governing body should appoint an independent non-executive member as the lead independent…” This clarity was considered necessary due to the change in approach from King III to King IV and attendant enhancement of the role.
King III Practice 40 of Principle 2.16 contained elaboration on the core role of the chair. Due to the approach of King IV being more succinct and less prescriptive, detailed guidance on the role of the chair was not provided in the Code.
Furthermore, King III only recommended the appointment of a lead independent director in situations where the chair was not considered independent. This approach has changed in King IV, where a practice recommends that a lead independent member of the governing body should be appointed regardless of the independence of the chair (as outlined below), to fill specific functions.
This practice note should be read in the context of proportionality as well as any applicable sector supplement, where certain nuances as to both the appointment and role of the Chair may exist, by virtue of legislation and or other guidelines and codes.
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King IV’s approach is that a lead independent (LI) should be appointed as a matter of course, regardless of whether the chair is independent or not.
This change in approach resulted from the view that aspects of the role that the LI plays are relevant and necessary, not only when the chair is conflicted, but in general, to perform certain specific duties primarily around strengthening the role of the chair, overseeing evaluation of the chair and being an avenue of communication for the other governing body members on any issues relating to the Chair.
This change was considered necessary to, amongst others:
- give the other non-executive governing body members a stronger voice, particularly where there is a dominant chair but without undermining the authority of the chair;
- achieve a balance of power and reinforce accountability mechanisms;
- mediate conflict/dysfunction on the governing body, where the chair is involved;
- be forearmed with a LI in place from the start, before things go wrong.
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