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Thursday, December 08, 2005

 

Rugby Administration: Corporate governance vs Operational/Financial Management

I got the impression over the past year that this new buzz word “Corporate Governance” is sometimes misunderstood as to what it really entails. I decided to write a few pieces on it, based on what is stated in the King II report and my opinion there on.

I will also relate this back to the structures and doings of the the South African Rugby Union to just see why this all of a sudden has become the buzz word in rugby.

Introduction

The impression I get is that quite a few people believes that corporate governance is the same as operating/financial management. This is not true in a certain sense. Why, because of the level at which the responsibility for these functions lie. In short, you can have bad corporate governance, but with good operating/financial management the institution will still be able to survive and even turn out good results.

Corporate Governance casts its web much further than just operational/financial management. It includes a big variety of functions which I will discuss seperately in articles. Please remember to always keep the complete picture in mind and see the concept of Corporate governance.

One can go and read the whole King II report, but in essence it is summarised on page 22 of the report :” …successful governance in the world of the 21st century requires companies to adopt an inclusive approach that takes the community, its customers, its employees and its suppliers into consideration when developing the company strategy. This inclusive approach requires that the purpose of the company is defined and that the values by which it will operate are identified and communicated to all stakeholders. The relationship between company and its stakeholders must be mutually beneficial. The company must be open to institutional activism and there must be greater emphasis on the non-financial aspects of its performance. Boards must apply the test of fairness, accountability, responsibility and transparency in all acts or ommissions and be accountable to the company but responsive and responsible to the company’s identified stakeholders. The correct balancebetween conformance and performance must be struck.

What does this entails? Corporate governance is the responsibility of the board of the company /institution. In my opinion it can be summed up in one word: integrity.

Responsibilities of the board of directors

1. Effective control over the company/institution. This means that the ultimate responsibility stays with the board. They cannot delegate the reponsibility, only the accountability.
2. The board determines the strategic plans for the entity and appoints the CEO who will brings these plans to execution.
3. They should setup a code of conduct, the value system to be implemented and procedures whereby they can seek independent advice.
4. They should monitor the implementation of all the abovementioned.
5. They should strive to be innovative and entrepreneurial while still functioning within their law and governance requirements.
6. They are responsible for evaluating business units, demographics of the company, and the risks within the company aswell as the external risks.
7. They have to monitor the performance indicators and assess the non-financial aspects that is influenced by the company or that can have an influence on the company.
8. They should ensure that all communication, internal and external, are effective with regards to the value system and the strategic plans.

I have read literature where the writers includes the monitoring of the internal controls and information systems. I believe that this is the responsibility of the CEO. He is the one who is running the show and reports to the board. It is not the responsibility of the chairperson to run the company, but to lead the board, formulate their work plan and be responsible for the public relations with the shareholders/interested parties.

I trust that you now understand my argument surrounding the bad governance vs good operational controls.

SA Rugby

You can apply these responsibilities to SA Rugby yourself, but here is my thoughts on it. Applying the above to the situations, one can actually say that it is very unfair just to blame Brian van Rooyen for the bad corporate governance. The whole board is responsible for this, unless it can be proven that he acted maliciously and without their consent. Not one of the members can walk away and point a finger at him, except the ones who brought it into the open, being Markgraaff and Stofile. My impression however is that they only used the buzz word and did not really understand the meaning or their ultimate responsibilty towards the whole concept of corporate governance.

There has been no reports of bad financial management form the SARU side, but this does not mean Prinsloo was doing his job. In accordance with what information is offered to the public in comparison what is expected by corporate governance, he has failed along with the board or presidents’ council (call it what you want). Being in that position, he should be aware of these requirements and if the board did not request him to comply, he should have advised them on the issue.

Where we must give Prinsloo credit is that nowhere did we hear about financial problems at SARU. We did hear how money was wasted by the board on ridiculously expensive lunches, but other than that things seems to be running smoothly on the financial side. This was a waste of money, but not necessarily bad financial management.

On the operational side however, there was major issues that come to mind and that is the contract negotiations with the Springboks, the late determining of the CC venues and the now infamous debacle over the fifth S14 franchise. Here I do have a big problem to decide who I will blame for the fiascos. Some of these were obviously not in Prinsloo’s hands, but again he needed to take control (in absence of Van Rooyen – he was by his own admission focussing on Labat) and advised the board. From the little information we do get, I have come to the conclusion that Prinsloo is not a leader. My problem is that he doesn’t seem to be a do-er either.

The reason for the problems over the past year within SA Rugby can, in my opinion, be summed up as:

1. The chairman/president (whatever) was not focussed on the job he was elected to do. This resulted in people being able to critisize him and focus on his mistakes and thus play their own political game.
2. The board has not realised their own responsibility towards corporate governance and was keeping themselves busy with infighting and politics. The result was that the sport so many people love, was neglected for personal gain.
3. A CEO who did not understand his responsibilities and seems to be more focused on this own problems than the job at hand.

The only solution I can offer is that we return to a corporate setup in a similar mould to that which Rian Oberholser used when he was in charge, but without window dressing positions. The people need to work towards the furthering of rugby and not focus on their personal interests. Dedicated people who can pull their weight and add value to the organisation. Being a corporate will force corporate governance to be complied with and take the loophole under which SARU is operating out of the system.

The sponsors of SA Rugby will need to strengthen their representation of the board and the appointment of Ali Bacher has already been a step in the right direction. I only hope and trust that the rihgt people will be appointed in SA Rugby and that the only news we hear in SA Rugby in future is not only how strong our Springboks is, but also how strong the integrity of our administration leadership is.

Till next time
Comments:
Dragons


Okay donner, very good analysis.


I see King II also gives a responsibility for ensuring good corporate governance to the non executive directors. The guys who are independent of the company and sit on the board.


The issue I see is that there are no such people on the SARU board aside from Ali Bacher.

My other issue is that the SARU board is paralysed by the differing interests of the provinces. The provinces have too much say in how SARU is run. In my mind, this leads to a board that is paralysed by stakeholders interests and the leverage that stakeholders have on them. They have to fear that any executive decision may have the consequence of pissing the stakeholders off and seeing them get voted out before they can implement policy or make important and sometimes unpopular decisions.


So then how do we ensure that the SARU board DOES actually have the power to make decisions and be able to leverage so that they can back themselves without the fear of being voted out or facing no confidence votes like what happened in June this year?
 
Davids,

Ja I didn't want to make the post too long, but to answer your question.

The structure needs to change form the bottom up. Very much like the old farmer coops was converted to corporates, rugby in SA needs to follow suite. Teh unions needs to convert to companies and all aspects that we want in SARU needs to be applied.

SARU board can have for instances a director from each union company nominated to the board with for instance two directors from the sponsors and five non executives form businesss. Chairman needs to be elected from the non executives and sponsor nominated directors with vice chairman from union companies. They then appoint a CEO.

I know this is pie in the sky, but we can always work towards it.
 
Good board structure idea


But with shareholders out of it so that they cannot have too much influence over what the board does in the execution of its duties.
 
Davids,

The shareholders are the fans and lets be honest they are to emotional. I haven't figured out the shareholding part yet, but doesn't matter what the board will have to be independant and allowed to do the job in the most professional way wtihout politics or emotion holding a sword over their head.

Results must be the only measure
 
Well, if you list the bastard on Satrix (the requirements are quite easy and I'm sure they'll qualify), then you can dilute shareholder power quite a lot.


I think it would be terrific if you could get shareholders who are fans of the game.


That would virtually guarantee that the board will have the power. The unions also need to be franchises of SARU instead of independent shareholders.
 
Good idea.

Unions gets "special" shares which limits their voting rights to say 25%. That should keep them in check.
 
Ja, you can structure it quite nicely, like leaving shareholding within the company unissued, issue say 49% of the shares with unions who are franchises getting just a certain % of shares and issuing the remainder of your shares for the public to buy. And you hold certain shares in reserve for use or sale to other shareholders. It should also work absolute wonders to their BEE if they get a BEE shareholder and believe me, people (fund administrators) will be lining up to get their paws on shares.

Then of course you can give sponsors board representation, without shares (because you never know when they change)


ALTX requirements for Satrx listing:

1. Asset value in excess of R25 million

2. 2 000 000 shares to issue

3. 8 million pre-tax profit (easy actually)

4. At least 100 shareholders

5. 25% of board to be independent non-executive members
 
O shit don't get me started.

Why can't these guys see this. Even if they don't have the knowledge, someone will do it for them for much less than R150,000.
 
The easy answer is that they're there for self aggrandisement.

It's easy to buy off ANCYL and government with some juicy promises and a look at the representivity of the youth teams.

Shareholdesr won't be that easily fooled and it'll be much harder to keep them happy if you're a bunch of useless 'administrators' instead of employees with a goal driven view where you ahve to deliver and sign all sorts of pesky documents about your performance etc....


And of course if you don't so well, there's this pesky thing of shareholders holding your responsible and making you pay if you f-up. And all these damned legally required disclosures force you to be transparent and that can't be nice because then you can't sweep problems under the table and put on a united front of happy faces.
 
Donner

What do you collect in that hobbies pages of yours?
 
Very nicely summed up there.

I still wonder why Van Rooyen went back to this system. Maybe his own company is giving us clues.

I can just imagine if you start putting somethin glike this in place, how p/off the bigger unions will be if you tell them they can only buy the same omount of shares as the small unions.

If we could just derail this bloody gravy train.
 
I am into radio controlled stuff.

Did also buy a slot car set from Hobby People. They are bloody cheap on their specials, the only problem is that the shipping basically doubles the price.

I would be into much more if the budget allowed it. Men and their toys :-D
 
I think the issues Labat has with the JSE regulators should tell you exactly why he reverted to this system!


I collect the die cast military vehicles and planes. My wife is also very skeptical about those and I'm prohibited from display anywhere but in the study....
 
Have you seen how fanatical the guys can be with trains.

There is a guy in Bloem who had his collection valued at close to R2 million.

I tried to get into that, but even a basic set is too much to get approved by the finance committee.
 
Sorry to gate crash your twin poke but it is a great article- it just proves Raputins point on having a good team- based on individual competencies.

On the hobby stuff- I am into Lego- do you guys know of any unused lego that is collecting dust somewhere- will pay for shipping and pay 10 ZAR to the kilo.
 
Donner

Who is the Bloem guy with thetrain collection- would like to take the boys there

BTW when are you visiting your sister again?
 
I have searched quite a few American and British hobby sites and Hobby People is the best one. When you are viewing an item there is usually a link to the manufacturer and then you cna see what else they have.

Hobby People will then order it for you, sometimes at a better price than the manufacturer.

Guess they get a very good confidential discount.

OO,

Sorry can't help you there. Everyone I know still uses theirs
 
OO,

Check jou mail.

O ja hy is 'n groot Blou Bul ondersteuner. Gee vir hom grief.
 
Sies donner, hoekom moet hy die ou nou grief gee oor hy 'n bloubul ondersteuner is? Ek skaam my dood om met julle ge assosieer te word!  
lol Donner

There are a number of die cast dealers who do offer better prices than hobby people unfortunately, but yes the price of shipping to SA can be shocking!

I have a friend who is a high up at IBM and collects trains. I know these guys can be absolutely crazy with their collections. And OO they won't let kids go anywhere near the train sets!
 
Aldo,

All in good spirit. Hy moet mos maar verwag om dit te kry as hy in Bloem wil bly nou.
 
"The issue I see is that there are no such people on the SARU board aside from Ali Bacher."

And he's only there for the colour of his skin.

The only way to save the Saffas is to get Graham Henry after he's taken the All Blacks to the WC. You guys think that because of your little website, you sre so cool, you suck, the only cool people around are the ones staying in NZ!
 
Davids

I reaaly can't comment on the die cast stuf, but the RC stuff is quite competitive. Especially in comparison to England. Those guys are crazy with their pricing.
 
Ag sorry, ek dog net ek stir as daar dalk nog iemand daar buite is wat nie weet dat dit nie die regte tackler is nie! Jammer man, nou dat dinge stil word by die werk, is ek verveeld.  
That is not the real tackler

The real tackler actually has a bit of a brain enough to know Ali is Jewish despite the name.

That sounds more like our friend Taranaki Mauler!

Also

Relax man.

Die Bulle is my tweede span ook. In elk geval na die manier hoe die Bulle ondersteuners en media hulle klaar gemaak het om na die vierde CC wen in 'n ry fees te vier moet mens regtig lag vir die manier hoe hulle planne platgeval het!
 
Donner,

Superb piece.

I would only point out one issue.

It was Van Rooyen himself who said he is going to be a hands-on President, not the traditional functionary.

It was that decision that created so much confusion in the ranks, I believe.

In fact, I'd almost go as far as to say that Prinsloo's role has been usurped and is merely titular.

As you correctly point out, as CEO, he shouldn't have allowed it to happen but it goes back to my question the other day, is Prinsloo part and parcel of having the Van Rooyen package? Are they not both previously Lions/Cats?
 
Donner


The Poms are crazy with their prices.

As an example Corgi and Dinky Toys are a British manufacturers of die cast toys. Very good quality ones too.


They have a factory purchase site where you can buy directly from them and it's cheaper to buy from most American sites, and the kicker is the yanks actually import thiers from the UK!!!!!



Also



Miskien kan jy aan die 'look en feel' van hierdie site werk.




ps. I changed the spelling on the front page. "Off-course" is actually spelled "of course" and "independant" is actually "independent".


I have a thing about spelling....
 
Good point Rasp


And there Louis Luyt taught Brian Van Rooyen the basics of dictatorship.....
 
Is there a reason I can't see the left hand 'buttons' anymore?

Everything appears to have shifted to the left?
 
Ras,

They had an interview with Van Rooyen on Moneyweb Radio where he acknowledged his focus was on Labat and not SARU. It was just politic speech about being hands on.

He probably think she was hands on, but being at games, calling meetings, and having lunches does not fit my definition of hands on. That is the perks not the job.
 
Ahhhh, I see why it has happened, the Spears logo is too wide.  
Hands on is way out of vogue.


Delegation is in.


Oversight is in.


Creating an environment where people perform for you is in.


Dictatorship is out.

Management is out.

Leadership is in.


Maybe he should go and attend a couple of business management courses. Services SETA has a few good ones that will benefit him no doubt.
 
DavidS,

Think he is still in the stone age. He doesn't realise there are courses available.
 
I like the hands on method, espesially if the girl looks like Candice Hillebrand or Angelina Jolie!  
Sies maar julle is lelik met die mense. Arme BvR, al wat hy gedoen het was om SA Rugby op te F@k, nou se julle hom sleg!  
Pick anyone in the world to be CEO......it still won't cure Jake White's foot-in-mouth disease or give him the know how to organize a rolling maul or bring more creativity to our back division.

Ironic.....?

With the current Saru leadership and Bok management....I can't see us winning the WC or becoming No.1.....but we'll do ok though.

The bigger the operation...the more time that is required to make an impact.Now,I don't follow the Saru ramblings as much as the rest of you but what is undeniable, is that since Van Rooyen and the other seemingly inept plonkers have been in charge, we've had 2 fairly succesful seasons.Very succesful at junior level.Isn't THAT what it's all about?
Now, I know the recruiting of JW was pure luck on Van Rooyens part and he didn't list him as one of the original candidates.......but who cares? He would have been critisized for not recruiting him....shouldn't he be praised for eventually recruiting him?

Personally,I'd give the current setup until 2007 to show what they can do......that would have been adequate time to make a proper evaluation on Saru's progress as well as JW's. Let's not forget that people grow,learn and develope.Van Rooyen in all likelyhood will be a far better CEO in 2007....not sure if JW will be a better coach.
Let me rephrase...I think Jake is a good coach but I don't think his gameplan is good enough to win away from home consistantly.The pack as a unit aren't good enough and we can't hold on to possession long enough.
On SA soil field position may well be more important the possession but not away from home.

Maybe we are all just wasting our time....fire everyone now?

As a side note....my only concern with SARU revolves around contracting players properly,reimbursing unions withregards to Bok's being rested.Also,I'd like to see them seriously consider pulling us out of the S14 if fair and evenly uncomfortable travel iteneries aren't supplied to all.Heineken Cup rugby....why not?

As for mismanagement of funds etc.....what the fck do I care? If the government/shareholders/etc. are to stupid to do anything about it......good on them I say,I'd be doing it as well.
 
You think Kandas will be offended if we make the Spears logo smaller.....;-)

Who is brave enough....

Donner, yeah, I know he said that about his 'energies' being focussed on Labat.

Simply put, I don't believe him. He tailors what he says to the audience he is speaking to.

He has been far TOO hands-on within SARU and it's directly led to the left hand not knowing what the right hand is doing.

By taking executive duties he can get executive perks, or I suspect that was the plan - like offices, a PA, an office manager etc etc etc

As you so correctly pointed out, it is no BvR's fault alone - the board should have reigned him in.

To be fair, I suspect that is all that Markgraaf was trying to do. Pity for Markies that he was on Keo's shitlist.

I'm not so sure about Lategan's motivations though.
 
I like your style Aldo


Especially if you have both and one is dressed in a Spearleader outfit and the other in a Bulls outfit and the Spearleader is spanking the Bulls poppie
 
LOL DavidS

If Van Rooyen really wanted to be "hands on"..........he'd be packing down in the frontrow on a Saterday afternoon at Ellis.

From my personnel experience, if you want a strong team, the leader has to be an autocrat.More things get done this way, when a change of direction is needed,that's when problems start.But then the bloke usually leaves anyway to start a new challenge somewhere else.........and the company recruits a new autocrat to get things done who the usually leaves.....etc,etc,etc....
 
Geez, St Pete, don't get me started on that non-existant rolling maul of ours!!!

Maybe someone will post an article on the dark arts of the maul.

It is a source of continual frustration to me that we cannot score a pushover try.

I mean, we are talking the SPRINGBOKS here!
 
Davids, what are we going to do with you, those thoughts will only get you into trouble! Mind you, it is a lovely thought, if you turn it around, so that the Bulls poppie does the spanking! I like my girls to be dominant!  
Rasp


I don't think he'll be offended

Matter of interest. I think we need one of those thigies like keo has that gives short summaries of what an article is about first before we go to them.

Just a thought.

BVRR got into trouble because Labat was not reporting correctky to the JSE and their listing even got suspended for a while.

He has apparently been compelled to appoint corporate advisors to assit him in running Labat properly. I think he has a team from KPMG or PWC checking out that the company is properly run.


StP makes some valid points though. Why tamper with the system when the teams are performing.

My view though is that the teams and the coaching staff will perform better if they are given the better structures within which to operate. The other issue is that if proper trustworthy structures exist, people will be attracted to them and we may be able to reign in some real help for JW.
 
lol Aldo!

I'll send you the picture, then you can turn her into a Lions poppie. I don't think Kandas will enjoy a picture of a Spearleader being spanked!

Rasp, maybe PA or Murph can give us a rundown of what the damned rolling maul is all about.

StP


My personal experience is that there's a difference between leading and dictating. If you leave your people to do their jobs and manage their performance, rather than their functions you are more likely to get the whole organisation performing better as a a whole. In any case this is prevailing management theory...
 
DavidS,

Pity that not alot of people are following that theory.

Some "managers" still believe that the majority of people shy away from responsibility. This is true for a small number of people in the work environment today. People linger for responsibility and freedom to express themselves. This gives them the purpose they seek in the routine lifes we are living.

People that is given the freedom to express themselves are more innovative and in the end the company is the winner. But I guess i don't have to tell you this.
 
David,

I like the idea of just having the title, and the first paragraph etc. like Ig does it.

Haven't the foggiest how to do it though.

Yes, Murph has great technical knowledge, as does PA. Hopefully we'll get something from them some time.

I enjoyed Murph's pieces on the front row a lot.
 
DONNER


Great minds and all that...
 
Actually that kind of theorem is self evident  
Ja, I will support first paragraph views.

Re dictators:
Maybe there is something to say for enlightened dictators.
Craven was one without doubt, and Luyt too. And things seemed to work then :-)
 
...please where can I buy a unicorn?  
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