SOE Board Independence Doesn’t Grant Freedom From Accountability

The Organisation Undoing Tax Abuse (OUTA), in partnership with The Ethics Institute (TEI) and with support from the Konrad-Adenauer-Stiftung (KAS), has launched a new research series examining governance, accountability and board remuneration practices within South Africa’s state-owned enterprises (SOE’s).

The research comes at a critical time for South Africa’s SOEs, many of which continue to face concerns over governance failures, financial sustainability, board accountability and declining public confidence in institutions entrusted with public resources.

Two papers released as part of the series examine a central question: how should South Africa hold SOE boards accountable for performance and governance failures without undermining the independence of non-executive directors?

The first paper, Understanding Drivers of Ethical and Professional Board Governance in South African Public Institutions, finds that remuneration reform cannot be considered in isolation. Effective governance depends on merit-based appointments, appropriate accountability mechanisms and strong ethical and professional standards.

The second paper, Holding State-Owned Entities (SOEs) Boards and Non-Executive Directors Accountable for SOE Performance, finds that fixed remuneration remains important in protecting the independence of non-executive directors. Rather than linking directors’ pay directly to SOE performance, the research argues for stronger performance-based accountability through effective board evaluations, greater transparency and meaningful consequences when governance failures occur.

“South Africans have repeatedly carried the financial and social cost when state-owned enterprises are poorly governed. The question is therefore not simply how much board members are paid, but whether the governance system ensures that the right people are appointed, their performance is properly assessed, and there are consequences when they fail in their responsibilities,” says Robyn Pasensie, OUTA’s Parliamentary Project Manager.

Together, the papers point to a broader problem: remuneration alone cannot fix weak governance.

The research calls for:

• stronger, merit-based board appointment processes;
• independent and credible board and governance evaluations;
• greater transparency around board performance and accountability;
• stronger parliamentary oversight; and
• clearer consequences when directors fail to meet their governance responsibilities.

“Board independence matters, particularly for non-executive directors who must be able to exercise objective judgement. But independence cannot become a shield against accountability. We need governance systems that protect independent decision-making while making it clear who is responsible when oversight fails,” says Pasensie.

The papers argue that South Africa needs governance systems that properly connect authority, stewardship, remuneration and accountability. Those entrusted with overseeing public institutions must have the independence to do their jobs, but that independence cannot mean an absence of accountability.

Pasensie says Parliament also has a critical role to play.

“Parliamentary oversight cannot begin only once an SOE is already in crisis. Parliament needs access to credible information about board appointments, governance assessments and performance so that problems can be identified and challenged before they become another financial crisis that the public is expected to carry.”

The research is particularly timely as government considers reforms to the governance of state-owned companies, including the proposed National State Enterprises Bill. This presents an opportunity to strengthen board appointments, improve governance arrangements and establish clearer accountability across South Africa’s SOE landscape.