Article Overview

This is the third of a series of three articles written by Taka Sande and Carel Van Zyl, both Project Management Professionals at the South Africa Chapter. In this article they speak about the dual board structure in the Management of PMI Chapters, the PMI South Africa Chapter’s case and Director Development Program.


Table of Contents

Effective Corporate Governance in the Management of PMI Chapters

The Dual Board Structure

The Case of PMI South Africa Chapter

About The South Africa Chapter’s Director Development Program (DDP)


Effective Corporate Governance in the Management of PMI Chapters

The PMI provides opportunities for project professionals to take advantage of the leadership positions to sharpen and harness their executive level skills through Chapter leadership and the PMI International leadership positions.

Here are some mostly statistics from the PMI 2018 Annual Report;

PMI BY NUMBERS;

Number of Members Worldwide

565,021

Revenue of PMI HQ

US$220 million

Number of Chapters Worldwide

At least 300

Number of Chapter Members Worldwide

295,499

Size of Largest Chapter

11,000 members (Washington DC Chapter)

Budget of Largest Chapter

At least US$0.5 million (estimate)

 

The above statistics shows that since it foundation in 1969, PMI has grown to be a large organisation. This is also reflected by the number and size of chapters. With growth comes the need to improve the integrity of management systems to keep in step with the current corporate trends.

Due to recent corporate scandals worldwide, there is a growing trend to separate the CEO and Board Chairperson functions, especially as the organisation grows. This results in having the executive management separate from a structured corporate board, as a way of reducing the risk of falling into the abyss of scandals.

The Dual Board Structure

A Dual Board or Two Tier system is a corporate structure system that consists of two separate Boards of directors that govern a corporation. The structure is composed of two boards, the "Management Board", and the "Supervisory Board" each of these have different roles. In an ideal two-tier board the executive board is made up of all executive leaders and the supervisory board is mostly made up of all non-executive directors. The application of the dual board structure, and the roles and relationships between the two boards differs with different countries.

Chair by the Chief Executive Officer, the management board also referred as the Executive Committee or Management Team is responsible for the day to day running of the organisation. They focus on production, growth and numbers. On the other hand. the supervisory board also called Board of Directors, governs, guides and monitors the management board and is chaired by a Non-Executive Chairperson.

The benefits of dual board include efficient monitoring through separation. It promotes independence, transparency and creates a sense of trust. A dual board ensures that the CEO and Chairman are held by different individuals. Besides the shareholders (or in PMI case members), the independency of the supervisory board enables it to consider the broader stakeholder issues of the organisation like the environment, equity and organisational impact.

PMI International has a dual board with a separate the board of directors and executive management team. This structure ensures integrity and creates trust. Adapting a similar structure in PMI chapters will also pass down these benefits to chapters.

Non-profits and even for-profit organisations worldwide, have dual boards. In most countries it is a statutory requirement for formal and non-profit organisations. As part of the non-profit, corporate governance of PMI Chapters can be strengthened by introducing the dual board structure. This is done to strengthen the overall integrity of the organisation as the supervisory board;

  • expresses independent opinions on the chapter.
  • assesses the chapter’s performance with clarity.
  • listen to member concerns and advise the chapter executive.
  • make sure that the chapter follows relevant laws and adheres to its goals.

The chapter members act as the shareholder and they appoint the supervisory board. The supervisory board becomes the chapter corporate board for the executive management. This promotes accountability and transparency within the chapter management.

This has several advantages that includes;

  • Better corporate governance for the chapter, especially for large chapters that have grown to become large organisations.
  • Better services to PMI Chapter members.
  • More opportunities to engage at corporate level.

There are very few PMI chapters where the chapter executive is separate from the chapter supervisory board. Some of these include;

  • South Africa Chapter has a Board of Directors and an Executive Management team.
  • Montreal Chapter in Canada has a Board of Directors (VP’s) and Board of Governors
  • Pune Chapter in India has a Board and an Advisory Board
  • Queensland Chapter in Australia has separate Board and Executive

The names of the two boards, their composition and application can vary by country or/and by chapter.

The Case of PMI South Africa Chapter

The PMI South Africa Chapter is one of the few chapters in the world with the chapter executive separate from the chapter board according to national law for incorporated bodies. This structure has proven to be beneficial for the chapter.

The need for integrity, accountability and democratic processes come from the long dynamic history of the country. The ideologies of the South African society and the institutions are shaped by impactful events that includes; the 1994 peaceful democratisation process, the guerrilla warfare and concentration camps and trench warfare in Anglo-Boer War from 1899 to 1902 and most recently the 2017 calls for de-colonialization.

Most of the professional non-profit associations in South Africa are incorporated and have Board of Directors separate from the Executive. Professional statutory bodies established by Acts of parliament such as the Engineering Council of South Africa (ECSA) and the South African Council for the Project and Construction Management Professions (SACPCMP) also have the double structures.

Incorporating the PMI South Africa Chapter under the South African Company’s Act as a Non-Profit Organisation requires;

  1. An independent board of directors with a majority of non-executive directors with ‘independent and unfettered’ judgement. Directors are voted in by the members.
  2. Only three executives can also be directors on the Board, that is, the CEO and two others.
  3. The Executive is quite separate and gives reports to the Board of Directors for specific issues.
  4. The Board must register all the directors and also a Memorandum of Incorporation that complies with the South African Company’s Act.
  5. The Board chose to be guided by the King IV guidelines produced by the SA Institute of Directors.
  6. The board itself is required to have several active committees which in the case of the Chapter for 2020 includes a:
  • Nominations, Social development and Ethics committee
  • Company Secretary and Incorporation committee
  • Finance, Fundraising and Policies Committee
  • Audit and Risk committee
  • Performance, Governance, Strategy and Bylaws Committee
  • Director Training committee

The chapter board adopted Bob Garret model in The Learning Organisation [1986 & 2000] which devised a general “learning board model” with four cycles of activity per annum of the Board:

  1. Policy review cycle
  2. Strategy review cycle
  3.  Operations Review cycle
  4. Governance review cycle and accountability

Hence the PMI South Africa Chapter Board of Directors only meet four times a year, one of the meetings being the AGM where accountability is done. The Board committees however can meet more frequently, especially the Finance and Audit committee that is concerned with Budget approval and four Quarterly financial reports from the Executive and the annual external audit.

The Chapter has already had great benefit of the ‘double board’ system. For example:

  • In 2016 the President and many of the VP’s resigned in a short space of time and the Board of directors immediately took over running the Chapter and restore steady state Chapter management by filling vacancies, while chapter member activities continued.
  • The Board of directors advise the President when issues arise, and also reduce his/her exposure and workload where possible.
  • Being Incorporated under the South Africa Company’s act brings clear fiduciary requirements and the chosen King IV guidelines from the Institute of Directors of Southern Africa (IoDSA), that leaves little doubt about the functioning standards of a compliant board of directors
  • The chapter has an efficient member development opportunity for project professionals who want to get into the governance of their companies, giving effect to the Talent Triangle’s Leadership and Strategic Management skills.
  • In a process to meet requirements of the Act, the PMI SA Chapter in 2019 launched a Director Development Program (DDP) for members of the Chapter which will also expand the potential of their careers.
  • After their terms of service on the executive is over, the VP’s and ex-presidents can easily transfer onto the board, leaving space for the new incumbents in the executive to innovate and grow and establish their own way of management.

About The South Africa Chapter’s Director Development Program (DDP)

The Director Training Committee of the PMI South Africa Chapter Board was launched by the South Africa Chapter in an effort to comply with the Company Act’s induction and training requirements for Board Directors. The Director Training Committee compiled a Charter for a Director Development Program (DDP) which was approved by the PMI South Africa Chapter Board. The DDP aims to introduce Chapter Directors and other interested Chapter members to the skills and knowledge required to be an effective director of the Chapter, but also any other company, NGO or Public benefit organisation in South Africa.

The belief is that many members want to improve their chances to reach the highest levels in their own working environment and need the necessary governance skills. This is providing members with corporate skills beyond the technical project management career.

In 2019, a total of 60 applications were received from Chapter members to participate in the 10-month long DDP. They were organised into 8 study groups countrywide. Every group had elements of virtual participation, which gave members in the outback also opportunity to experience group participation. Participation was enthusiastic in most groups and only one folded during the process. At the end of 2019, as many as 41 participants completed the programme.


Read the first part of the series: Corporate Governance Knowledge for Project Professionals: Progressing Up Towards the Chief-Level

Read the second part of the series: Corporate Governance Knowledge for Project Professionals: Linking Project Management and Corporate Governance