From the above extract it is probable that Steinhoff International’s board was dominated by its
CEO. Discuss the effect of a dominant personality of the board including possible methods of
dealing with dominant personalities and the effect of a dominant personality on the fiduciary duties
of the other directors.
According to Kneal (2012) a dominant personality is an individual who is able to, through force of
character or other means, impose his way of thinking on others, so that they do not oppose his or her
opinions. A single individual who is both chairman/chairperson and CEO may, for example, be a
dominant personality, who does not allow for or encourage dissenting views during board discussions
and may perpetuate poor governance practices. A number of corporate collapses have been attributed
to a dominant individual, in many instances acting in a dual role as chairperson and chief executive,
running the company as a personal kingdom and with complete disregard to the interests of
shareholders and other stakeholders. Well-known examples: Brett Kebble, Jeff Levenstein (Regal
Bank) or any other acceptable example.
According to Kneal (2012) the balance of power is a central issue in corporate governance, and thus
the most important issue in the running of the company is the balance of power among the board
members. Balance at board will request that no-one induvial board Chairman or CEO will exert too
much pressure, power, and influence on other members of the whole board. Rather, there should be
checks and balances that will prevent one individual from dominating the decisions of others. Identifying
ways in which one can be restricted from dominating others, the board will be having ways to which it
can deal with dominant personalities.
The negative aspects of dominant personality is that it leads directors to work in self-interests and
disregards the interests of all other stakeholders. Kneal (2012) put it well and stated that, companies
with dominant personality are badly governed companies, and these badly governed companies have
opportunities of creating autocratic leaders, who disregard the views of other board members and thus
lead to company failure. There are various ways in which the problem of dominant personality can be
dealt with within an organisation, among other ways are discussed below.
Dealing with Dominant Personality at Board Level
The various ways in which the board of directors can deal with dominant personality rest with the ability
of having independent views, more importantly from the independent non-executive directors. It is
important to take note that, they goal is not of complying with codes of governance and ensuring that
more independent non-executive have been appointed to the board, rather their contribution and
deliberation towards board issues is the borne of contention. Upon appointment to the board, the
independent non-executives should acknowledge that, there are accountable and responsible to the
affairs of the company the same way the executives are. In that regard, these independent nonexecutives need to ensure that they continuous improve their effectiveness on the matters that will be
presented in board meeting, and thus contribute towards fostering the interesting shareholders on
board deliberations and playing the devil’s advocate where necessary.
Sufficient Number of Non-Executive Directors
Kneal argued that, there should be a majority of non-executive directors on the board to create a
suitable balance of power and prevent the dominance by one individual or by a small group of
individuals, of the board. Kneal (2012) went on and said that, non-executive directors should be
appointed to provide a counterbalance to powerful executive directors and to give the benefit of their
experience and know-how to the decision-making by the board. At minimum there should be 4
independent non-executive directors, 3 members of the audit committee as stipulated in the companies
Act 71 of 2008, and the chairman, who is recommended by the King Reports. In the Steinhoff, the
Chairman was not independent, for he has been in the executive positions of Steinhoff subsidiaries
prior to appointment of Chairman.
Avoiding undue reliance on specific individual for decision making
In trying to reduce the problem of dominant personality, the board and its committees should ensure
that, there is no undue reliance on specific individuals during the decision-making process. These can
be achieved through refreshing and rotation of committee memberships as well as making sure that
those who are entitled to attend the nomination, remuneration and audit committee meetings do so,
rather any other individuals will do through invitation.
As stated above, the best ways of dealing with dominant personality on the board is through improving
the effectiveness of non-executive directors. The three main ways in which non-executive directors
effectiveness is improved include (1) improving the knowledge of the non-executive directors, (2)
increasing the amount of time non-executive directors spend at the companies they have been
appointed to work at, (3) meeting of the non-executives in the absence of the executive probably with
the internal auditors and external auditors.
The quality of decision making process at board level is determined by the amount of information all
directors have and as such, the company secretary should that all directors do have all the necessary
information needed in improving the decision making process, even if it means providing education and
training development so that the non-executive can have more knowledge about the company. The
non-executive should not accept too many directorships from various companies, so that they can
improve the effectiveness of their decision making in the deliberation of board matters.
Effect of a dominant personality on the fiduciary duties of the other directors
Section 76 of the Companies Act states the fiduciary duties of directors, as the duty
 Skill & care
 No secret profit
 No conflict of interest
Fair dealing is among these duties. With the problem of dominant personality most directors will fail to
check and work in accordance with the law requirements. By aligning and failing to question the
decisions of the dominant part directors will be failing on their duty of skill and care as well as on the
duty of secret profit and conflict of interest. To larger, this emanates from the fact that directors are
individually and severally liable to the actions and decision made by the board.
Failure to exercise these fiduciary duties, directors will be failing on the duty to work as agents of the
company, which emphasize that directors should work in the best interest of the company not in their
own interest, thus by supporting the dominating part directors will be neglecting their duty to act in the
interest of the company, rather they will be working in the interest of the dominating part.
It is important for directors to take note that, directors’ fiduciary duties are connected with risk
management and requires compliance with the laws and regulations, such that allowing dominating
party to override their decisions in the board, the other directors will contravening the requires of the
companies act.
More can be said by define the duties and elaborating on the tests of the fiduciary duties but the number
of marks I don’t thing its necessary.