Taking the gloss off Boards of Directors
The King IV Report on Corporate Governance indicates that a Board of Directors should incorporate diversity. Diversity, in the context of the report includes fields of knowledge, skills and experience as well as age, race, culture and gender. Gender, racial, geographic and many other diversities frequently appear in glossy annual reports, although if we look closer the evidence of success remains underwhelming.
Gender is one of the more emphasised forms of diversity in the boardroom. Historically, corporate boardrooms have largely been a male consortium. In recent years, this practice has been challenged as many companies, boards and shareholders have recognised the benefits of having a gender-balanced boardroom. In South Africa, approximately 19% of JSE listed companies have women directors with 6.9% being board chairpersons. Per a recent Deloitte global survey, South Africa ranks fourth globally for the percentage of board chairs that are women, against a global average of 4%. The low numbers indicate that we are dealing with a global problem of exclusion of women in the boardroom. Europe and, in particular, the Scandinavian countries have opted for quotas of women representation which I believe should become practice in South Africa.
Ethnic diversity pertains to having a mix of individuals from various racial, cultural and religious backgrounds. The ethnic mix of a board should ideally represent the area in which the company operates.
In South Africa, legislation such as the Broad-Based Black Economic Empowerment Act promotes ethnic diversity in the workplace. Nearly 30% of directors on boards of South African listed companies are African Black, Coloured or Indian. It is estimated that individuals from these race groups make up approximately 15% of all executive directors on listed companies, and nearly 40% of independent non-executive directors on listed companies. This is a shocking indictment on transformation and employment equity given that black Africans make up 76% of the country’s population. The 2017 / 2018 employment equity report reflected glaring issues with whites dominating top positions, black Africans not being promoted to higher positions while constantly provided training and the increasing employment of foreigners.
Age diversity is an often-overlooked element in the boardroom. Board members tend to be older, as many boards equate age with experience. The 2014 Board Practices Report found marginal evidence of generational diversity in boardrooms, with so-called “younger” directors being in their fifties. While older directors do provide a wealth of knowledge, having younger directors introduces a fresh perspective into the boardroom which should not be underestimated. In the fourth industrial revolution, where rapid change is the new normal, to boost the accumulated wisdom of our boards we need the differential, forward thinking and often radical perspectives that young people offer.
In this business, friendly environment, the private sector and, in particular, the Johannesburg Stock Exchange should remember its commitments to diversity and transformation. And yet, it should not even be challenging to carry out. Twenty-four years of democracy has given us a rising black middle class and in turn more black and more female graduates than ever before. I have firsthand seen the impact that young black professionals have had both in government and the private sector. We now need a deliberate attempt to incorporate them into Boards of Directors which will start to address the lack of diversity highlighted above.
Sheryl Sandberg, the COO of Facebook, has said “We need to resist the tyranny of low expectations. We need to open our eyes to the inequality that remains. We won’t unlock the full potential of the workplace until we see how far from equality we really are”
Waseem Carrim is the CEO of the National Youth Development Agency.