South African companies still have a long way to go when it comes to gender diversity, said Parmi Natesan, senior governance specialist at the Institute for Directors in Southern Africa (IoDSA).
Her statement comes in a month designed to galvanize gender equality with South Africa commemorating Women’s day on August 9.
The statement observed that despite making up just over half the population, women are hugely under-represented in corporate South Africa.
According to the Women in Leadership Census 2012, undertaken by the Businesswomen’s Association of South Africa, only 3.6% of CEOs, 17.1% of directors and 5.5% of board chairs are female.
While these figures represent a slight advance on the 2011 figures, it’s clear that The pressure to improve women’s representation on boards comes from a number of directions.
Aside from the question of simple fairness, companies wishing to comply with King III are advised to “…consider whether its [board’s] size, diversity and demographics make it effective. Diversity applies to academic qualifications, technical expertise, relevant industry knowledge, experience, nationality, age, race and gender.”
“However, gender diversity is more than a compliance issue,” said Natesan. “King III incorporated the concept into its recommendations because the more diverse a board is, the more effectively it can meet its obligations to diverse groups of stakeholders.”
In fact, research by McKinsey, among others, has demonstrated a link between enhanced financial performance and gender diversity. The global study by McKinsey indicated that public and private companies that performed well as regards gender in nine dimensions “tended to have operating margins and market capitalisation twice as high as those of the lower-ranked companies”.
Another common-sense reason to include more women on boards is the fact that women control the majority of consumer spending. Figures vary but, for example, recent research by Oxfam suggests that women control 65% of global consumer expenditure, estimated to be around $12 trillion.
“The boards leading South African companies—particularly in today’s competitive global environment—certainly won’t want to ignore the important source of competitive advantage that a strong female presence on the board confers,” comments Natesan.
Other countries are taking concrete steps to ensure their companies realise the benefits of diversity. In the United Kingdom, for example, the Financial Reporting Council has recommended two changes to the UK Corporate Governance Code. One is to require annual reports to include “a description of the board’s policy on diversity, including gender” and “any measurable objectives that it has set for implementing the policy, and progress on achieving the objectives”.
More telling, the second amendment will introduce diversity, including gender diversity, into the criteria for evaluating the board’s effectiveness.
The Institute of Corporate Directors in Canada has also recognised the positive effect of boardroom diversity on performance. In a 2011 report, it found that diversity “enables boards to deliberate with greater perspective and insight, which results in better decision making”; it also expands the available pool of qualified directors.
Natesan says that South African boards wanting to enhance their diversity and so improve performance should look at how their diversity compares with that of their peers, set targets, and direct search firms to look for candidates in non-traditional talent pools. Nomination committees should also continuously evaluate the needs of the board in the context of the company’s strategy. Internationally, says Natesan, quotas have helped to increase female representation on boards but, she cautions, merit should be the deciding factor in appointing any director.
“The bottom line is that shareholders want strong performance from the companies they own, and that means making sound decisions based on the realities of today’s complex and diverse markets. They also want them to behave in a socially responsible manner,” says Natesan. “Having more women on boards is a way to help achieve all these goals.”