Early beginnings
A progressive University of Johannesburg research paper from October 2011 titled, “The Relationship Between Gender Diversity and Corporate Profitability: The Top 100 Companies on the JSE Ltd”, found through correlation, regression and industry comparative analysis that companies with a higher proportion of female directors (particularly non-executive directors on their boards) tend to be more profitable. But considering that it was probably one of the first studies of its kind undertaken in South Africa, and that the findings may have been a little premature for policy-making, it was found to be essential that future studies of a similar nature be undertaken.
Types of diversity
However, in January 2021, the report by PricewaterhouseCoopers (PwC), “Non-executive directors: practices and fees trends report, 14th edition”, revealed that while 81 percent of non-executive directors of JSE-listed companies are South African, 48 percent of these (including chairpersons) are white. The remaining split was found to be 40 percent Black, seven percent Indian or Asian, and just five percent Coloured.
Female non-executive directors on the JSE were also found to be in the minority, with 71 percent of NED positions filled by men. The PwC report also called on boards of directors to “reflect age dynamics when making board appointments to ensure diversity of views”, which was sure to overturn the familiar scenario in which the median age of South African chairpersons was in their 60s and board members in their later 50s.
There is certainly “a need for a greater focus on transformation within South African boards, and the consideration of age dynamics”, the report found. While age has traditionally been equated with experience, “a mixture of young and old is important to ensure diversity of thinking and approach, and to ensure that boards are able to face the challenges of the digital age,” the report revealed.
Under the spotlight
Most organisations would argue that their workforce is their most valuable asset but, in the steady march towards the Fourth Industrial Revolution (4IR), few JSE boards are able to boast a member with specialised IT skills – as just one crucial example of the importance of diversity.
Essentially, diversity in the corporate boardroom takes many different forms including –
- Skills, expertise and experience: there is no doubt that a wider, more diverse pool of NEDs will bring a range of interesting and exciting perspectives to the boardroom table
- Gender: females need, increasingly, to sit shoulder to shoulder with their male counterparts for reasons of productivity, profitability and an enhanced management style that rests on collaboration
- Ethnicity: locally, the B-BBEE Act assists in promoting ethnic diversity in the workplace, alongside fair opportunity, skill, talent, education and industry affiliation
- Age: while older directors provide a wealth of knowledge, younger directors can introduce a fresh perspective that can change things up for the better
- Geography: looking at successful European boards, as just one regional example, nearly 90 percent include at least one director from a country other than where the company is head-quartered; and
- Independence: directors without any direct stakes in a company can certainly assess all matters in a more objective and balanced manner.
Value creation
According to the Deloitte “King VI Report on Diversity in the Boardroom”, the principal argument in favour of a board with a degree of diversity among its members is the wide range of perspectives that each individual is then able to bring to the boardroom table. “Boards that fail to seek out and include diversity among their members essentially run the risk of limiting the creation of value, halting sustainability, and undermining the very long-term competitiveness for which they are in business in the first place,” enthuses Thuli Nkosi, director at BossJansen Executive Search.
From the above, it’s clear to see that boardroom diversity is certainly something to think about.
