News & Press: IoDSA in the Press

South Africa is a Leader in Gender Diversity on Corporate Boards, says New Study

07 August 2013  
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According to the GMI Ratings 2013 Women on Boards survey, women hold 11 percent of board seats globally. Surprisingly, South Africa ranks fifth in the world, with 17.9 percent female representation on the boards of the 59 companies included in the research.

This result puts South Africa ahead of most countries, developed and emerging.

"The benefits of gender diversity in the boardroom are now accepted,” says Parmi Natesan, senior governance specialist that Institute of Directors in Southern Africa (IoDSA). "South African business has a global reputation for its competitiveness, and its progressive stance towards gender diversity is one component of its winning formula.”

South Africa’s stellar performance, Natesan believes, could be linked to King III’s recommendation that a company’s board "…consider whether its size, diversity and demographics make it effective. Diversity applies to academic qualifications, technical expertise, relevant industry knowledge, experience, nationality, age, race and gender.”

Another contributing factor could be the drive for employment equity, with female representation on the workforce generally counting towards empowerment criteria.

Globally, the research shows that female board representation grew by only 0.5 percent since 2012. The most significant improvement was shown by European companies, where legal mandates for female board representation exist or are mooted. Norway, Sweden and Finland continue to lead the developed world in their percentage of female directors, with 36.1 percent, 27.0 percent and 26.8 percent, respectively. Significant increases in women’s representation are also taking place in Italy and France, following the recent passing of laws on board diversity. France now ranks fourth in the world, with 18.3 percent female directors.

The link between enhanced performance and gender diversity was first identified by McKinsey & Co in 2007 . McKinsey’s research pointed to the fact that there is a positive correlation between gender diversity in top management and organisational excellence, return on equity, operating results and share appreciation.

By 2012, the McKinsey research was showing that gender diversity had become important although positive impacts were still not generally being felt.

"The business case for gender diversity is multi-faceted,” comments Natesan. "Diverse groups are able to solve complex problems better, and ‘group think’ is less likely. Such groups are also more able to relate with the diverse stakeholder groups that new modes of governance now include.”

Other drivers for gender diversity include the fact that women control the majority of consumer spending—roughly 65 percent of global consumer spending, according to the Boston Consulting Group. Women also form a large proportion of graduates globally, making them an obvious target in the so-called global war for talent. In Organisation of Economic Co-operation and Development (OECD) countries, for example, females make up 58 percent of all graduates. This "graduate gender gap” is evident elsewhere: women also earn around 60 percent of US degrees, and this is expected to increase slowly into the future.

"South African boards wanting to enhance their diversity and so improve performance should set targets and direct search firms to find candidates in non-traditional sectors. Benchmarking against peers can be a useful exercise when it comes to setting initial targets, but nomination committees should be mainly guided by what skills the board needs to implement the company strategy,” Natesan says. "Having more women on their boards can help companies improve performance in a more responsible way—that’s the bottom line.”