NEW AGE, THE 2014/03/03 12:00:00 AM, Page: p.21 Opinion: Ansie Ramalho
Boards of directors with fewer than three female members are severely hampered in unlocking value
ALL of the typical what-to-expect-on-the governance-front-in-2014 emails, blogs and articles that I have received since the start of the new year deal with diversity and gender equality in some way or another. This is no surprise as there are many good reasons to take this topic seriously. There are ample studies showing that the presence of female company directors on boards leads to better company performance measured both in financial and sustainability terms. Interestingly, John Okray, the chairperson of the Federal Bar Association's Corporate and Association Counsel Division in the US argues (and backs this up with an impressive array of research sources - see: www.linkedin. com/in/johnokray) that those countries with more female company directors are able to show success in other areas such as prosperity, wealth, happiness, lower corruption and better education. Okray does not deal with the reasons for this correlation between woman directors and achievement. However, at least as far as company performance is concerned, it is broadly recognised that the active participation of women adds balance by bringing a more diverse perspective and depth to debates and decision-making, which in turn unlocks value for companies. There are more reasons for including females in the higher echelons of decisionmaking, whether it be in business or politics. Females make up approximately half of the population and form a large proportion of the educated work force. Largely excluding women from active participation means that this segment of the population remains an untapped resource of talent. South Africa is not doing too badly on gender transformation comparatively speaking.
The non-profit organisation Catalyst issued a report in December 2013 drawing from a wide variety of international sources showing that in South Africa 17.1% of board seats are filled by women. South Africa ranks 7th on the index, outperformed mostly by countries like Norway, Finland and France where quota systems have been introduced. A notable exception is the UK, which ranks sixth, being reported as having 17.3% female directors. On the political front, according to the Economist, South Africa ranks eighth in the world, with women taking 42% of Parliament seats. Although this particular figure is encouraging, having only 17% females in the highest corporate decision-making bodies is a far cry from being representative of demographics. Are quotas the answer? It is certainly true that quotas produce impressive statistics over relative short periods. It appears that the government is pursuing this track of thinking, with the Women Empowerment and Gender Equality Bill setting the ambitious target to fill a minimum of 50% of all senior and top management positions with women. Nevertheless, the number is not the end in itself. We rather wish to achieve the higher goal of true empowerment. An interesting detail that I have observed perusing the indices reported by Catalyst is that in South Africa the number of women board chairs stands at 5.5% - certainly not a number to be proud of in comparison to the 17% female directors who serve on boards. It is sobering that this low percentage affords South Africa the second place in the female chairmanship rankings. France, which has 18.3% female directors, is ranking in the middle regions of this index with 2% women chairs and Finland which has 26.8% female directors are among those at the bottom of the index with no women board chairs. If women are given board positions but seldom rise to the position of board chair one cannot help but contemplate the possibility of these being token appointments. Is this real power and influence? I do not think so.
There is much debate about why progress on this is so slow - ranging from gender bias that is part of the socialisation of growing children to a need for women to internalise a leadership identity. It is a hugely complicated issue that will not be fixed in the short term unless of course the sole aim is to meet the targeted number without regard for whether power and the ability to have an impact are actually in place. Appalling as I find quotas it seems that there is something in the numbers after all. Experts on human behaviour contend that the measure of influence that is exerted depends on the number of people who support an opinion. They have settled on three as the minimum number for carrying such influence. As a matter of coincidence or perhaps intuitive wisdom the Chinese have a proverb saying, "three men make a tiger" and it refers to the tendency by humans to believe absurd information like there being a tiger in the village if there are enough people repeating it. Applying this insight to the board situation, it means that women on boards with less than two female colleagues are severely hamstrung in making their alternative and diverse views felt. Do the calculation with women in 17% of board seats and boards being an average size of 12 to 15. I'd say it is time for boards and nomination committees to up those numbers if we wish to produce the tigers.
Ansie Ramalho is CEO of the Institute of Directors in Southern Africa
There are ample studies showing that the presence of female company directors on boards leads to better company performance measured both in financial and sustainability terms
There are more reasons for including females in the higher echelons of decisionmaking, whether it be in business or politics
South Africa is not doing too badly on gender transformation comparatively speaking
On the political front, according to the Economist, South Africa ranks eighth in the world with women taking 42% of Parliament seats
Although this particular figure is encouraging, having only 17% females within the highest corporate decision-making bodies is a far cry from being representative of demographics