Who Owns Whom

Analysis of data by the independent research organisation Who Owns Whom reveals that active JSE-listed companies’ boards have directors who, on average, are relatively younger and who are serving in their current positions for a shorter time than their overseas counterparts. These directorships remain dominated by white men.

Long-term structural reform needed

Directorships held by women only account for 17% of all board-level appointments across all JSE-listed companies. By comparison, 20% and 25% of directors of widely-held companies in the United Kingdom and the Netherlands respectively are women. South Africa’s economy will need to undergo further long-term structural reform if our society wants to resemble its European counterparts.

It is particularly important to consider in further detail the degree to which JSE-listed company directorships are held by black South African women. Research carried out by Citadel and Empowerdex for their 2012 Trailblazers Report tracked the number of directorships held by black individuals from 2006 to 2012. A comparison of this data with Who Owns Whom’s recent study reveals that black women directorships have increased by 238% over the past 10 years. However, this rate of increase has slowed to 20% over the past five years.

Who Owns Whom was not able to ascertain whether Trailblazers included directorships of suspended companies in their reporting, so it was decided to exclude these in the current data to provide the most conservative figures.

According to the 2010 Trailblazers report, 181 black men and women held at least two directorships at that time. Today, that figure has only increased to 186. This implies that the pool of appointed black directors has remained stable and that appointments are not increasingly allocated to a select few.

Ostensibly, the Trailblazers study did not distinguish between South Africans and foreign nationals. Current data shows that South African women now hold 15% of the total number of directorships, with black South African women specifically holding 11% of the total number.

Considering that one person can theoretically hold more than one directorship, the absolute number of black female executive directors has changed as follows: from 11 (in 2006) to 25 (in 2011) and to 26 today.

In accordance with the findings of a Business Unity South Africa survey released in 2010, black individuals, particularly women, continue to be grossly under-represented across all types of board appointments on JSE-listed companies.

The magnitude of this is an unequivocal and blatantly obvious rationale for the effective implementation and enforcement of employment equity and broad-based black employment equity (B-BBEE) legislation.

Self-sustaining transformation requires more women rising successfully through middle management to ensure that they are strong candidates to take up board and C-level positions. If more women are to lead, it must be ensured that they are mentored, up-skilled and experienced enough to earn and succeed in their positions.

The South African Institute of Chartered Accountants (Saica) noted in a 2014 study that 8% of all JSE-listed directorships were held by black women, 5% by white women, whereas 17% and 70% were held by black men and white men respectively. If one accepts the results found by the institute to be accurate (doing racial profiling on people is a dirty job), a shorter-term biennial comparison with the current data can be made.

This evaluation reveals a somewhat optimistic trend in racial and gender transformation. Firstly, the gender gap is closing, particularly among black directors: today, one in every three black directorships is held by a woman. Furthermore, considering that white directors now make up 68% of all directors, there appears to have been a significant decrease of seven percentage points in just two years.

There are clear signs that the transformation the South African private sector desperately needs is taking place, but there is lot of work still to be done. Ultimately, a woman’s career should take her wherever she chooses. Whether this destination is being reached, particularly if it’s the boardroom, is more difficult to evaluate objectively. Arguably, for reasons beyond mere tokenism, the ideal board has a diverse and representative mix of leaders, including young and old.

Frail and stale

Lengthy board tenure is widely regarded as a clear indication that non-executive directors have diminished their independence and objectivity in relation to their responsibility of protecting shareholders’ interests. The tenure, the average length of a director’s current board appointment, of the average JSE-listed company director is five years and four months. By comparison, this is 1.2 and 0.7 years more than in Russia and Brazil respectively. The South African average is three years less than the American equivalent.

Interestingly, the average age of directors is 55 years, almost four years older than their counterparts in Russia, and six-and-a-half years younger than their American equivalents.

Remarkably, the international data shows that there is a distinct positive correlation between average tenure length and directors’ age.

Regarding tenure at a collective board-byboard level, rather than looking at individuals, it is easy to understand that the prognosis for lengthy tenure is groupthink. Having too many directors who think alike, look alike, have the same background, are serving or have served on many other boards together, lends itself to rationalised conformity and the self-censorship of alternative ideas and strategies.

Arguably, the most debilitating symptom of this groupthink is the illusion of invulnerability. Sustainable companies need directors who ask management the right questions – those tough questions – and make uncomfortable, but critical, strategic organisational reforms.

With this in mind, a comparison of the JSE-listed companies at an industry level shows that the primary sector – agriculture, hunting, forestry and fishing – has the oldest directors, averaging almost 57 years. This is nearly six years older than the average director appointed in the energy/utilities sector. Interestingly, the energy sector also has by far the fewest women on boards – only 6.25% of directorships of the listed companies in the sector.

Construction, a relatively small industry in terms of the total number of directorships, has the highest representation of women at 22.47%. This is 5% higher than the average across all listed companies.

For average length of tenure, directors appointed in retail, agriculture, transport, storage and information communications technology serve the longest terms.

Ostensibly, non-executive directors and boards can justify longer tenures if they are overseeing investment decisions in industries that play themselves out over longer cycles.

Directors in the relatively large financial and manufacturing sectors are in the middle of the pack in terms of both average age and tenure. But these two sectors lead in the total number of directorships held by women.

For directors over the age of 60, there are almost 14 times as many held by men and four times as many held by white directors. According to Saica, there were nearly 10 times as many white directors in this bracket in 2014.

The importance of the transformation of directorships to better match the country’s demographics cannot be understated. Equally, the task of expanding the total number of successful South African companies (and thus increasing the number of directorships itself) shouldn’t be underemphasised.

• Jeremy Dobbin is an economist at Who Owns Whom.

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