Gender Transformation Improves Bottom Line

6 November 2016Latest News,Human Capital and Skills Development

Gender Transformation Improves Bottom Line

By Melanie Mulholland, Human Capital and Skills Development Executive at SEIFSA.

Gender transformation, particularly in the metals and engineering sector is very slow. According to research findings issued by the Department of Labour through the 2016 Commission for Employment Equity Report, white males continue to dominate top and senior management levels in the metals and engineering sector.

In the 16th annual report, the analysis of the “Workforce profile for Manufacturing by race and gender” compared 2014 and 2015 statistics. It found that there was a slight increase in the representation of women of all races at the top management level. At the same time, African and Indian men managed to have a slight increase in their representation at this level, while there was a decrease of white men. The number of coloured men remained constant. The professionally qualified level indicated that the representation of whites in the manufacturing sector has decreased by 2.3%. There was a continued reduction of whites and Indian males at the skilled technical level in the manufacturing sector and a 0.2% decrease of African women, while their African men increased by 1% during the same period.

Formidable gender gap

Talent is critical to staying competitive, but despite the growing number of qualified women in the workforce in all areas, the female talent pool continues to remain underutilised. This is a worldwide phenomenon in which women in business continue to face a formidable gender gap in senior, leadership positions. The barriers too are well known: a mix of cultural factors, ingrained mindsets and stubborn forms of behavior, including a tendency to tap a much narrower band of women leaders than is possible given the available talent pool. However, data also showed that including at least three women on company Boards improves the tone and responsibility of Boards.

A 2015 report by the African Development Bank on “Women Board Directors of Africa’s Top Listed Companies” found that women hold 12.7% of Board Directorships (364 out of 2,865) in 307 listed companies based in 12 African countries. This is 4.6% lower than the 17.3% women representation on the Boards of the 200 largest companies globally. Kenya (19,8%) has the highest percentage of women Board Directors, followed by South Africa (17,4%), Botswana (16,9%) and Zambia (15,7%).

The paucity of women directors is due, to some extent, to companies’ lack of understanding of the necessity for and benefits of diverse Boards.

In South Africa, women currently hold less than four percent of CEO positions in JSE-listed companies. According to Carmen Le Grange, PwC Partner in Advisory Services: “Companies that are actively promoting and advancing women to the highest levels of management and leadership tend to have more engaged Boards, with a greater diversity of talent and wealth”.

Impacting bottom line

Recent research found that companies with the highest percentage of women on Boards also tend to outperform those with lower percentages of women on Boards. This includes higher returns on sale, a greater return on invested capital and a higher return on equity.
There is now a plethora of over 30 studies undertaken by academics, women’s groups, management consulting firms and accounting and investment firms from different countries showing a correlation between more women in senior corporate leadership roles and a company’s better financial performance. Ample research has shown that the impact of women on Boards takes effect when women are no longer solitary figures on otherwise all-male Boards. When three or more women directors serve on the same Board, women’s voices are more likely heard and boardroom dynamics change substantially.

The three South African companies with a quarter of their Boards comprised of women include Barclays Africa Group (which is chaired by a woman, Wendy Lucas-Bull, and who’s CEO is also a woman, Maria Ramos), consumer goods company Tiger Brands and telecommunications company Vodacom.

Need for legislation

The 2015 report by Women Board Directors of Africa’s Top Listed Companies further highlights that South Africa has succeeded, since 2005, in ensuring that at least 30% women Directors serve on the Boards of its State-Owned Enterprises (SOEs). The 2012 Business Women’s Association (BWA) Census actually recorded 33% women’s representation on SOE Boards, proving that this government mandate has been effective.

The law, however, does not cover listed companies. As a result, without a similar framework, the percentage of women Directors on the country’s blue chip index, the JSE40, has stalled at 17.4%.

To address this issue and other areas of gender equity, there is now proposed legislation introduced by the Ministry of Women, Children, and People with Disabilities to “establish a legislative framework for the empowerment of women; to align all aspects of laws and implementation of laws relating to women empowerment, and the appointment and representation of women in decision making positions and structures.” The Women Empowerment and Gender Equality Bill calls for equal representation (50%) on boards of all public and private corporations. If passed as currently written, all companies – listed, private, and state-owned – would have to provide a plan for increasing the percentage of women Board Directors towards 50%.

Beyond gender equity laws, there is actually an existing South African legislative initiative which provides a door to the inclusion of women in corporate leadership. The Broad-Based Black Economic Empowerment (“B-BBEE”) Act, passed in 2003 and revised in 2013, gives points to companies with black Directors and extra points for black female Directors. At the senior management level, the revised Act sets a compliance target for senior management at 60% black and 30% black female. Any company seeking government contracts, whether at a provincial or national level, is evaluated on the basis of its score on Black Empowerment Code measures. Consequently, the B-BBEE provides a financial incentive for companies to advance black females onto Boards and senior leadership and could serve as a model for legislation in other countries to accelerate gender diversity on Boards for all women.

Pay gap

PwC’s 2014 “Executive Directors’ Remuneration” report showed that at Board, level the gap between male and female Executive Directors widens according to industry type. The report also indicated that more effective work needs to be done to achieve better representation of women on Boards. Gender equality at management level has tended to remain flat at about 24% since 2009. According to the report, without proactive support at Board level, in another five years organisations that do not mainstream women may find that there are even fewer female leaders in decision-making positions.

It is also interesting to note that 23% of male senior executives and senior managers were paid in the upper quartile of the market, while only 2.3% of females were paid at the same level, according to research carried out by PwC’s REMchannel® on-line survey.

2013 Tax Statistics issued by the National Treasury and the South African Revenue Service (SARS) show that women accounted for 43.6% of the assessed individual taxpayers, had an average taxable income of R167 489 and were liable for tax of R27 980 at an effective rate of 16.7%. On the other hand, men had an average taxable income of R225 919 and were liable for tax of R50 100 at an effective rate of 22.2%.

Boardroom diversity

The matter of Boardroom diversity in the context of increasing the number of women sitting on Boards is a global phenomenon and not unique to South Africa. In the US women hold only 11% of Board seats at the world’s largest and most well-known companies, with little progress being made on gender diversity for more than a decade.

Diversity and inclusion must become a Boardroom imperative and norm. Under-representation of women is not new – it is a matter which gets ignored in the business world. There are those who say that women “unintentionally hold themselves back” in their careers, meaning that they don’t allow their voices to be heard in the business world. Others contend that women’s lifestyles change the outcome of their professional careers. PwC’s “Women in Work” index shows that in countries where there is a more equal proportion of women to men in executive positions, both mothers and fathers share the workload of raising a family and promote a healthier work/life balance for both genders.

King Code of Governance

“The King Code of Governance Principles” and the “King Report on Governance for South Africa” (known as King III) published in 2009 also mentions gender as a factor to be considered in appointing Directors. The Code recommends that a Board consider “whether its size, diversity and demographics make it effective” and lists gender as one of the factors of diversity (Section 71). As a whole, the King Code has strong guidelines regarding nominations and corporate governance principles, but the language regarding gender diversity lacks force and has not been as effective in increasing the number of women Board Directors.

Empower more women

There is no quick fix: the pace of transformation has been slow and more needs to be done by the business world to address transformation to change the culture of building a diverse workforce. Businesses and policymakers have a vital role to play in addressing the needs of female employees in a variety of areas and diversity goals. Businesses need to empower more women to step up and be counted and included for their knowledge, talent and skills and what they can bring to the business when they are placed in high-level positions.

Let’s provide opportunities to ensure women get the experience they require to be appointed to senior positions on Boards. These could include work-integrated learning training, executive coaching, mentoring and sponsorship programmes, to name a few.

At this rate, it will take many years for equitable representation in the labour

by SEIFSA .