Universiteit Stellenbosch
Welkom by Universiteit Stellenbosch
Maatskappye met vroue-direkteure is meer verantwoordbare korporatiewe burgers
Outeur: Corporate Marketing / Korporatiewe Bemarking
Gepubliseer: 02/08/2016

Genoteerde maatskappye met meer vroue-direkteure is ook meer verantwoordbare korporatiewe burgers, skryf prof Suzette Viviers en dr Nadia Mans-Kemp van die Departement Ondernemingsbestuur in ʼn meningsartikel wat Vrydag (29 Julie 2016) op The Conversation-webtuiste gepubliseer is.

  • Lees die volledige artikel hier onder of klik hier vir die stuk soos geplaas.

Are JSE-listed companies with more female directors better corporate citizens?

South Africa faces numerous social and environmental challenges, such as poverty, pandemic levels of economic crime, dwindling natural sources (including water) and high levels of greenhouse gas emissions, to name but a few. As corporate citizens, companies have an important role in identifying and addressing these challenges.

A growing body of international research suggests that companies with gender diverse boards are better corporate citizens. These companies not only comply with legislation, but also have initiatives in place to meet the social and environmental demands placed on them by their shareholders and key stakeholders. Good corporate citizens can distinguish themselves from their competitors by being equitable employers, engaging in ethical business dealings, protecting the natural environment, uplifting local communities and practicing good corporate governance. Good corporate citizenship is increasingly regarded as a source of competitive advantage and means of attracting (more) responsible investors.

In light of the above, we set out to investigate the relationship between board gender diversity and corporate citizenship in a sample of JSE-listed companies for the period 2009 to 2015. Many scholars and practitioners equate a company's inclusion in a responsible investment (RI) index as a proxy for good corporate citizenship. Well-known RI indices include the Dow Jones Sustainability index series, the FTSE4Good index series and our own FTSE/JSE RI index. In line with other local researchers, we used a company's inclusion in the latter as a narrow measure of good corporate citizenship.

A broad composite measure was also designed comprising corporate citizenship actions, reporting and reputation elements. For the first element, attention was given to whether or not a company had an environmental quality management policy and emissions reduction targets. Companies were furthermore evaluated on the extent to which they recognised physical and regulatory risks associated with climate change, their level of compliance with the Broad-Based Black Economic Empowerment (B-BBEE) Act (No. 53 of 2003) and corporate social responsibility (CSR) training provided for internal stakeholders. A company's involvement in unlawful activities was measured in terms of fines, litigation and investigations being conducted by the Competition Commission and Tribunal.

The second element centred on Bloomberg's environmental, social and governance disclosure scores which were used as proxies for corporate citizenship reporting. Thirdly, corporate citizenship reputation was based on whether or not a firm received one or more of the following awards: the Sunday Times Top Brands Green Award, the Sunday Times Top Brands Corporate Social Investment Award, the Nkonki Integrated Reporting Award and the Universum Best Employer Award. As mentioned, we also determined whether a firm was included in the FTSE/JSE RI index. Data was collected from Bloomberg, the JSE and other relevant websites. A total of 745 observations were analysed across all economic sectors.

Our research shows that the average percentage of female directors appointed to boards increased from 14.58% to 18.66% over the research period. Although this development is encouraging, female board representation is still very low, especially in the light of females' contribution (almost half) to the working population in South Africa.

The number of companies that had an environmental quality management policy increased by 72% over the research period. A considerable improvement was also noted in terms of emissions reduction targets (the variable increased by 148% over the considered seven years). Furthermore, the number of managers acknowledging physical and regulatory risks associated with climate change increased with 108 and 132 per cent respectively. In contrast, virtually no improvement was noted in the average B-BBEE compliance score (Level 4) of the considered companies.

We found it disheartening that less than 1% of the sampled companies provided internal CSR training. Studies have shown that employees who have received CSR training are more motivated, as they form part of a company that aims to "make a difference". These employees also tend to be more loyal thereby reducing the cost and disruption of recruitment and retraining. Other financial incentives accrue from employees being actively involved in recycling and waste management efforts. The average Bloomberg scores for environmental, social and governance disclosure over the research period were 24.69, 42.60 and 55.12 respectively (a score of zero implies that a company did not report on any of the ESG criteria evaluated and 100 shows full disclosure). The low levels of environmental and social disclosure are surprising, given that all JSE-listed companies have been obliged since 2011 to produce integrated reports.

After controlling for board size, company size, financial slack and accounting performance, a statistically significant positive relationship was observed between the percentage female directors serving on a company's board and the company being a FTSE/JSE RI constituent. Albeit not statistically significant, a positive association was also noted between board gender diversity and the composite measure. Significant positive relationships were identified between female board representation and certain corporate citizenship actions, most notably having an environmental quality management policy, having emissions reduction targets and receiving green awards. It was encouraging to see that two industries which are notorious for polluting the environment, namely resources and industrials, have taken decisive steps to reduce emissions under the auspices of female directors in recent years.

The empirical evidence suggests that JSE-listed companies with gender diverse boards are indeed better corporate citizens, particularly in terms of environmental management. It also seems as if these companies' efforts are being recognised by stakeholders and rewarded accordingly. As responsible investors are increasingly considering environmental, social and corporate governance matters in their investment analysis and ownership practices, good corporate citizens are likely to become more attractive investments.

Although some local companies have initiatives, such as transformation programmes, mentoring and shadow directorships in place to address the gender imbalance in their boardrooms, much remains to be done to remove real and perceived barriers. A company that position itself as a fair employer who treat all individuals equally and reward them based on their performance rather than their gender, is likely to attract top talent. Women should also empower themselves with the knowledge and experience required to reach the highest decision-making echelons of their companies. They are then not only likely to benefit personally, but also serve the greater good of society.