While there have been significant strides in increasing the number of women directors in South African companies, women continue to be underrepresented in boardrooms. According to the Businesswomen’s Association of South Africa’s (BWA) 2017 Women in Leadership Census (“BWA 2017 Census”), women comprise 20.7% of total director positions, 29.4% of executive managers, 4.7% of CEOs, and 7.1% of chairpersons in South Africa.1 In 2017, there were 1,062 directorship positions in South African companies held by women.2 However, only 506 women filled these positions, meaning that many women held more than one directorship position; several women even held three or more directorships.3 Furthermore, only 10 companies had at least 50% of their director positions filled by women.4
Notably, the number of women on boards of state owned enterprises (SOEs) far surpasses that of companies listed on the JSE Ltd.5 The BWA 2017 Census found that women accounted for 41.2% of directors at SOEs, as compared to 19.1% at JSE-listed companies.6 In addition, 85% of the SOEs surveyed had three or more women directors.7 However, only 25.6% of JSE-listed companies had three or more women directors and 16.3% of JSE-listed companies had no women directors at all.8
Moreover, the low percentage of women CEOs and chairpersons indicates that there is still significant room for improvement, particularly since women comprise 51% of the South African population and 44.3%9 of the employed workforce.10
In many ways, South Africa’s efforts to increase the presence of women, both in business generally and in boardrooms specifically, are a byproduct of the country’s efforts to overcome the legacy of apartheid. Apartheid, which ended in 1994, systematically excluded a majority of South Africans from meaningful participation in the economy for almost 50 years.11 In addition to the exclusion of persons of color, women in general were also excluded. Laws limited the rights of women of all races to own, inherit, or alienate property.12 Since the end of apartheid, South Africa has worked to develop a legislative framework to overcome existing economic disparities and entrenched inequalities that are a result of apartheid.
The equality clause in the South African Constitution’s Bill of Rights provides a basis for government legislation promoting gender parity:
Since the end of apartheid, the South African government has implemented several pieces of legislation that advance gender equity. In 1996, the Commission for Gender Equality (CGE) was established to “promote, protect, monitor and evaluate gender equality” in both the government and private sector in South Africa.15 The CGE reviews and recommends legislation and investigates gender discrimination complaints.16 The Employment Equity Act and the Broad-Based Black Economic Empowerment (BBBEE) Act (the “Act”) have implemented broad requirements for diversity and equity in business generally. The BBBEE also addresses diversity in boardrooms specifically.
A. BBBEE Scoring System
As a result of South Africa’s history with apartheid, efforts to redress the effects of discrimination have focused on racial discrimination as well as discrimination based on gender and people with disabilities.17 The largest and most well-known program implemented by the South African government to address historic discrimination in the economic sector is the BBBEE Scorecard.18 The BBBEE scoring system rates companies based on Black19 participation, giving each company a total score based on their weighted scores in seven categories: Equity Ownership; Management; Employment Equity; Skills Development; Preferential Procurement; Enterprise Development; and Socio-Economic Development.20 Depending on the company’s score, they receive a BBBEE status, ranging from a Level One Contributor to a Level Eight Contributor, with Level One being the best score. South African law requires state and public entities to take into consideration a company’s BBBEE status when issuing licenses, awarding contracts, entering partnerships, or selling SOEs, thereby incentivizing companies to have strong BBBEE ratings in order to be competitive.
Remedying gender discrimination is only a secondary focus of BBBEE, and the BBBEE is limited in scope to the empowerment of Black women only. Still, while BBBEE primarily focuses on race, scores also take into account gender, disability, youth, unemployment, and rural location. Therefore, companies have an additional incentive to recruit black women in particular. One of the Act’s many objectives is to increase black women’s ownership and management of “new enterprises and facilitate their access to economic activities, infrastructure, and skills training.”21 There are Codes of Good Practice to enforce the system, which measure, among other things, the extent to which companies have empowered black people and women in the composition of management teams, including boards of directors.22 The Management category for BBBEE scoring encompasses participation on the company’s board of directors, with the target being 50% Black voting members. The Adjusted Recognition for Gender allows additional points for Black women members, up to the target of 50% of the Black members being women.23 According to the 2013 BEE Codes of Good Practice, the appointment of female leaders in the Management and Skills development categories was specifically referred to and a 25% compliance target was set for the exercisable voting rights of Black female directors (as a percentage of all directors) and for Black female executives (as a percentage of all executives).24
The BBBEE system, while similar to the quota systems utilized in some countries, is not actually a quota system. Companies are not required to have a minimum number of female or Black board members on their boards of directors.25 Because the BBBEE Level rating is based on the total score from seven categories, companies can achieve competitive BBBEE scores in a variety of ways. For example, a company can compensate for a low Management score with strong scores in other categories, such as Employment Equity or Preferential Procurement. That a company without any female or Black directors on its board can still have a strong BBBEE score suggests that the BBBEE is less effective at remedying gender inequality at the board level than more gender-focused initiatives, such as quotas or comply-or-explain obligations.
B. Proposed Gender Equity Bill
In 2010, the Department for Women, Children and People with Disabilities issued a Green Paper26 proposing the passage of gender equality legislation to ensure enforcement of existing gender equity laws in the public and private sectors. The proposed gender equity legislation would establish punitive sanctions for public and private entities that violate anti-discrimination laws;27 make affirmative action mandatory for all employers;28 and implement mandatory measurement of progress toward gender equality, including gender audits, analysis and compulsory reports.29 The minister for the Department for Women, Children and People with Disabilities had hoped the bill would be submitted for consideration by the Cabinet in March 2012.30
However, the bill was withdrawn in Parliament in November 2013.31 Certain proposed quotas in the bill were criticized as being unrealistic, such as the appointment of at least 50% females in corporate decision-making structures.32 The criticism was that quotas would not address the problems underlying the existing gender inequalities (such as problems in the education system or rigid labor policies).33 Additionally, critics also suggested the bill would place an administrative burden on companies, contribute to symbolic appointments, and had ‘vague’ objectives and weak enforcement mechanisms.34 As of 2017, there was no board-related gender diversity legislation in South Africa.35
The private sector in South Africa has been involved in developing initiatives to ensure gender equity on boards. Most of the private sector efforts to increase the representation of women on boards were initiated by South Africa’s business associations. These efforts include the 2016 King Code of Governance for South Africa and the King Report on Governance for South Africa (together referred to as “King IV”), as well as increasing support for board diversification from institutional investors.
In addition to conducting an annual census on the number of women directors, the BWA has also taken steps to try to accelerate growth in numbers. For example, as part of its Census report each year, BWA publishes a list of the “top performing” and “worst performing” companies in terms of the number of women directors.36 In 2008, only 18.5% of companies (62 companies) in the Census had 25% or more female directors on their boards and by 2017 this percentage has increased to 34.4% (102 companies) of the total number of companies included in the Census.37
The King Code of Governance (“King Code”) applies to all companies listed on the JSE, and although its provisions are not mandatory, the JSE-listing requirements provide that all listed companies must disclose and explain any non-compliance with the King Code in their annual report. Consistent with King IV, which promotes the benefits of diverse boards, the JSE included a requirement for the boards of listed companies to disclose targets at the board level for gender and race representation, as well as progress made against these targets in annual reports. In June 2017, the JSE amended its listing requirements and the implementation date of the required disclosure in the annual report was June 1, 2018.38 While no quotas have been prescribed, the goal is that companies will be held accountable for meeting their respective gender and race targets.39
Business Unity South Africa (BUSA) promotes the interests of the country’s business community to create an environment in which businesses can thrive. The organization brings together professional associations, industry groups, and chambers of commerce. Like BWA, BUSA has also developed a number of recommendations for companies to improve board diversity,40 including:
Similar to BWA, BUSA has also pledged to develop a database of potential board candidates, training for future directors, and programs to monitor changes in board composition on an on-going basis.41
The King reports are named after Mervyn King, a veteran corporate lawyer and former South African Supreme Court judge, who formed the first King Committee in 1993, shortly after South Africa gained independence.42 This committee issued the first King report on corporate governance in 1994. King IV, the most recent report, was issued in 2016 by the fourth King Committee, which consists of professionals and experts in various areas of corporate governance. The Committee was convened by the Institute of Directors in Southern Africa (IoDSA), a non-profit organization promoting good governance. The King reports include a voluntary code of governance referred to as the King Code. It is closely aligned with the Companies Act, and the JSE listings requirements incorporate certain provisions of the King Code. The King Code promotes ethics as the foundation of corporate governance and, along with the Companies Act and the JSE listing requirements, serves as a guide for corporate entities throughout South Africa.
As discussed above, in addition to setting targets for race and gender representation in its membership,43 King IV specifically deals with diversity and board composition, which is a new addition from King III. King IV proposes that a board should promote diversity in its membership in order to promote better decision-making and effective governance. Diversity includes “fields of knowledge, skills and experience as well as age, culture, race and gender.”44
In addition, the King Code provides that the majority of the board should consist of non-executive directors, and that the majority of those directors should be independent.45 It also states that companies should implement a staggered rotation of directors.46 Furthermore, it states that a formal evaluation of the board, its committees and its individual members should be conducted at least every two years.47 As mentioned above, the BUSA is advocating for restrictions on director terms to increase turnover, such as maximum term limits, to create more opportunities to fill empty board seats with diverse directors.
Significant government-initiated legislation, such as the BBBEE Act, has largely contributed to the increase in women on boards in South Africa. Since 2004, when the BWA Census started, the percentage of female South African directors has increased from 7.1% to 20.7%, as of 2017.48 The argument that government intervention, especially the BBBEE which focuses exclusively on Black women, is having a positive effect is bolstered by the fact that 74.3% of female directors are Black as compared 21.9% White women directors.49 However, the gap between the number of women directors on JSE-listed companies and SOEs emphasizes the continued importance of private sector initiatives as well. Gender diversity on boards is increasing in South Africa, but slowly.50
2 Id. at 18.
3 Id.
4 Id. at 26.
5 Previously called the Johannesburg Stock Exchange, the largest stock exchange in South Africa, it was officially changed to the “JSE Ltd.” in 2006.
6 BWA Census, supra note 1, at 8.
7 Id. at 16.
8 Id.
9 Id. at 11; Quarterly Labour Force Survey Quarter 1: 2017, Stats SA Statistics S. Afr. (2017), http://www.statssa.gov.za/publications/P0211/P02111stQuarter2017.pdf (hereinafter “StatsSA”).
10 StatsSA defines “employed” persons as “those aged 15–64 years who, during the reference week, did any work for at least one hour, or had a job or business but were not at work (i.e. were temporarily absent).” Id.
11South Africa’s Economic Transformation: A Strategy for Broad-Based Black Economic Empowerment, Dep’t Trade & Industry 3 (2003), http://www.empowerdex.com/Portals/5/docs/dti%20BEE%20STRATEGY.pdf.
12 Women’s Charter, Fed. of South African Women (April 17, 1954), http://www.anc.org.za/content/womens-charter. See also The Women's Charter for Effective Equality, National Women's Coalition (Feb. 27, 1994), http://www.anc.org.za/content/womens-charter-effective-equality.
13 S. Afr. Const. 1996, ch. 2, § 9(4).
14 S. Afr. Const. 1996, ch. 2, § 9(2).
15 The Commission for Gender Equality, http://www.cge.org.za/ (last visited Sept. 14, 2018).
16 Suzette Viviers et al., Mechanisms to promote board gender diversity in South Africa (2017), http://www.scielo.org.za/pdf/acom/v17n1/23.pdf.
17 Id.
18 In 2003, South Africa passed the Black Economic Empowerment Act (BEE). The BEE system was criticized for being narrow and only empowering a few Black individuals, failing at its goal of large-scale black empowerment. In 2007, the Broad-Based Black Economic Empowerment: Codes of Good Practice on Black Economic Empowerment were implemented, expanding the prior Act and adding additional scoring categories.
19 “Black” as defined by the BEE Act includes “Africans, Coloureds and Indians,” where “Coloureds” refers to people of mixed-race. Codes of Good Practice on Broad-Based Black Economic Empowerment, Schedule 1: Interpretation and Definitions. The High Court of South Africa ruled in 2008 that Chinese South Africans were to be considered “Black” for purposes of the BEE Act and other affirmative action programs, as they had been defined as “Coloured” under apartheid. See Sky Canaves, In South Africa, Chinese is the New Black, Wall Street J. (Jun. 19, 2008), http://blogs.wsj.com/chinarealtime/2008/06/19/in-south-africa-chinese-is-the-new-black/.
20 Broad-Based Black Economic Empowerment Act (53/2003): Issue of Codes of Good Practice, Gov’t Gazette, Vol. 580 No. 36928 (Oct. 11, 2013) (S. Afr.), http://bee.b1sa.co.za/docs/Revised_BBBEE_COGP_10102013.pdf (hereinafter Codes of Good Practice).
21 Diversity in the Boardroom, King IV, Deloitte 5 (2017), https://www2.deloitte.com/content/dam/Deloitte/za/Documents/za_KGIV_BoardDiversity_FA.pdf.
22 Women in the boardroom: A global perspective, Deloitte 42 (2017) https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Risk/Women%20in%20the%20boardroom%20a%20global%20perspective%20fifth%20edition.pdf.
23 Codes of Good Practice, supra note 20.
24 Id.
25 An article on Women on Boards mentions 1996 legislation implementing a quota reserving one-third of SOE’s board seats for women, but we were not able to confirm the existence of this legislation. Marie-Laurence Guy, Carmen Niethammer & Ann Moline, Women on Boards: A Conversation with Male Directors, Global Corporate Governance Forum 26 (2011). The legislation referred to may have been the 1997 ANC Constitution, which recommends that women be represented at a rate not below 30 percent in all elected structures of the ANC. Arguably this could include boards of SOEs. African National Congress Constitution 1997, rule 14.1 (S. Afr.).
26 Green Paper: Toward a Gender Equality Bill (draft), Ministry for Women, Children & People with Disabilities (2008), http://www.pmg.org.za/node/26586.
27 Id. at § 22.
28 Id.
29 Id. at § 23.
30 Theo Barclary, Gender Equality Reform in South Africa Beset By Delays, Think Africa Press (Sept. 27, 2011), http://thinkafricapress.com/south-africa/gender-equality-reform-south-africa-beset-delays.
31 Viviers et al., supra note 16.
32 Id.
33 Id.
34 Id.
35 Id.
36 BWA Census, supra note 1, at 20-33.
37 Id. at 20.
38 JSE amends listing requirements to include disclosure on the promotion of racial diversity at board level, JSE (June 22, 2017), https://www.jse.co.za/articles/jse-amends-listing-requirements.
39Deloitte, supra note 22.
40Transformation Study: A Snapshot of the Demographic Profile and Pace of Transformation of JSE Listed Companies, Business Unity S. Afr., 4-5 (2011), http://www.politicsweb.co.za/documents/busas-transformation-study.
41 Id.
42 Mervyn E. King, Judge Professor, Integrated Reporting,http://integratedreporting.org/profile/professor-mervyn-e-king/(last visited Sept. 14, 2018).
43 King IV, Report on Corporate Governance for South Africa 2016, Inst. of Directors Southern Africa (2016), https://c.ymcdn.com/sites/iodsa.site-ym.com/resource/collection/684B68A7-B768-465C-8214-E3A007F15A5A/IoDSA_King_IV_Report_-_WebVersion.pdf (hereinafter “King IV”).
45 King IV, supra note 43, at 50.
46Id.
47 Id. at 29.
48 BWA Census, supra note 1, at 11.
49 Id. at 42. The census uses separate categories for Black, Indian, and Coloured, all of which the BBBEE Act considers “Black.” Broken down, the census found that female directors were 58.7% Black, 8.2% Indian, and 7.4% Coloured. Id.