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DIVERSITY: Executive Boards need to step up or risk getting voted out

02 сентября 2021, 17:10 / Публикации

Recently, during an enlightening conversation discussing sustainable business practices with an AIMS Belgium client, Mr Rohit Sathe, he commented that he only employs leaders who are open minded and inclusive, because, they – in turn – will do the same. This way, he ensures that the culture is built top-down. Sounds simple?

Indeed, if you are lucky enough to have these kinds of leaders as executives and decision makers, chances are that you would already have created an inclusive and gender diverse workforce. On the other hand, it is not always that straight forward. Cultural bias and systemic preconditioning means that governance is often needed to push boards in the ‘right’ direction. 

Just recently, in March 2021 the U.A.E. regulator, the Securities and Commodities Authority (SCA), announced that all listed companies need to have at least one female board member. According to Aurora50 (a social enterprise co-founded by Sheikha Shamma bint Sultan bin Khalifa, which is aimed at increasing the number of women on the boards of both public and private UAE companies), only 110 listed companies in the U.A.E. currently have women on their boards. 26 per cent of the total. However, they only make up around 3.5 per cent (29 of a total of 823 board members) of the board directors of these firms. This might sound like progress, however, if we consider that, almost a decade ago, the New York Times reported that the U.A.E. Government has made female representation in the boardroom compulsory, one may raise the question; what have we been doing in the last ten years? The author made the staggering comment that; even though 70 percent of university graduates in the U.A.E. are women, men still completely dominate boardrooms in the workplace’. This would follow that more than 70% of Board Executives in the region are chosen out of a pool of ONLY 30% of university graduates…

In other parts of the world, the picture is not necessarily any better. According to Bloomberg, following the racial injustice protests last year, the world’s largest asset manager, BlackRock said it may vote against directors at companies that aren’t diversifying their ranks. Yes – it appears that, (finally) diversity is not only a ‘nice to have’ but that companies may actually see serious repercussions if they do not reach required diversity targets. In fact, BlackRock put their money where their mouths are and voted against the re-election of 1,862 directors at 975 companies because of a lack of board diversity. This vote clearly shows that ESG is at the top of their agenda when it comes to looking at the ‘investability’ of businesses. One may argue that they are simply ‘following the money’ and that this is not necessarily for humanitarian reasons. In 2018 the Financial Times reported that, according to Black Rock’s Larry Fink, the Asset Management giant was ‘staking its claim on sustainability investing’.

According to their own websiteIn 2021, our priorities reflect our continuing emphasis on board effectiveness alongside the impact of sustainability-related factors on a company’s ability to generate long-term financial returns. We have mapped our priorities to specific United Nations Sustainable Development Goals, such as Gender Equality and Clean and Affordable Energy, and provided high level, globally relevant Key Performance Indicators (KPIs) for each priority so companies are aware of our expectations. Where we believe a company is not adequately addressing a key business risk or opportunity, or is not responsive to shareholders, our most common course of action is to hold the responsible members of the board accountable by voting against their re-election”

I say, whatever the motivation, the goals will achieve the same results and these are, in my opinion, long overdue results. For years, many case studies reported that companies with more female leaders show better results. For example, in this article written in 2015, Fortune reported that a comparison showed that 80 women CEOs during the 12 years from 2002 to 2014, produced equity returns 226% better than the S&P 500!   

Today’s reality is that you too, could show excellent results by having a more diverse leadership team. Alternatively, whether due to mediocre financial results, investment decisions or governance, you might be out of business soon. AIMS International can show you how to transform your organisation by starting at the top. Whatever your motivations. The time is now.

About the Author:

Leonie Pentz, VP Sustainability & Managing Partner AIMS International South Africa

Leonie has 20+ years as a recruitment professional in the Sub Sahara African market and since January 2011 as AIMS International’s Managing Partner based in South Africa. She represents the MEA region on the AIMS International Executive Board since 2016.