Greater diversity means improved corporate governance.
obal research has shown that companies that have diverse boards tend to outperform those with no women on their boards — they can expect higher returns and overall better financial performance. More women on boards also mean improved corporate governance — better risk management and audit control, as well as challenging inputs and increased ethical oversight.
Women are as well educated as men, and in many instances they have higher qualifications and are as talented. According to 2013 Organisation for Economic Co-operation Development indicators, in South Africa, 61% of tertiary education qualifications awarded in 2010 went to women, compared to 60% in the United States (US), and 58% in the United Kingdom (UK).
But when it comes to the corporate world, there is a general sentiment that women have not progressed sufficiently. This is evident from the number of women in leadership positions and remuneration trends published in annual reports and salary surveys such as PwC’s REMchannel online remuneration survey.
Currently women hold less than 4% of chief executive positions in JSE listed companies — there are only seven women chief executives, compared to 346 male chief executives. Further, women occupy less than 10.7% of chief financial officer (CFO) positions, and 14.4% of executive positions on boards.
PwC’s recent 2014 Executive Directors’ Remuneration report also shows that at board level the gap between male and female directors widens and according to industry type. For instance, the financial services sector is largely dominated by men at board level (85%), with a minority of women (15%). This research also shows that South Africa’s mining companies have the best level of female representation at board level followed by Canada, while Australia has the lowest percentage of women in executive management positions in the industry.
President Jacob Zuma has alluded to legislation to establishing a 50/50 representation of women in decision-making structures. Gender equality at management level in South Africa has remained flat at about 24% since 2009. Without proactive initiatives and support at board level, in another five years one may find that the percentage is still inadequate to meet legislative aims or just to achieve gender equality.
Some countries have or are in the process of adopting legislation to increase the participation of women on boards. Businesswomen across the European Union (EU) are moving closer to equal representation in the boardroom as EU MPs pushed through a proposal in November 2013 mandating a 40% female quota for non-executive board posts.
However, those against the quota system point out that Norway’s introduction of similar laws in 2003 worked only at the level implemented. Not one of the 25 companies listed on the Oslo bourse has a female chief executive and the gender pay gap is still estimated at about 15%. The concern for some is that quotas amount to “optics” and tend to be symbolic solutions that tackle the symptom rather than the cause.
Norway, Sweden and Finland continue to be the leaders in the developed world in terms of their percentage of women directors on the boards of listed companies, with 36.1%, 27% and 26.8%, respectively. It has been three years in the UK since Lord Davies challenged the top companies to increase the number of women in the boardroom.
Today the figures speak for themselves. The Financial Times Stock Exchange (FTSE) 100 companies have increased their number of women on their board from 12.5% in 2011 to 20.7% today, and similarly the FTSE 250 has improved from 7.8% to 15.6%.
In the US women only hold 11% of board seats at the world’s largest and best-known companies. There has been little progress on gender diversity for more than decade. The representation of women in boards in Japan remains poorest where 1.1% of directors are female. In emerging economies such as Brazil, there is an increase in the percentage of female directors (1.3% since 2011), a faster rate of change than in many other countries.
Although there has been some improvement in terms of representation of women on boards, it is happening at a slow pace and more needs to be done. The reality is there are a number of obstacles and barriers that businesses need to overcome before any progress can be made.
This includes tackling perceptions and assumptions that people in the corporate world make about leadership, which is usually linked to and influenced by our history of predominantly male leaders.
Leadership is often associated with attributes such as gravitas and impact, which is connected with men in the drivers’ seat. As a result, women don’t put themselves forward for these roles as they don’t think they will be suitable or fitting for the position.
[Crosshead] Pay gap
Although blatant chauvinism in some workplaces has been done away with in developed markets, it is vital that subtle prejudices about gender are not ignored, and that business leaders address these issues. To make real progress in gender diversity, corporations must promote and retain their female talent. They must provide career opportunities, which include executive training, coaching, mentoring and sponsorship opportunities, to ensure young women are ready for high-level positions.
Further, the issue of a substantial pay gap between men and women in the workplace remains to be addressed. The concept of “gender pay equity” is still not fully understood. Traditionally, it was understood as “equal pay for equal work”. However, as companies tried to achieve equal pay, they quickly realised that it was difficult to compare two jobs at the same level and their compensation, since each job consisted of different set of tasks.
The following definition was therefore arrived at: “Equal pay for different but equivalent work”. This does away with the sexist bias in the comparison of compensation, so that predominantly female jobs are paid equally to predominantly male jobs of equivalent value. Undoubtedly this is difficult to achieve in the real world, but if leadership adopts and drives a gender equity plan, it is a step in the right direction.
According to research carried out by PwC’s REMchannel on line survey the median gender gap of total guaranteed pay between male and female CFOs is 57.8%, and between executive directors 31.1%. The research also shows 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.
Essentially, to earn the same as their male counterparts, women would have to work for 14 years longer. And 2013 Tax Statistics issued by National Treasury and the South African Revenue Service 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%.
Carmen le Grange is a PwC partner in advisory services and René Richter is a PwC partner responsible for managing the research division of human resources services.