The racial justice protests that erupted in the United States earlier this year put the subject of inclusion centre stage in many aspects of life, including company boardrooms.

As someone who has served on boards for more than 20 years, the speed with which the subject was taken up by companies and pressure groups fascinated me.

In one week alone, I received at least six invitations from organizations decrying the lack of diversity on boards and committing to change the status quo. Many asked recipients to submit details of candidates for consideration as directors or members of professional associations, with a bias towards minority groups.

Female directors

This made me think about the state of diversity in boardrooms, starting with the United States. According to the Spencer Stuart United States Annual Board Index of April 2019, 26 per cent of directors of S&P 500 companies are women, an increase from 24 per cent in 2018 and 16 per cent in 2009. This means that in the nine years between 2009 and 2018 the number of women appointed to the boards of this category of companies has risen by 65 per cent. 

According to the same report, of the top 200 company boards, only 12 have non-nationals as directors. The appointees came mainly from India, Canada, Britain, France and Germany.

The regional dimension intrigued me and I decided to dig a little deeper. I found interesting trends thanks to Egon Zehnder’s 14-year tracker of gender and international diversity on boards. The company’s latest research found that in 19 of the 44 countries studied, all of the major companies had at least one female director. This is an increase of five boards since 2016. The survey includes Australia, Canada, India, Poland, South Africa, Turkey and the majority of western European nations. As regards mining, an industry I have worked in for many years, the proportion was on par with many others, but not as good as the service industries.

This was confirmed by another report. According to a study by Women in Mining entitled, Mining for Talent: A study of Women on Boards in the Mining Industry, women occupy 8 per cent of board seats in the top 100 mining companies. In the service industry the figure is nearly 18 per cent.

These statistics intrigued me even more and I decided to look at the current composition of a handful of boards of large mining and oil companies doing business in Africa. I wanted to establish how the companies perform on gender and the inclusion of African nationals. I assumed that diversity, including regional diversity, is good for business and accepted the findings of many studies that concluded that diverse boards – and executives when surrounded by diverse talent – perform better.

But I was mindful of other factors too. First, the watchful eye of Britain’s Hampton-Alexander review report, which set a target of 33.3 per cent of the FTSE 100 boards to be female by 2020, and the voice of the 30% Club. Thanks to these and other initiatives, it is now accepted that listed companies ignore gender diversity at their peril.

Secondly, the increasing importance of ESG ratings – the environment, social and governance criteria set by socially conscious investors – and their impact on corporate performance and brand reputation. ESG suggests that a deeper appreciation of the socio-cultural dynamics and strategies that respond to environmental factors are an important consideration for board composition. 

This consideration is particularly important for companies that operate across cultures, and here mining and oil companies are some of the most vulnerable. This challenge can be addressed in several ways but a logical starting point is to seek candidates from countries or regions in which the companies conduct business.

Professionals in these countries are not just a pool of knowledge with insights into local business environments but also important influencers of public opinion and policy. I selected ten publicly listed companies, five from the mining sector and five from oil industries. The mining companies are Anglo American Corporation, Barrick Gold Corporation, Glencore, Newmont and Rio Tinto. The petroleum companies are BP, ENI, ExxonMobil and Royal Dutch Shell. All the data relates to the group and not subsidiaries.

On regional representation, the mining industry fares better, with Anglo American and Glencore leading with two directors each, out of a total of 11 and nine directors respectively. The oil companies have no representatives from the region, but all have 30 per cent or more female appointees, with Total leading at 50 per cent.

The report notes that South African authorities apply quotas to achieve diversity across both race and gender lines and this might explain Anglo’s high percentage of South African appointees.

For companies with a diverse footprint, knowledge of regional socio-cultural norms and politics is an essential attribute of the board.

Not surprisingly given the influence of the guidelines by the Hampton-Alexander and scrutiny from the 30% Club, all companies on the FTSE do well on gender. I have not found any similar initiative to lobby for regional nominees in Africa. If British initiatives have influenced the rise of women appointees, then one can safely assume that the absence of similar African initiatives might explain poor representation of Africans in companies that work in that continent.

A lost opportunity

A case has been successfully made for diversity and inclusion on boards. The question is whether or not there is a case to be made for regional diversity. For mining and petroleum companies a logical starting point is the ESG criteria because, for the companies with a diverse regional footprint, knowledge of regional socio-cultural norms and politics is an essential attribute of the board. I believe it is now only a matter of time before the appointment of directors from the region of activity is brought to the fore. Here are some arguments for the companies to take a lead in this direction:

  • The governance of mining and oil industries is under perpetual scrutiny and in Africa it is often alleged that these sectors are riddled with corruption. Boards are a perfect training ground for promoting corporate governance in the region.
  • Boards are also a vehicle for creating a pool of skilled advisers to governments with global knowledge of the industries. l The appointees are also potential bridge-builders in often difficult relations between multinationals, international NGOs, communities and governments.
  • Boards could be the source of a critical mass of a materially independent African elite who are needed to contribute impartially to policy dialogue.
  • Big brands set the tone for what it means to be a responsible global corporate citizen. If large multinationals determine that the elite in the global south will not be part of the face of corporate boards, then those images will shape the future of the world of business.

While appointments to a board of directors are a strategic decision that must be driven by the needs of the company, it is clear that public expectations of a company cannot be ignored. In this respect while the world debates the subject of inclusion, if the small sample of mining and oil and gas companies that I have used to assess diversity are anything to go by, there is a missing link. That link is the regional dimension.

Given the current focus on racial justice, the mood is ripe for some public criticism and companies would do well to get ahead of that risk.

As a result of outside pressure, progress has been made on gender and companies have come to understand the benefits. It seems to me that decisions on regional inclusion will be more sustainable when driven from within the organization instead of being enforced by outside forces.