The composition of company boards has been a contentious topic for decades, with many taking exception to the dominance of older males in boardrooms the world over.
A new report, the result of a two-year study by the Kenya Institute of Management (KIM) in collaboration with the Nairobi Securities Exchange (NSE), the Graca Machel Trust-Kenya Chapter and Barclays Bank, shows that boards of listed firms in Kenya are more diverse compared to global and African averages.The balance, however, is still heavily skewed in favour of older men.
The study, titled Board Diversity and Inclusion, takes into account the gender, profession, age and nationality of board members. It polled 52 out of 62 companies listed on the NSE.
Kenyan firms score above average on gender inclusivity, with the percentage of women in boards going up to 21 per cent in 2017, from 18 per cent in 2015 and 12 per cent in 2012. At this rate of growth, Kenyan boards should achieve gender parity by 2030.
The Africa average is 13 per cent, South America eight per cent, Asia nine per cent, Europe 26 per cent and North America 20 per cent.
A quarter of top management positions are filled by women, but the number of women heading boards still remains low at just five among listed firms. Companies whose boards are headed by women include Uchumi #ticker:UCHM , Liberty Holdings #ticker:CFCI , Eveready East Africa #ticker:EVRD , Standard Chartered #ticker:SCBK and Unga Limited #ticker:UNGA .
Although there has been a push to include more women on boards and top management positions, industry leaders argue that there should also be diversity in inclusion to avoid appointments on the basis of affirmative action alone.
“Diversity is hollow unless it is accompanied by inclusion, which is giving the resources you have brought on board the opportunity to be the best they can be, and accommodate their different perspectives so that they know they are not just tokens appointed to tick a box,” says Charles Muchene, chairman of Barclays Kenya #ticker:BBK, which was was one of the sponsors of the study.
Women are also increasingly getting into company boards at a younger age, although they are required to have higher educational qualifications for them to do so, the study reveals. Fifty-four per cent of the women serving on the boards of NSE-listed companies have a Masters degree or a PhD, compared to just 43 per cent of males.
On the other end of the scale, just one per cent of the women sitting on the boards hold diploma or certificate as their highest educational accomplishment, compared to six per cent of males. The accounting profession provides the most board members in Kenya, followed by business management, legal, banking and finance.
The highest age group concentration on boards is between 45 and 59 years, who account for 52.5 per cent of all appointees, followed by those over 60 years who account for 35.5 per cent.
Youth, it emerges, are locked out of company boards, with just 0.2 per cent of those aged between 25 and 34 taking a seat in boardrooms of listed firms.
Globally, the average age of a board member is 60.6 years, while in Kenya it is 55.8.
The shift to diversify boards will have to be driven by individual firms as the law cannot compel companies to embrace it.
The Capital Markets Authority (CMA) code of corporate governance guidelines only recommend that a board “shall have a policy to ensure the achievement of diversity in its composition”, based on academic qualifications, technical expertise, relevant industry knowledge, experience, nationality, age, race and gender.
These guidelines are applied by companies on a voluntary basis. This, the NSE chief executive officer Geoffrey Odundo says is the right approach because it allows companies to select individuals who best fit the competencies needed on the boards.
CMA chief executive Paul Muthaura concurs with Mr Odundo, adding that companies must bring in new faces by appointing people based on competency to break the old habit of acquiesces.
The shift, he adds, should be driven by shareholders who have the power to appoint board members and can push management to offer more women and youth top jobs.
“If shareholders are not holding their own management and boards to account, it becomes very challenging for the regulator to step in,” says Mr Muthaura.
Although Kenyan companies have done better than the global average in gender, professional and age diversity, they lag behind in appointment of non-nationals to boards, thus denying themselves a chance to benchmark against global expertise.
The study shows that only 62 per cent of the 52 reviewed companies have a non-Kenyan on their board—and many who do are the multinationals— against a global non-national representation average of 79 per cent.