Leveraging ESG to drive age diversity in board leadership - a case of JSE top 50 mining companies

Abstract

Managing sustainability by companies involves considering the Environmental, Social, and Governance (ESG) aspects and measuring their impact. In this study, the focus on Governance (“G”) in ESG was evaluated, as there is evidence in the literature that shows a biased focus on the Environmental and Social aspects (the “E” and “S”) of ESG, with the governance aspect often being overlooked. In 2022, the average age of directors on JSE Top 40 boards was reported as 56.5 years, compared to 56.8 years in 2021 and 57.4 years in 2020. This research examined age diversity in the board leadership of JSE Top-listed mining companies. The study analysed the composition and age diversity of boards with a focus on the governance "G" aspect of ESG. A qualitative methodology was employed to collect data primarily from board members who hold board seats in JSE-listed mining companies. The study also conducted semi-structured interviews with individuals affected by board leadership, including members of executive committees and board members of financial institutions listed on the JSE, as investors have adopted ESG as one of their funding requirements. Furthermore, the study conducted interviews with relevant stakeholders, including recruitment representatives from boards and associations such as the Directors Association of South Africa (DASA) and the National Youth Development Agency (NYDA), which represents the interests of young people in South Africa. The findings demonstrate that departing from homogeneous board structures to allow for age diversity is beneficial to firms, as this aspect introduces various expertise and viewpoints that can enhance the decision-making process and are crucial in an increasingly multicultural society. Moreover, the study found that board membership inclusion in South Africa was mainly driven by networking. As such, the reliance on closed networks and a preference for a select group of individuals creates a restrictive ecosystem for board leadership. This results in the same individuals rotating in and out of multiple board positions simultaneously, thereby perpetuating the exclusion of young professionals from board leadership.