The gender leadership gap: A risk no business can afford

Since the Employment Equity Act of 1998, corporate SA has made many pledges in terms of progress to parity, but when it comes to actual representation, women remain underrepresented in executive suites and boardrooms.

This is materially bad for business’ bottom-lines; McKinsey’s Diversity Matters Even More 2023 report shows companies in the bottom quartile for gender and ethnic diversity are now 66% less likely to financially outperform. Conversely, companies with progressive parity continue to outperform – as do countries. The onus isn’t just on companies to push change; it’s the responsibility of all stakeholders, including investors and asset managers.

According to the 25th Commission for Employment Equity Annual Report, women comprise just 27.5% of top management and 38.3% of senior management roles across all sectors in South Africa. In the private sector, representation continues to decline the higher up the ladder one climbs; a clear sign that transformation has stagnated at the most influential levels.

Meanwhile, the seventh edition of the Status of Gender on JSE Listed Boards report reveals that women hold just 36% of board seats across JSE-listed companies, with only 17% of executive directors being women. Alarmingly, eight JSE-listed companies still have no women on their boards, and 43 companies fall into the “one-and-done” category – having appointed only a single woman often as a token gesture, without making further progress toward gender balance.

Underrepresentation is frequently framed as an issue of fairness or inclusion. Even though this remains an important part of the picture, it masks the very serious commercial risk and missed opportunities from solely homogenous leadership teams. The business case for gender is well established. Differentially-led businesses consistently outperform their more homogenously led peers not just theoretically, but in financially measurable outcomes.

McKinsey’s research, which reviewed more than 1 200 companies in 23 countries and across six regions, the business case for gender-diverse leadership is more undeniable than ever. The report looked at the relationship between gender and ethnic diversity on executive teams, boards, and across several outcomes: from financial performance to workforce well-being, and environmental and social context.

It found that businesses in the top quartile for gender diversity on their executive teams are 39% more likely to financially outperform their peers. That is a substantial increase from the 15% gap in 2015. It also shows that the risks of inaction are growing. Businesses lagging are facing steeper performance penalties than ever before.

Morgan Stanley’s 2023 research further strengthens the financial case for gender equality. Measuring nearly 1 900 global companies in the MSCI World Index, over 10 years of data going back to 2011, Morgan Stanley found that companies that have stronger gender balance – measured using its Holistic Equal Representation Score – outperform their less diverse peers by 1.6% per year on average.

These are not trifling performance gains. In South African's difficult economic climate – where growth has lingered below 1% for several years, and many companies are under financial stress – even small advantages can be substantial.

The recently released Global Gender Gap Report by the World Economic Forum further reinforces this point: although women still hold only 28.1% of senior leadership roles globally, economies with greater gender parity in leadership have shown stronger resilience in the face of economic shocks, including faster recoveries from COVID-19 disruptions.

Countries and companies with more inclusive leadership structures continue to outperform in terms of productivity, innovation, and long-term competitiveness, again demonstrating that gender-diverse leadership is not just a moral imperative, but a business one too.

The problem isn't pipeline

It is a common argument that there aren’t enough qualified women to fill senior roles – but research shows us that this simply isn’t true. There is no shortage of capable, experienced women. What persists are structural and cultural barriers that prevent them from advancing.

These studies show that workplace cultures often undervalue women’s contributions, offer fewer promotion opportunities and penalise those who take on caregiving responsibilities. Women are more likely to have their competence questioned in meetings, more likely to be interrupted, and less likely to be assigned high visibility “stretch” roles that lead to promotion.

These accumulated aggressions push women out of leadership pipelines before they even have a chance to reach the top.

It’s a shared responsibility to make change happen

However, the responsibility does not rest with companies alone. Investors and asset managers have a crucial role to play in holding companies accountable for gender transformation. Through proxy voting, and investment allocation, they can encourage and influence companies to do more.

Globally, gender-lens investing is growing with specialised funds targeting firms with strong women-in-leadership records, pay equity, and inclusive workplace policies.

Importantly, the Global Impact Investing Network’s 2024 report showed that 90% of these gender-lens investors met or outperformed their financial expectations, with 13% exceeding them, and real-asset funds delivering roughly 3 percentage points of alpha above target.

Gender equity must be a priority

As we mark Women’s Month, the intention of sharing and awareness cannot be hashtags and symbolic gestures alone. The slow pace of gender transformation in leadership is not just a reflection of the past, it’s a risk to our shared future. Business leaders, investors, and policymakers need to recognise that gender equity is not a "nice-to-have", but a core ingredient to having sustained performance, and progress, in the future.

Until gender transformation is embedded as a business imperative, we will continue to fall short. Not just on diversity metrics, but on the innovation, growth, and sustainability that diverse leadership brings.

The evidence is clear. The moral case is clear. The business case is clear. What is missing are clear actionable measures that could drive meaningful change.

Kristen Fourie and Ayabulela Quzu, ESG and Impact analysts at Sanlam Investments

*** The views expressed here do not necessarily represent those of Independent Media or IOL

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