More than seven years ago, Ezra Davids and Xolani Ntamane of Bowmans published an article reflecting on shareholder rights and activism in South Africa. In the preface, they observed that shareholder activism was on the rise in South Africa, which mirrored the trend observed across the world. Prior to that, and no doubt influenced by the country's unique historical context, the type of activism that was common was from “interested parties such as trade unions”.
The nature of relationships between shareholders, boards and executives, and who is responsible for what, is a central and continuous feature of deliberations about the governance of institutions. Strategic activism has the ability to influence the direction of governance and accelerate the focus on critical issues.
But it wasn’t always so.
Many years ago, Milton Friedman stated that the social responsibility of business was to increase profits, as its only responsibility was to shareholders. Such sentiments seemed premised on the idea that businesses had no duty beyond the interests of those who created and owned them. Everything else was simply the responsibility of someone else.
Over the years, everyone warmed up to the reality that businesses hardly ever exist in a vacuum where the effects of their activities have no effect on other stakeholders. The evolution of that understanding has informed the embrace of a much wider stakeholder canvas where businesses are expected to acknowledge that they exist as corporate citizens who need to understand and appreciate that they should consider more than just their own primary needs.
In a country like South Africa, where the relationships between business and society exhibit a mixed and sometimes confrontational history, the idea of a broad canvas is perhaps more widely understood than in the type of world Milton Friedman had in mind.
All business executives in South Africa had to understand the national imperatives of redress and transformation. In recent years, as anxieties about executive compensation and new critical issues relating to sustainability have emerged, the average board of directors has had to figure out how to address these intersectional issues as a key aspect of their governance responsibilities.
Over the past two decades, as the raft of empowerment and redress policies that South Africans have adopted as law have evolved and matured, the spotlight on institutions that are meant to abide by these laws has gradually increased
What all boards will share as a universal sentiment is that such issues are a matter of a methodical journey rather than immediate windfalls. This on its own makes the idea of identifying and monitoring pathways towards ultimate success such a critical component of leadership.
Over the past two decades, as the raft of empowerment and redress policies that South Africans have adopted as law have evolved and matured, the spotlight on institutions that are meant to abide by these laws has gradually increased.
In the banking sector — where much economic power rests — the question of getting transformation right has been central in deliberations at policy, stakeholder and governance level. The progress of the various initiatives aimed at meaningfully supporting the transformation and redress agenda has been a mixed bag where, regrettably, data points often contradict each other and seem at odds with the public’s understanding of the state of transformation within the sector.
Advocacy and lobby institutions like ABSIP and Just Share have applied different and complementary ways of reminding leaders in the sector about the need to continuously reflect on and address the challenges and bottlenecks on their transformation journeys.
Absa, which is a prominent and critical player in the sector, occasionally finds itself having to play catch-up on various key issues relating to its progress on race and gender transformation. While the bank is still moving on from the damaging governance and leadership crisis of recent years, it also has to continuously assess and address transformation gaps and bottlenecks that are not necessarily unique to Absa but seem to trip up the bank more frequently than its peers.
At its 2024 AGM, the bank had to address questions regarding its gender transformation and pay gaps posed by Just Share, which highlighted that Absa’s executive committee had averaged 19% female representation over the past five years in a country where women make up 45.5% of the economically-active population. In senior management roles, Just Share indicated that Absa’s female representation was at 38.8%. The bank’s response that its female representation at Exco was now at 29% was cited as an indication of progress. However, that may just be where the problem lies.
Over the past few years, Absa’s leadership and governance journey has been under continuous scrutiny due to the various shuffles and squabbles that transcended the boardroom and its executive structures. At the heart of the issues, was the lack of clarity regarding the long-term succession strategy and its commitment to transformation.
In our capacity as the advocacy organisation for black professionals in the financial services sector, ABSIP has continuously engaged with Absa with the ultimate guidance always centred on the need for the banking group to engage in critical and difficult conversations about how it manages succession and transformation and actually commit to a road map that would bind all of its key stakeholders.
The purpose of such a road map is that it should provide clarity to Absa’s wide range of internal and external stakeholders about the bank’s approach to such critical matters. When such a road map exists, Absa stands a better chance of articulating to its stakeholders and the market at large where its ongoing bottlenecks and pressure points are. While this won’t necessarily translate into a perfect fix, it would go a long way in assisting every stakeholder understand what issues tend to affect an organisation of its kind when mapping its future.
In recent weeks, Absa has undertaken an executive shuffle that, while presumably motivated by internal strategic considerations, still leaves questions over whether it is all part of a particular road map. The net effect of the recent shuffles is that the company seems to be steadily standing still on the transformation treadmill rather than progressing with greater momentum and clarity than previously witnessed. Whether this represents an intersection of poor internal pipeline management or a lack of interest from a wider range of diverse and appropriately skilled candidates to join such a critical institution is something the board of Absa needs to seriously deliberate on.
From the perspective of an organisation that continuously asks critical questions about the pathway towards substantive transformation within Absa, we remain concerned that the complex leadership transitions of yesteryear will be revived again in the medium-term. In the meantime, it might just be ideal for Absa to embrace the critical and difficult conversations that stakeholders like ABSIP and Just Share, and even influential institutional investors like the PIC, keep elevating through various forms of engagement as one way of ensuring continuous introspection.
In the absence of this embrace, Absa may end up discovering that the tide of accelerating activism at shareholder and stakeholder level will make its future interactions with stakeholders ever more challenging.
• Radebe is president of the Association of Black Securities and Investment Professionals (ABSIP)
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