In the international mining community, company boards are coming increasingly into the spotlight. The reason? It is well known that those companies that operate with the core principles of good governance firmly in mind, will perform better, attract more investors, and achieve superior growth. Here’s a look at how the size, diversity, and ESG awareness of a mining board can impact on the overall success of the company.
By Jeremy Bossenger, director of BossJansen Executive Search.
A recent white paper on mining boards is proving helpful among worldwide executive search firms, as it focuses on the steps necessary to improve the running of mining companies via their boards. If you’ve ever heard of “bloated board” syndrome, in which any keen and qualified executive’s ability to participate effectively in a board meeting is severely hampered by the size of that board, this topic will resonate strongly with you.
An example from Governance Coach spells it out: “A board of 28 directors, meeting for a solid seven hours (not including any breaks), averages 15 minutes of speaking time per person.” This expert coaching business adds that because committee chairs, CEOs and the like tend to receive more airtime than others, the remainder of the board members would likely get even less than their allotted 15 minutes to contribute a critical opinion.
Size matters
While 28 members on a mining board may be excessive, you wouldn’t – on the other hand –want to go too small because that could reduce your company’s strategic network, leading to the hiring of potentially inappropriate or lesser-qualified staff members.
According to the research of governance practice specialists, Governance Today, eight to 10 members is ideal – with the benefits of this size including:
• sufficient individuals to meet diversity and skill-related needs;
• numbers big enough to spread what projects need to be accomplished;
• less likelihood of cliches forming;
• each individual receives sufficient air time;
• cost can be kept in hand;
• attendance and engagement remain high; and
• a streamlined succession plan can be implemented.
Diversity rules
While mining is reported to have some of the least minority-inclusive boards of any sector, when companies begin to hire in a more inclusive fashion, the profit margins soar. A case in point is shared in the PWC paper “Mining for talent – a study of women on boards in the mining industry”. It reveals that within the male-dominated sectors, i.e. mining, oil, gas, aerospace and construction, when women with the relevant qualifications are hired, they add considerable value.
The paper’s section on financial performance reveals that of the top 500 global mining companies surveyed, the 18 companies with 25 percent or more of their board comprised of women had an average net profit margin for the financial year that was 49 percent higher than the average net profit margin. What’s clear is that the benefits of more gender-diverse boards are yet to be realised within the global mining sector, with the paper reporting that only five percent of board seats – on average – are currently occupied by women.
What’s good news in our territory down south, is that the average percentage of women on boards, i.e. for mining companies listed on the JSE and Australia’s ASX, is a more inclusive and steadily rising 21 and 12 percent respectively.
Adoption of ESG
Another factor that cannot be ignore by CEOs in this sector, is the way in which mining companies with superior ESG ratings are delivering average shareholder returns that are 10 higher than their competitors. While it can be tough to find a suitably qualified and experienced ESG director, this is not an area to skip over because the research – for example Accenture’s 2022 report “Mining’s new role as a champion of decarbonisation” – reveals that up to 63 percent of all investors in mining and metals would either divest, or not invest in the first place, in those companies falling short of the industry’s decarbonisation targets.
Clearly, a figurehead board member will not suffice, as ESG is becoming an icreasingly complex and demanding niche in which vast quantities of relevant data (concerning environmental impact, spocial spending, and public engagement) will need to be prepared and shared with investors before the latter consider a particular mining company to be worthy of their money and attention.
An interesting aside: while only five percent of individuals on global mining boards have specialised in ESG, at least half of them are women.
Hiring for the planet
Through our work in the challenging executive search realm, we keep all these factors firmly in mind as we take on the task of hiring suitably qualified and experienced executives to join the boards of mining firms. This is, after all, going to be a key sector in driving the energy transition – and not just for financial reasons, but because the UN’s 17 Sustainable Development Goals (particularly 3> gender equality and 12> responsible consumption and production) are of critical importance in ensuring there is a planet for our children to live on.