e-spaces

May 23, 2008

By Roy Cokayne

Pretoria – The JSE’s building and construction sector scored the lowest of the six listed sectors analysed by Board Barometer, a diagnostic survey of the composition of boards and their attitudes to corporate governance and transformation.

The barometer measured 19 JSE-listed construction and materials companies in the sector. The worst performing variables were black economic empowerment (BEE) and transformation, with a score of 4.70 and demographic diversity at 3.49.

Thirteen of the 19 firms got a zero score for BEE and transformation. This does not mean these companies do not have any BEE or transformation, but they are below the threshold and not meaningful.

For instance, it reflected the lack of BEE ratings, transformation committees and the failure to submit employment equity reports.

Only six out of the 19 firms had transformation committees. The racial diversity scores were also mixed, with six out of the 19 firms scoring 10, but 10 others scoring 4.00 or less.

The demographic diversity variable included the racial, gender and age diversity of board members and was pulled down by extremely poor gender diversity, with a score of 1.05.

AG Industries managing director of South African operations Jackie Martingano said the firm, which came out in the bottom three of the worst performing companies surveyed, scored poorly because it did not have enough independent non-executive directors and the board was not diverse enough.

It had completed the empowerment scorecard and complied with employment equity requirements, but did not have any BEE shareholding.

She said the company did not have a transformation committee, however, BEE was discussed in board meetings. The company had identified this as a weakness and was working towards improving it.

The other two firms in the bottom three were TWP Holdings and Masonite Africa.

TWP chief executive Nigel Townshend said yesterday his company had sold 16 percent of its shares to Vunani Capital, with an option for the BEE firm to raise its stake to a minimum of 25.1 percent. Of TWP’s five directors, two were black, including chairman Ethan Dube of Vunani. TWP also had audit and remuneration committees, in line with the corporate governance requirements.

Brett Bowes, the managing director of Terranova Research, which developed the Board Barometer with Leaders Unlimited, said on Wednesday the very low gender diversity score was not surprising as it was a male-dominated business, but business acumen did not only come in men, and he would have expected this to be changing.

Bowes said the major message from this sector, as with the household and leisure goods and related retail sectors, was that board attitude had not focused strongly on diversity, BEE and transformation.

By far the best scores in the sector were for expertise (8.66), where five companies scored the perfect 10. These were M&R, Pretoria Portland Cement, Aveng, Afrimat and Ceramic Tile Industries.

The objective of the barometer was to encourage companies to improve their corporate governance processes and not to “beat them up”.

The building materials and fixtures subsector performed worse than the heavy construction subsector, but both sub-sectors scored poorly. Building materials and fixtures scored 5.01 and heavy construction 5.9.

Bowes believed the sector was the worst performing of the JSE sectors analysed to date because the managements and boards had remained the same for a long time.