The South African economic landscape changed for ever after the first democratic
election of 1994. The change heralded an era of inclusion, the economic landscape
became open to people from all races, whereas before economic power was
centralised in the hands of a minority group due to Apartheid legislation.
Exploring the relationship of diversity of board members on the corporate
governance of small, micro and medium enterprises (SMME’s) in South Africa has
become imperative. Understanding the relationship, if any, which exists can aid
SMME’s in board selection and corporate governance alike.
Data for the study was collected through a self-enumerated questionnaire completed
electronically and followed-up by interviews with heads of boards surveyed. Both the
questionnaire and the interviews focussed on corporate governance, which included
different components of governance such as the general principles of governance
followed in the enterprise, the stakeholder focus exerted by the board of directors
and the functioning of the board of directors. This resulted in a score for the
enterprise which can be expressed as a percentage. This governance indicator was
related to questions on the diversity of board members.
The findings were in many cases contradictive when a single variable was observed
against the score an enterprise achieved for governance. When taking a more
holistic approach and evaluating multiple variables, it became evident that it is rather
a combination of variables which displays some relationship with corporate
governance.
This study found that board diversity does have a relationship with corporate
governance. The magnitude of this relationship could not be ascertained and
warrants further research in a wider spectrum of the South African economy and also
with a larger group of subjects.