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SA directors tend to be older than average, which may explain the retail slump.
SA directors tend to be older than average, which may explain the retail slump.

Are retailers' boards in need of new blood?

RETAILER NEWS

By Palesa Vuyolwethu Tshandu - Aug 21st 2017, 09:40

The average age of the 12 board members of the world's second-largest fashion retailer, Sweden's H&M, is 52. 

That's younger than the average age of board members of most of South Africa's retailing behemoths; the average age of board members at fashion house Truworths is 61. And maybe one of the reasons for the underperformance of the country's older players.

In the two years that H&M has been in South Africa, the retailer has opened 12 stores.

Through its innovative strategies and by embracing the latest trends of its fashion-conscious consumer base, the retailer has eaten into the market share of leaders such as Mr Price and Edcon, owner of Edgars and Jet.

From being the perennial outperformers on the local bourse in recent years, retailers have buckled under the pressure of a struggling domestic economy and increased competition that has seen many of the world's leading fashion houses raising their flags abroad. Over the past three years, the JSE retailers index has sunk 18%, compared to a 9% rise in the All Share index.

Outside of factors such as an underperforming economy, there is the question of whether the demographic advantage held by the Swedish retailer has been a significant factor in its success over the country's mainstays.

Of the 13-member board of Durban-based Mr Price, only one is under the age of 50 - nonexecutive director Daisy Naidoo.

There were two main reasons of strategic importance why companies should attract a younger board profile, said Parmi Natesan, an executive at the Centre for Corporate Governance of the Institute of Directors in Southern Africa, in a note.

"One is the global emergence of innovative companies with totally new business and operating models, capable of radically disrupting settled industries. The second reason is linked to the fact that South Africa, like many emerging markets, is increasingly a young country," she said.

Understand stakeholders

"If stakeholders are so vital to an organisation's ability to survive, then boards need to be appropriately constituted and equipped to understand what those stakeholders want, and to engage with them."



According to the most recent census, almost one in three, or 29.6%, of the population of South Africa are aged 14 or younger, and 28.9% are aged between 15 and 34, meaning that more than half the population are under the age of 35.

At the biggest grocery retailer in Africa, Shoprite, the average age of its board members is 59. The youngest are 41-year-old Adriaan Basson, son of its longest-serving CEO, Whitey Basson, and Jacob Daniel Wiese, 36, the son of one of the group's largest shareholders, Christo Wiese.

Diverse consumer profiles are vital to stay ahead of the curve, with some retailers supplying the needs of various demographics on the shop floor.

In an attempt to bridge the age divide, TFG, which has a 27-brand portfolio including Charles & Keith, Markham and @Home, has two boards, a supervising board and an operating one - the latter looking at actual retail operations.

Inclusive decision-making

The average age of the first board is 59, and 51 for the second. CEO Doug Murray sits on both boards and, according to the company, decision-making is an inclusive process.

A spokesperson for the group said the supervisory board was responsible for TFG's strategy, direction, leadership, governance and performance. The operating board was responsible for day-to-day management and the operations of the retail trading and service divisions.

While a younger demographic in a boardroom is beneficial to the health of an organisation in this fast-evolving technological world, Stacey Wallaberger, founder of Switzerland-based Metis Consulting, said it "does not guarantee a successful company".

"It's the quality of board members, their alignment and understanding and contribution to the brand, that is important, each focused on the upliftment of the company."

"It is not about age. Business models are constantly being redefined if the company wants to stay innovative and move with the times regardless of the board members. The larger the company, the more difficult to change the attitude and mindset," said Wallaberger.

But with the business world, and South Africa as a whole, getting younger, the future of boards will look to draw in younger members.

"Companies that have been in business for over 50 years have a more deep-seated traditional board; younger companies are more diverse," said Wallaberger.

"From my experience, boards tend to be a reflection of their network, therefore there are unconscious similarities between members. It's not a question of reluctance."
© BusinessLIVE MMXVII 

Read more about: retailers | retail | digital age | business | boards

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