Reflecting on compliance with Broad-Based Black Economic Empowerment codes of good practice: Trends and suggestions

Abstract

Purpose: Broad-Based Black Economic Empowerment (B-BBEE) legislation was introduced to promote the economic participation of black people in the South African economy. Some scholars have argued that, whilst it is important to empower black people, B-BBEE legislation is not necessarily the best mechanism available. Despite the criticism against B-BBEE, it remains the most prominent means of uplifting black people in the country. This study was conducted to reflect on whether selected companies listed on the Johannesburg Stock Exchange have improved their B-BBEE compliance and determine which elements included in the 2004 and 2007 Codes of Good Practice the companies have focussed on. The authors highlight progress made by listed companies in empowering black people and offer suggestions for improvement. Design/methodology/approach: A comprehensive data set, comprising 1767 observations for 379 listed companies over more than a decade (2004–2015), was analysed. Mixed-model analysis of variance and Fisher’s least significant difference tests were used to assess the significance of the observed trends. Significant increases in B-BBEE scores (in total and per element) were observed. Findings/results: The mean socio-economic development B-BBEE element score showed the largest change over the study period, whilst the employment equity element reflected the smallest change. Practical implications: The Department of Trade and Industry should reflect on the attainability of certain targets, especially employment equity and ownership. Government and listed companies are encouraged to critically evaluate the optimal manner to empower previously disadvantaged individuals. Originality/value: This study comprehensively explores the trends in B-BBEE compliance using statistical methods to provide suggestions to the Department of Trade and Industry and companies listed on the JSE.

Keywords

• broad-based black economic empowerment
• south africa
• socio-economic development
• management control
• compliance.