By: Kautsar Abd Rahman
The current global conversation on corporate governance hones in on the need to accelerate greater diversity on corporate leadership and management. The call for diversity includes variants such as gender, ethnicity, age, and skill set. This entry seeks to highlight the importance of improving gender balance in the composition of corporate leadership.
Some may question the reason for this emphasis. Others may say, “If the woman is, at all, capable, shouldn’t she be in a position of authority? Why is there a need for such an initiative? After all, promotion should be given based on meritocracy, should it not?” Making it a requirement for any board of leadership to intentionally allocate a seat for a woman, simply to fulfil gender diversity, would mean the practice of merit-based performance may have been compromised.
Having a woman on any leadership board should never be about meeting a prerequisite, filling a quota, or heeding a need to satisfy the government’s call for an agenda. Rather, it should be about ensuring qualified and competent women are given access into the positions worthy of their merit without having to fight against barriers that exist because of their gender.
The barriers that the women of today need to overcome stems from a misguided prejudice and skewed perception, both of which will hinder their progress into positions of power or senior management roles. A Harvard Business Review article sums up the following as some of the barriers faced by females:
Prejudice: Men are promoted more quickly than women with equivalent qualifications, even in traditionally female settings such as nursing and education.
Resistance to women in leadership: People view successful female managers as more deceitful, pushy, selfish, and abrasive than successful male managers.
Leadership style issues: Many female leaders struggle to reconcile qualities people prefer in women (compassion for others) with qualities people think leaders need to succeed (assertion and control).
Family demands: Women are still the ones who interrupt their careers to handle work / family trade-offs. Overloaded, they lack time to engage in the social networking essential to advancement.
Closer to home, the Diversity Action Committee in Singapore found the reason why women are still sidelined – when it comes to most senior positions – are due to corporate governance practices of firms. Companies in Singapore are not required to disclose board diversity practices, which means change is not a necessity. Because of that, women in Singapore bear the brunt of this oversight, with board renewals being stagnant –22% independent directors stay on longer than 10 years – making the percentage for promotions impossibly slim. In addition, 93% of appointments of new directors are sourced through personal contacts or network from the male-dominated senior corporate leader’s pool, saturating top ranking positions with even more male corporate leaders.
To counter this linear perception and encourage a positive response to the call for corporate gender diversity, female corporate leaders from around the world – including Malaysia in 2015 – have established a country-specific ‘30% Club’. This industry-driven initiative aims to bolster better corporate leadership and governance, as well as increase corporate performance for the benefit of companies and their shareholders through board gender diversity.
We return to the pressing question of the day: Why is it imperative to have women onboard?
A 2012 report by Standard Chartered Bank, Women on Boards: Hang Seng Index discovered that top-ranking companies on the index had a number of women on their boards. Topping the list is Hang Seng Bank, with four women, representing 31.3% of its board. Conversely, the three lowest ranking companies have no women in their board.
A study on 1,643 companies on the MSCI World Index has proved that companies with strong female leadership delivers a 36% higher return on equity, averaging at 10.1% return on equity from the end of 2009 to September 2015, compared to companies without women at the most senior ranks, which scored an average of 7.4%. The Singapore Board Diversity Report 2014 – The Diversity Dividend found that boards with gender diversity have an average return on assets of 3.3% versus 0.3% of those without.
The numbers do not lie; the data is proof that having gender diversity points towards a positive growth in a company’s performance.
It didn’t take long for boards to realise that a better gender balance in senior ranks is a business issue, not a woman’s issue, Helena Morrissey – who established the first 30% Club (United Kingdom) said. Simply put, achieving a gender-variant board is an effective way to moving forward and grow because it enhances decision-making with new perspective that represents female consumers. This delivers a richer customer insight throughout their service and production value chain.
Diversity of skills, experience, and gender are also regarded as key indicators of good governance, which is likely to attract more investors.
With an expected turn to Asia for global business focus in the near future, it is an opportune time for the new Malaysian Code on Corporate Governance to champion gender diversity and effectively root for the Prime Minister’s message to increase women’s participation in boards and senior management level in Malaysia.
The Code is part of a three-year strategic plan to advance key corporate governance priorities, which includes plans for collaborations with industry groups and stakeholders to increase women’s participation in the top 100 companies on Bursa Malaysia.
The new Code will require PLC to disclose their targets and measures to meet gender diversity in their annual report. For companies on the FTSE Bursa Malaysia Top 100 Index or companies with market capitalisation of RM2 billion and above, their board gender composition should include a requisite minimum of 30% women.
With regards to the progress of our nation on this, Malaysia leads the way with the largest year-on-year increase in women representation from 8.3% to 12.5% (2014), ahead of 10 economies in the Asia-Pacific region. Whilst this achievement is commendable, we are still far from our goal. Currently, the number of women representation stands at 16.8%. The aim is to raise women participation on board to 30% by year 2020, which would mean the drive, work, and effort done at present needs to be accelerated to close the gap within the next 3 years.
To help companies source for women directors, Malaysia has developed a Women Directors Registry to provide data of all eligible and qualified Malaysian women for board positions. Besides providing structured training curriculum that includes board readiness assessment, coaching and mentoring programs are already in motion, to ensure sufficient qualified women are in the pipeline to take up the seats in the board.
With such initiatives and a growing pool of women corporate professionals in Malaysia, it seems, to me, that the 30% women on board by 2020 target, very much plausible and possible. Here’s hoping for another ‘Malaysia Boleh’ achievement we can all be proud of!
References
Women and the Labyrinth of Leadership by Alice H. Eagly and Linda L. Carli – Harvard Business Review, Sept 2007
Singapore Board of Directors’ Survey 2015
The MSCI World Index, which is part of The Modern Index Strategy, is a broad global equity benchmark that represents large and mid-cap equity performance across 23 developed markets countries.
NUS Business School, by Dr Marleen Dieleman, Dr Qian Meijun and Mr Muhammad Ibrahim.
Study on Australia, China Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Singapore and South Korea by Korn Ferry and the National University of Singapore Business School 2014.