Case For Diverse Boards

Diversity of Singapore boards approaching a momentous milestone

Progress on gender shows path for multi-dimensional board diversity ambitions.

By Loh Boon Chye and Mildred Tan, Co-Chairs of the Council for Board Diversity

The diversity of Singapore boards is approaching a momentous milestone, and with it a timely opportunity to set our course for the next stage of our collective governance journey.

Two themes stand out. The first is that organisations in Singapore can and should be boldly ambitious in their goals on diversity; the second is organisations must encourage and develop a holistic approach to board diversity that goes beyond numerical targets and box ticking.

Given that Singapore’s diversity journey began with gender in 2012, progress on gender continues to provide a useful bellwether for board diversity in general. Organisations’ experience on the gender front often provides useful lessons as they develop other facets of diversity.

It is in that context that the latest numbers on women’s participation on boards offer encouraging signs for board diversity in general. As at Jan 1, 2022, women held 19.7 per cent of board seats among the 100 largest listed companies on the Singapore Exchange (SGX). Women’s share of board seats among statutory boards and the top 100 Institutions of a Public Character (IPCs) rose to 29.7 per cent and 28.4 per cent as at end-2021 respectively.

For those who are keeping track, the percentages of board seats held by women at Singapore’s largest organisations are close to reaching the interim goals that CBD had previously set: 20 per cent for the largest companies on SGX and 30 per cent for statutory boards and the largest IPCs. It took a combination of factors to get here.

Diversity champions

It is encouraging to see companies like CapitaLand Integrated Commercial Trust, Far East Hospitality Trust, SATS and Venture Corporation go from all-male boards in 2013 to having women comprising at least one-third of the boards.

There are also other outstanding organisations where women have consistently held one-third of board seats since 2013: Mapletree Commercial Trust and HRnetGroup.

Regulations catalysing change

From a regulatory perspective, the 9-year rule on director independence, which raises the bar for long-serving directors to be considered independent, came into effect on the Singapore Exchange on Jan 1 this year, and has helped to open up opportunities for board renewal and increased diversity at corporate boards.

A jump in the appointments of first-time directors in 2021 suggests that companies are embracing the spirit of the rule as they comply with it. First-time directors (both male and female), represented 59 per cent of all appointments to boards among the top 100 listed companies in 2021, significantly more than the 43 per cent average in the preceding 4 years. More companies looking further afield for board candidates will grow the pool of board-ready candidates and hopefully lead to better diversity in all aspects.

Investors expect accountability

Global investors including BlackRock, State Street Global Advisors (SSGA), and AXA Investment Managers have publicly stated their intention to withhold support from the leaders of boards that do not have enough women representation.

These different parts working together have shown that significant progress is possible when stakeholders pull in the same direction. Furthermore, they have clearly debunked commonly held misconceptions on board diversity, especially gender diversity. There is no shortage of women candidates; family commitments will not pose an obstacle to women thriving on boards; and board harmony is not threatened by adding diversity. As we develop more aspects of board diversity, this must inspire us to be bold in our ambitions.

Go beyond numbers and box-ticking

Numbers and targets help to signal intention and to measure progress; but like all tools, they need to be carefully employed.

As a starting point, goals and targets should reflect a holistic approach to diversity. That means considering a matrix of factors that include not just gender, but also capabilities, experience and other aspects.

In these volatile and uncertain times, a homogenous board is a one-dimensional creature in a multi-dimensional world; it will struggle to serve its organisation well.

Going further, targets and measurements must use the correct metrics. In some cases, like women’s participation on boards, the metrics can be relatively straightforward. But values like capabilities can be more complex to measure meaningfully, and sometimes a focus on assessing processes and qualities might make more sense than an insistence on quantifiable data.

Given the limitations of targets and metrics, it is therefore important that we do not become too narrowly focused on reaching objectives, but also pay attention to how we reach our goals.

Organisations need to ensure that they harness and utilise the diverse perspectives and capabilities of their directors, and that differences are not deliberately or inadvertently sidelined. Doing so requires board chairs to set the tone for respectful and participative dynamics that give due consideration to varied views and perspectives.

We must also be careful not to let board diversity become a cynical box-ticking compliance exercise where directors appear diverse at a superficial level but do not expand the cognitive breadth or depth of leadership in reality.

For instance, organisations should be willing to take on first-time directors whose capabilities may be more important than prior board experience.

We therefore commend organisations like Singapore Post, which appointed corporate lawyer Elizabeth Kong in 2016 to its board even though it was Kong’s first directorship; and Yeo Hiap Seng, which in 2019 appointed National University Hospital chief dietitian Lim Su Lin as an independent director. Such companies understand that sometimes the best way to fill a new gap is to look in new places, and set an example for the rest of us.

Build sustainable growth with diversity

Organisations that embrace a range of diversities equip themselves with the fresh perspectives and the broadbased analysis of risks and opportunities that elevate decision making. Their reward is improved reputation, organisational resilience, and sustainable growth; not just short-term performance.

The whole eco-system – comprising investors, regulators, and advocates of board diversity – should continue to highlight exemplary organisations which are taking the right steps, while demanding improvements from those that are inadequate.

The board diversity journey for Singapore continues to evolve. From our beginnings looking at gender issues and simple targets, we now encourage organisations to embrace a range of diversities fit for their purpose.

Our achievements on gender show us what is possible for such a multi-faceted diversity agenda. So strap in, because we are not slowing down.

This article was published in The Business Times on 22 March 2022, “Diversity of Singapore boards approaching a momentous milestone“.