Case for Diverse Boards
Diversified boards. The new standard for leading organisations.
Diversity on Boards which – at its core – brings different perspectives to bear on critical issues, is globally recognised as a hallmark of progressive boards. The diversity of approach strengthens organisational resilience and sustainability and facilitates better decision-making. It is needed now, more than before, as business leaders are increasingly held accountable for not just economic outcomes, but also for how business is done and interacts with environmental, social and governance stakeholders to build enterprise value.
Enterprises with social and non-financial objectives also benefit from a diverse range of viewpoints. The most critical decisions in an organisation, entrusted to the Board, require weighing the risks against opportunities. Making the best choices may generate benefits beyond the ‘bottom line’ to reach beneficiaries in the triple bottom line.
We encourage organisations to embrace a range of diversities best suited for their needs and ambitions. Women on Boards – one of the most visible and measurable aspects of diversity – is a useful lead-in to an organisation’s consideration of broader diversity on their boards.
Leveraging board diversity as a competitive edge
In today’s highly competitive world, companies are expected to stay ahead of developments. Globally, regulators, investors, proxy advisers and stakeholders are looking at how the directors, as a group, chart corporate strategy and create enterprise value. Investors have publicly stated their intention to withhold support from the leaders of boards that do not have enough women representation and too many long-serving independent directors, signalling businesses to improve board diversity and director independence.
Companies can take steps to show their commitment to improving board diversity (including gender) by disclosing clear board diversity policy and targets, and describing how the combination of skills, backgrounds, experience and diversity of their directors serves the needs and plans of the company.
In other leading markets, companies demonstrate their commitment to board diversity by having at least 30% women’s representation on their boards. CBD encourages companies listed on SGX to achieve 25% WOB by 2025, and 30% by 2030.
Companies can improve board diversity by:
- Considering a candidate’s capabilities and unique experiences instead of preferring those with prior board experience.
- Leveraging the nine-year guideline on director independence1 as an opportunity to bring on board new members, imbuing the board with fresh experiences and insights.
- Appointing more women as board and/or committee chairs to have a greater focus on board diversity and to reach a wider pool of candidates.
Leading the way through diversity
Diversity is a fundamental social tenet of Singapore. Statutory boards who represent the values of Singapore are in a prime position to exemplify diversity at the board level, leading by example.
Their unique position also enables them to play a key role in talent-spotting. CBD encourages statutory boards to discover and appoint more first-time women directors with the requisite competency, leading the way for board diversity and further growing the pool of board leaders in Singapore.
As respected organisations with statutory roots, statutory boards can move the standard in Singapore forward by exceeding 30% women’s representation on boards, while moving towards gender parity in the long-term.
Institutions of a Public Character (IPC)
Diversity: An asset for charities to tap on
Charities, like companies and statutory boards, need boards who exhibit understanding across a broad and varied spectrum of society. But while companies interact mainly with stakeholders related to their business, charities’ activities are less closely tied to economic objectives. In fact, they face a wider range of stakeholders including beneficiaries, donors and the rest of society.
A more diversified board helps to drive comprehensive solutions, robust governance, and optimised long-term value, in turn establishing strong and sustainable organisations.
Donors have become more selective of the charities they fund. Accountability for activities is giving way to enquiry into impact. Board diversity could potentially improve supporter communication and multiply channels for fund-raising. A well-constituted board that is refreshed regularly with relevant skillsets and experiences also builds a sense of progressive leadership, improving confidence and diverse donor support.
Women on boards has particular relevance in the charity sector. For example:
- Social Service and Healthcare sectors: Better articulation and understanding of the family, society and workplace complexities.
- Arts sector: Encourages balance, variety of viewpoints and more approaches investigated in decision making.
- Sports sector: Offers balanced representation of backgrounds and perspectives, supporting decisions that provide equal encouragement to women in sports.
One would expect gender-balanced boards to be a norm in the charity space given that women are said to have greater participation in social and charitable work. However, women hold less than 30% of board roles on the Top 100 IPCs, and this percentage has remained flat for some time. Diversity has a different magnitude of importance for IPCs, as it reflects and enables inclusivity and acceptance, key principles which most, if not all charities seek to encourage. In light of this, CBD encourages IPCs to work towards and go beyond 30% women’s representation on boards, empowering and enabling gender parity in the long-term.
Here are some skillsets charity boards can consider when searching for new board directors:
- Digital experience to accelerate digitisation and transformation processes.
- Communications, marketing or brand experience for clear and strategic plans and informed interaction with stakeholders, donors, volunteers, beneficiaries and partners.
- Business and governance backgrounds to complement directors with charity-specific skills.