Case For Diverse Boards
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Women in leadership, women on boards – it’s time for a change
Investors are increasingly vocal and active in their call for board gender diversity
By Loh Boon Chye and Mildred Tan, Co-Chairs of the Council for Board Diversity
There is an urgent need for more women on boards – and the time for change is now. The proportion of female university graduates and women in leadership positions in Singapore as at 2020 stood at 51 per cent and 31 per cent, respectively. Therefore, there are many opportunities for women to excel and reach their full potential in Singapore.
Today it is globally recognised that having diversity in leadership is good for business. A recent study by the Council for Board Diversity (CBD), comprising secondary research of academic studies published before the pandemic, found that board diversity is essential to the business sustainability and resilience of a company. The Covid-19 crisis has also brought societal issues further to the fore – resulting in global investors becoming increasingly vocal and active in their call for board gender diversity, among other forms of diversity.
The recently released 2021 Grant Thornton report showed that the proportion of women in senior management in Singapore stood at 33 per cent, higher than the global proportion of 31 per cent and comparable to proportions in the United Kingdom and the United States. The proportion of women in senior management is a good proxy for the pipeline of candidates with the qualities to become board directors. Their experience in making high-level decisions and interacting with boards puts them in a good position to take the next step on to the board.
CBD’s experience has been positive when we sought recommendations from corporate leaders for women whom they think have the capacity to serve on boards. More than 200 recommendations were given and many of these women have experience managing business units, which CBD acknowledges as being advantageous for being appointed on to boards.
Having a critical mass of women directors makes a positive difference, as it changes the way women directors are able to share their insights compared to being the lone woman voice. Having at least three women on a board, or in general 30 per cent, helps companies fully reap the benefits of gender diversity, such as better financial performance.
Three recent global trends that have come to the forefront support the need for greater board diversity
- Both investors and the general public increasingly expect companies to go beyond narrow financial interests, to use environment, social and corporate governance factors to create value in the company. Stakeholder interests are important for the way companies are operated and developed.
- Pandemic-induced uncertainty will continue to affect companies for some time to come. They need to demonstrate capabilities in the board and leadership that would enable continued success during such times of heightened uncertainty. Having board diversity provides the broad-based judgement of risks and opportunities that is needed.
- Investors are also increasingly vocal and active on societal issues such as those relating to diversity and inclusion, and companies need to respond. One recent indication is Nasdaq’s recent proposal to the US Securities and Exchange Commission to adopt new listing rules requiring companies listed on Nasdaq to disclose consistent, transparent diversity statistics regarding the board of directors. It also requires most Nasdaq-listed companies to meet, or explain why they do not meet, an objective of at least two diverse directors. There is similarly an increased awareness of diversities in Singapore’s community and their representation in terms of economic contribution, with board representation being at the apex of the economic ladder.
Today’s Covid-19 pandemic has made revisiting board roles an impetus to change as leaders look deeper at issues such as technology and digitalisation, employee welfare, etc. Companies should capitalise on the benefits of having a diverse range of perspectives and experiences on the board.
For companies, we urge you to strongly consider having more women directors with the necessary experience and skillsets to bring the organisation into the future. For women leaders, we encourage you to step forward and offer your expertise as directors, while companies are looking into recovery from the pandemic.
Each player can do its part to help Singapore build a stronger and a more sustainable corporate environment.
Board diversity is more than a number