As issues related to corporate governance and women’s empowerment have gained more attention,
global investors increasingly are focusing on the dearth of female directors
By Bruce Einhorn, Bhuma Shrivastava & Shoko Oda / BLOOMBERG
Asia has long been a laggard in the global struggle to get more women on corporate boards.
While countries in other parts of the world have adopted rules to integrate boardrooms, Asian regulators largely have been hands-off.
And it shows, with high-profile Asian companies including China’s Tencent Holdings Ltd and Japan’s SoftBank Group Corp having all-male boards of directors.
As issues related to corporate governance and women’s empowerment have gained more attention, spurred by the #MeToo movement, global investors increasingly are focusing on the dearth of female directors at many companies.
That’s leading some of Asia’s biggest financial centres to play catch-up with Western markets by encouraging listed companies to recruit more female directors. Some of the steps involve mandates while others are voluntary.
“We call on all listed companies to appoint more females as their board members,” Carrie Lam, chief executive of the Hong Kong government, said in her annual policy speech last Wednesday.
US and European policymakers keep pushing for gender diversity on boards. Last month, California Governor Jerry Brown signed a law requiring publicly held companies located in the state to have at least one female board member by the end of 2019. In Germany, a law took effect in 2016 requiring about 100 of the biggest-listed companies to have women in at least 30% of their oversight board seats.
Asian regulators and policymakers understand that investors are looking at diversity indicators, according to Lawrence Loh, director of the Centre for Governance, Institutions and Organisations at the National University of Singapore Business School. He recently was lead author of a study showing the positive effects of board diversity on corporate governance and business performance.
“You can see all around the pressure for change in diversity,” Loh said. “Companies will have to keep pace.”
In Asia’s big financial hubs, there’s still a long way to go. Women made up 14.7% of board membership at Singapore’s top 100 listed companies and 13.8% for the 50 members of Hong Kong’s Hang Seng Index, according to a July report from Singapore’s Diversity Action Committee.
That compared to 22% for the S&P 500 in the US, 29% for the FTSE 100 in the UK and 42% for the CAC 40 in France.
At the bottom of the list, women accounted for 4.9% of board members Japan’s Nikkei 225. Now, regulators and politicians are responding to calls for greater diversity.
Some changes are simply focused on getting companies to address the issue. The Monetary Authority of Singapore in August approved changes to the corporate governance code calling for listed companies to disclose their board diversity policies and progress made in achieving those policies.
Don’t expect fast improvement, cautioned Loh, who described Singapore’s new policy as a “baby step” in the right direction. “Asian jurisdictions are taking calibrated steps,” he said. “It would be quite disruptive to mandate drastic changes.”
Here are some other moves by Asian regulators to address the issue of gender diversity on corporate boards.
India: Closing a Loophole
In 2013, India enacted a new law requiring every listed company to have at least one female director. Many companies ended up appointing the mothers, wives or daughters of their chairmen or owners.
This year, India’s markets regulator moved to close that loophole by mandating that companies have at least one independent female director, thus eliminating the ability to appoint executives’ relatives.
India’s 500 largest companies by market capitalisation face an April 1, 2019 deadline, with others in the top 1,000 having another year to comply.
“Genuine attempts have been made to get independent women on boards,” said Arundhati Bhattacharya, former chairman of State Bank of India and the first woman to lead the bank since its founding more than 200 years ago. “Now, we need to see how it’s actioned and what penalties are imposed on those who don’t comply.”
Japan: Code of Governance
In June, the Tokyo Stock Exchange published a revision to its corporate governance code for boards of directors, for the first time including a reference to gender. According to the new code, a corporate board “should be constituted in a manner to achieve both diversity, including gender and international experience, and appropriate size”.
Efforts by policymakers to use their bully pulpit to promote diversity may have some impact, said Nobuko Kobayashi, a partner at AT Kearney in Tokyo. “The government’s role can be to encourage goal-setting and promote best practices,” she said.
However, the lack of female directors in Japan reflects complex societal and cultural attitudes in a country where women are discouraged from pursuing business careers, Kobayashi said. So it will be difficult to resolve the issue by regulations alone.
“What the government should do is to invest in enriching the pipeline of next-inline women executives by providing social infrastructure — childcare facilities or opportunities to get re-skilled — so women can easily come back to the workforce after maternity leave,” she said.
Hong Kong: Mandatory Diversity Policies
Other regulators are taking a broader swing at diversity. Hong Kong’s stock exchange currently encourages companies to publish statements about their diversity policies. Next year, it will begin requiring those statements.
Making the policy mandatory represents progress, said Pru Bennett, MD and head of investment stewardship for Asia Pacific at BlackRock Inc in Hong Kong.
“When it was best practice, it didn’t have much influence,” she said. The new requirement “might make companies think a little bit more about what they’re doing”. Still, advocates for greater diversity want the stock exchange to do more.
“It’s a big step in the right direction,” said Fiona Nott, CEO of Hong Kong-based nonprofit The Women’s Foundation Ltd. “We would like to see a formal requirement for measurable objectives included in the diversity policies.”
In a statement published in July, when it announced the new policy, Hong Kong’s stock exchange said there was no need to make such a change.
“We consider the current code adequate as it already requires mandatory disclosure of any measurable objectives that it has set for implementing the policy, and progress on achieving those objectives,” the stock exchange said.