Participation of women on the boards of the top 100 listed companies increased to 23.7% in 2018

By NG MIN SHEN / Pic By RAZAK GHAZALI

Female participation at the senior management and board levels of listed firms in Malaysia is growing, with two of the top most highly paid CEOs from family-run businesses and the average independent director’s tenure standing at five years, said the Securities Commission Malaysia (SC).

The findings were revealed in the SC’s inaugural Corporate Governance Monitor (CGM) 2019 released yesterday, which focused on the levels of adoption for practices recommended in the Malaysian Code on Corporate Governance.

Participation of women on the boards of the top 100 listed companies increased to 23.68% in 2018 from 16.6% in 2016, as per the report. The SC’s target is to have 30% women on the boards of the top 100 listed firms by end-2020.

As at Dec 31, 2018, there were 55 male independent directors who had served for more than nine years on the boards of Malaysia’s top 100 listed firms.

“These boards should take the opportunity to refresh its composition to meet the challenges ahead,” the SC said, adding that 134 listed companies had achieved the target of having 30% or more women on their boards.

Women also accounted for 28% of senior management positions at all local listed firms as at end-June 2018, higher than the Asia Pacific average of 23%, as per Grant Thornton International Ltd data in March 2018.

Maybank Kim Eng Holdings Ltd group CEO Ami Moris said while there are more than enough competent female candidates able to fill management positions, perceptions towards women must be addressed as part of the gender diversity drive.

“When it comes to women on the boards, that’s when the issue of capabilities and competencies tends to emerge, whereas when you’re talking about male board members it never arises — you just assume they have a right to be there.

“It is still the challenge of perception — that a woman must be fully skilled and trained in all different disciplines is perhaps not a conversation that you would tend to have with a male board member candidate,” she told reporters on the sidelines of the launch in Kuala Lumpur yesterday.

According to data from the Ministry of Higher Education, in 2017 women accounted for 62% of university enrolments, with 65% of graduates and 64% of enrolment in degrees related to the fields of science, mathematics and computer science.

“The reality is, the pipeline is real — there are loads of competent women out there. (But) that pipeline tends to shrink as women move to start families. What we need to do is emulate some of the practices or policies of other economies like Japan and South Korea, where they have very positive and affirmative action plans to bring women back into the workforce after they start their families,” Ami added.

She also noted the importance of networking as a means of climbing the ladder, given that strong relationships across different communities and stakeholders are required to get to the top levels of senior management.

“Eighty percent of referrals for new board members still come from either the CEO, or existing board members, so it creates a boys’ club. The way you network is very much within that — how you network after hours, how you spend time together.

“So, women and organisations collectively have to encourage women to network, to build their fraternity, taking into consideration that women do prioritise their roles at home. We need to network not just by the typical ways of networking, which women are very often excluded (from),” Ami said.

On the remuneration of CEOs, the SC’s report said the top three companies with the highest paid CEOs were family-controlled businesses, namely Genting Bhd, Genting Malaysia Bhd and Sapura Energy Bhd in third place.

Ten of the top 20 listed companies with the highest paid CEOs were family-controlled firms.

The median remuneration ranged from RM1 million to RM7.98 million across 13 sectors, with the top three sectors being telecommunications and media, financial services, and utilities, while real estate investment trusts recorded the lowest median for CEO remuneration.

Finance Minister Lim Guan Eng, whose speech was read by his political secretary Tony Pua at the event yesterday, also noted that the compensation of domestic employees as a percentage of GDP stood at only 35.2% in 2016, while the likes of Singapore and South Korea were well above 40%.

“Corporate Malaysia needs to play its part to ensure that Malaysian workers earn a decent wage with a good working environment. We look forward to the SC following up on its analysis of CEO remuneration with a review of key pay ratios and wage levels of employees in listed companies in next year’s CGM,” the speech read.

Meanwhile, the average tenure of independent directors fell from seven years in 2015 to five years as at end-2018, likely due to greater scrutiny by shareholders and the need to seek shareholders’ annual approval to retain long-serving independent directors beyond nine years.

However, there were 273 companies with independent directors serving more than 12 years.

Out of 3,244 independent director positions, 785 (24.2%) were held by independent directors with a tenure of over nine years. The longest-serving independent director had a tenure of 40 years.

The SC strongly recommended companies to limit the tenure of independent directors to nine years, in order to reduce the risk of familiarity impeding the director’s objectivity, control entrenchment risk and facilitate board refreshment for an optimum mix of skills and experience.

“In 2019, the SC will engage companies with long-serving independent directors, starting with those with a tenure of more than 20 years. This is to enable the SC to understand the circumstance of the company, the methodology used to evaluate the effectiveness of directors and challenges — if any — in identifying suitable board candidates,” it said.

Moving forward, the focus this year will be to review the anti-corruption measures of listed companies as part of the SC’s efforts to support the National Anti-Corruption Plan.

“Pursuant to the Budget 2019 announcement, the SC will also be looking at key pay ratios of listed companies. Findings from both reviews will be included in the 2020 edition of CGM,” SC chairman Datuk Syed Zaid Albar said in his keynote address.