Mandatory female director in PLC, a step forward?

The move is a form of recognition of women’s role in the corporate sector


THE government’s move to make it compulsory for public listed companies (PLCs) to appoint a female director is welcomed, but it remains contentious whether it is enough to promote female leadership in the corporate sector.

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz during the tabling of the Budget 2022 said the Securities Commission will make it mandatory for PLCs to appoint a female director from next year.

Tengku Zafrul said this is a form of recognition of women’s role in the corporate sector.

Currently, it is estimated that there are 6,004 directors on Bursa Malaysia Bhd.

Founder of Corston-Smith Asset Management Sdn Bhd Datuk Shireen Muhiudeen said that diversity, equity and inclusion are very complex issues, and is the one-woman director rule going to be sufficient in achieving the desired outcome for corporate Malaysia.

“It is a welcome move to start this as a mandate but with the five directorship maximum per person, there are concerns that the one person rule will only benefit a few.”

“And the question is then — what was the metric(s) that this one-woman rule was based on,” she told The Malaysian Reserve (TMR).

“If we take a rough estimate that we have 924 public listed companies, and we assume one woman per board rule starts with the top 100 companies (market capitalisation above RM2billion), that means the September 2022 ruling will impact 100 board seats.

And if one woman is allowed five PLC board roles that means this new one-woman per board listing rule change could impact only 20 women and at the best case 100 women,” she explained.

“As you have seen, the same women are on multiple boards,” Shireen said, noting that this issue is not exclusive to only women.

The move, according to the senior emerging markets fund manager, begs the question of whether the 30% target of women on boards has not been effective.

“Are they abolishing the target of 30% women on PLC boards? The corporate governance (CG) codes are not mandatory and if they are going to mandate one woman in the listing requirements, what will happen to all those other women who are currently on the PLC boards based on the CG code? It would certainly be a shame if we see PLCs reducing their women participation target of 30% of total board size to just one woman”.

In 2011, Corston-Smith conducted the Asean 5 Gender Diversity Project which reviewed 3054 companies from 1992 to 2010 within the main Asean nations: Singapore, Thailand, Indonesia, the Philippines and Malaysia.

Based on this study on Diversity within Asean 5, women boards of directors of PLCs positively contributed to a company’s performance.

The study also confirmed that having three or more women on boards offered better corporate results using the same regression analysis.

The study was released in 2011 and also presented at Johns Hopkins and the World Bank/IFC general meetings in Tokyo, Japan, and noted by the APEC Business Advisory Council.

The study was also referenced by former Women, Family and Community Development Minister Datuk Seri Shahrizat Jalil who recognised the vital role women play in the corporate sector. Diversity is not just a gender discussion, as the goal is of course to bring about more diverse views and avoidance of groupthink.

According to Women Leadership Foundation (WLF) chairman Datuk Dr Hafsah Hashim, as at July 2021, the participation of women on corporate boards stands at 25.3% for the top 100 listed companies, although the target was to reach at least 30% by end of 2020.

Hafsah said that if Malaysia is serious in pushing firms to put 30% women on corporate boards, there would be 828 seats available for women directors.

“Absence of gender equality in leadership positions not only hampers the due progress in every sphere but also costs the global economy substantially. Hence, there is a need to promote women’s leadership. Corporate houses or companies need the best of leaders and it will not be fulfilled if the recruitment pool excludes women,” she told TMR.

“Companies with gender diversity outperformed the average by 25% in the top quartile. A McKinsey study has revealed that eliminating gender in Malaysia will add at least 8.2% to GDP, equal to US$50 billion. This strategy will spark a new dynamism in women’s economic empowerment, ensuring a brighter future for Malaysia,” she added.

The need for promoting women’s leadership is as important as creating an enabling environment for women to hone their leadership qualities, she stressed, hence, why WLF has been working with various firms, including Huawei Malaysia in ensuring that future-ready female leaders of Malaysia are equipped with the relevant technical skill sets.

“This strategy will boost and promote the creation of the critical mass of female leaders that have been trained, nurtured and polished to take up senior positions in their organisations,” Hafsah said.