There have been many conversations on the need to have more women on company boards, but there has been a little headway on it. The Corston-Smith ASEAN-5 Gender Diversity Study© shows that more than half of the companies listed on Bursa Malaysia and the Jakarta Stock Exchange still do not have a single women director.
The study, which covers 3,054 companies in Corston-Smith’s universe, is for 13 years, from 1998 to 2010. All in all, it covers the top 75% of all listed companies in the five major ASEAN countries, namely Malaysia, Indonesia, Singapore, Thailand and The Philippines. Among them, only Singapore - despite its small size - has improved slightly, with just under 50% of all its companies surveyed without any female director representation.
The study concludes that the participation of women on boards is dismal and that the region’s women today are still hitting the glass ceiling despite more of them being better-educated. Statistics from the United Nations showed the number of Southeast Asian women who make it to university ranges between 48% and 56%.
The percentage of women directors within Corston-Smith’s universe of listed companies is only 10% for The Philippines; 9.6% for Thailand; 8.2% for Indonesia; 7.1% for Malaysia and 6.2% for Singapore.
When reviewing the impact of women participation on public listed companies, we performed a regression analysis to examine the association between the percentage of women on boards with the performance of the company. The performance indicators that we reviewed were revenue, market capitalization, earnings per share, net profit, return on equity (ROE) and return on assets.
Interestingly, the regression analysis showed that all six variables are positively correlated with female representation on boards. Most notably, for every 1 percentage point increase of women on Boards resulted in an increase in ROE by +2.26% for Malaysia, and by + 1.41% for the Philippines. All five countries showed a positive correlation between revenue and women directors on Boards.
We then went a step further and looked at those companies that had three or more women directors on their boards. Although the sample size is much smaller, (as there are very few companies in the region that have three or more women directors), the analysis showed stronger results. The regression models showed higher coefficients than our earlier survey of at least one woman on boards; this indicates that three or more women on boards further improves the performance of the company. Similar results have been reported in companies beyond ASEAN. There is now clear financial proof that women directors contribute positively to the effectiveness of a company’s performance.
To date, many such studies around the world have resulted in a wave of reforms to include women on boards. Resistance to the status quo of all-male boards is natural but, happily, even that is changing in ASEAN, albeit rather more slowly than in, say, the Scandinavian countries such as Denmark, Finland and Sweden.
All this is positive but the most progressive move we have seen is that various GLCs (Government Linked Companies) are putting women from their senior management positions onto their unlisted company boards, in an effort to get these women “board ready” for their role as directors on the main public listed companies. This is a very proactive way of training individuals to be ready as directors on the main company’s board, as well as hopefully into the various C-suite positions.
What we would like to see, however, is more of a buy in from the Chairman and CEOs of the PLCs. They all seem to accept that women directors do add depth to board meetings and to a company’s performance, but that is as far as they will go for now. We also don’t see many companies list out what skill sets they are looking for, and if they are actually looking for women directors with that specific skill set to join and add value to their company board. We urge these companies to articulate clearly their criteria for women directors to the investing public.
Some argue the influx of women on corporate boards would displace older board members altogether. We do not agree on this. We strongly believe that strong personalities and having someone with the ‘corporate memory’ is extremely important and valuable for continuity. What we do suggest is that if people have been serving for a long time, they need to change their role from being independent to non-independent.
We maintain our view that this whole exercise of including women directors is about broadening the talent search for better board members and ultimately demanding better corporate performance. We would like to see more Chairpersons and CEOs speak out and support gender diversity on boards, as it is obvious that this is purely a business case; achieves better results and gets companies more competitive.
Shireen Muhiudeen is the Managing Director and Principal Fund Manager at Corston-Smith Asset Management in Kuala Lumpur