CPD
Persuasion can only go so far. Beyond that, a drive for change has to be fuelled instead by sterner stuff.
We will see this hardening of tactics in September, when it becomes compulsory for Bursa Malaysia’s largest companies (those with market capitalisation of RM2bn or more) to have at least one woman director. This new requirement will apply to the other listed companies starting from 1 June 2023.
With this move, the capital market regulators have signalled that they will no longer wait for the corporate sector as a whole to voluntarily support women’s empowerment and board gender diversity.
To the 30% Club Malaysia, this development is an acknowledgement of the business case for gender diversity, and that the journey towards the critical mass of 30% women directors needs to be quickened.
Malaysia ‘has undoubtedly been the most aggressive in pursuing board gender diversity’
ASEAN’s hurdles
According to the International Finance Corporation (IFC) in its 2019 Board Gender Diversity in ASEAN report, the region has unique structural and cultural factors that create additional hurdles for women aspiring to be business leaders.
For example, the report notes that ‘women are often expected to leave the workforce later in their careers to care for elderly family members’.
Cultural expectations and unconscious bias are also prominent region-specific inhibitors that could prevent female advancement at work, adds the IFC, part of the World Bank group.
The IFC points out that in the ASEAN countries, the selection of new directors can also be problematic because candidates tend to be identified through male-dominated networks, rather than through more formal search processes.
Another matter that affects board gender diversity is the fact that the region has a large number of family-run companies. Says the IFC, ‘In these companies, female board members tend to come from the families that own them, potentially discouraging other women from pursuing senior leadership opportunities.’
Better and stronger boards
‘The conversation about achieving at least 30% representation of women is about ensuring companies understand that diversity can lead to better and stronger boards that are more diligent in assessing the evolving risks continuously shaping the business environment,’ says Datuk Ami Moris, chair of 30% Club Malaysia and CEO of Maybank Investment Banking Group.
‘Gender diversity is naturally a focus, given that women are half of the population and they drive decisions on consumption and spending. Equally important are diversity in age, ethnicity, domain specialisation and educational backgrounds.’
Kasturi Nathan, head of board advisory services at KPMG in Malaysia, welcomes the ‘hard rule’ because it will compel listed issuers to take a close look at their board diversity and composition.
And when it is combined with the right tone at the top, she says, better gender diversity policies can be established and implemented at boardroom level and throughout the organisation.
Code impetus
At the moment, the impetus for more board seats for women comes mainly through the Malaysian Code on Corporate Governance, which encourages the adoption of best practices, including ensuring that boards comprise at least 30% women directors.
The government’s goal of 30% women participation on boards has been in place since 2011. Malaysia was then one of the few countries outside of Western Europe – and the first in the region – to set such a target.
In a 2019 report on board gender diversity in ASEAN, the International Finance Corporation says Malaysia ‘has undoubtedly been the most aggressive in pursuing board gender diversity’.
The top 100 listed companies were expected to lead the way and, when several of them still maintained all-male boards, they got the name-and-shame treatment.
Despite all this, the numbers have not been approaching 30% fast enough.
Plateau risk
Women occupied 7.5% of the board seats of all Malaysian listed companies in 2009. That figure stood at 17.7% in October last year.
‘Data shows that there is a risk of progress plateauing. Since 2019, the percentage of board positions held by women have hovered around 17% overall and 25% for the top 100 listed companies,’ says the Securities Commission (SC) in its Corporate Governance Monitor 2021.
The large proportion (27%) of listed companies that do not have any woman directors adds to the concern.
Another facet of the lack of board gender diversity is particularly relevant to accountants. According to the SC, as at last September, only 15.9% of audit committee members were women, despite them making up 54% of the Malaysian Institute of Accountants’ membership.
It is likely that some boards will comply with the minimum requirement of one woman director and do no more
Unintended consequences
The introduction of some teeth into the gender diversity agenda is understandable, but will there be unintended consequences?
Quotas are seldom universally backed. Critics worry that the increased official pressure to bring in more women directors will result in tokenism (appointments that tick boxes rather than take into account merit and expertise gaps) and the ‘golden skirts’ phenomenon (a relatively small pool of women with multiple board positions).
In addition, the new listing rule may shift focus away from the 30% target. It is likely that some boards will comply with the minimum requirement of one woman director and do no more. A single board seat for women is a low bar considering that, on average, a listed company in Malaysia has seven directors.
‘To reap the benefits of diversity, the representation needs to be meaningful with 30% as the pivotal point. We should not stop there when you consider that half of the working population are women,’ says Ami.
Kasturi notes that the emphasis should be on the benefits that women bring to the table. ‘It must be driven home that diversity is not about numbers,’ she says. ‘It might take effort to change mindsets, but listening to and including the viewpoints of a diverse board in a real way can bring new perspectives and ideas to help a listed company succeed.’
