Ayla Majid FCCA is managing director of Khalid Majid Rehman and a member of ACCA’s Council

Diversity is more than an ethical stance or a ‘social good’, although those factors alone should be sufficient reason for businesses to embrace it. Diversity in boardrooms has been shown to increase profit margins and lead to better governance and corporate responsibility. More women in the boardroom results in a wider range of ways to see and solve problems, re-energising discussions and decision-making at the very top of the company.

Women act and perform differently to men in leadership roles. According to the Women Leadership Foundation, women are more prone to speak their mind to power, to deploy facts and logic in discussion rather than observations and experiences, and to encourage the expression of different opinions. Women leaders are also adept at developing strategy, monitoring management and creating cohesiveness. In short, women are strengthening decision-making at the top.

Pressure to act

Governments around the world are promoting gender inclusivity in boardrooms through policy measures and company codes. Investors too are convinced by the benefits and want the companies they invest in to embrace them.

Regulatory and investor pressure for gender diversity on boards has persuaded Fortune 500 companies and major private sector organisations to move towards gender parity. In January 2020, for example, David Solomon, CEO of investment bank Goldman Sachs, announced that it would no longer undertake IPO work with companies that lack diversity in their boardrooms.

Women are more prone to speak their mind to power, and to deploy facts and logic in discussion rather than observations and experiences

As a result, those formerly all-male bastions have seen an influx of women. Deloitte’s 2018 Missing Pieces report, based on a study of nearly 7,000 companies across 60 countries, found that the proportion of all board seats held by women rose from 12% in 2015 to 15% in 2017. The figure subsequently rose to 16.7% in 2018, according to Corporate Women Directors International.

Mature economies have made substantial progress. In the UK, women made up 29% of UK FTSE 100 boards in 2018, up from 12.5% in 2010. In 2018, the US state of California passed a law fining all public companies headquartered in the state US$100,000 if their boards were composed solely of male directors.

MENA and South Asia

Across the Middle East, North Africa (MENA) and South Asia regions, progress is undeniably slower – women now fill between just 2% and 4% of overall board seats across MENA – but nevertheless real.

According to the Securities and Exchange Commission of Pakistan, almost 58% of listed companies in the country had women on their boards in 2020, up from 30% in 2015 – a trend driven by corporate governance regulations – although the number with just a single woman remains stubbornly unchanged. There is a structural problem at work here too: female labour force participation, at 22%, is particularly low, which in turn leads to a network gap. Both these factors make it harder to find suitable women candidates for board roles. 

Likewise in Egypt, the Financial Regulatory Authority now requires all boards of listed companies to have a woman member, and the country’s national strategy has set the goal of having women in 30% of leadership positions by 2030. According to the American University of Cairo’s 2019 monitoring report, 10% of Egyptian listed companies have women on their boards.

The challenge of achieving gender diversity on boards and senior management teams in MENA has been taken up by organisations such as the Hawkamah Institute of Corporate Governance, which is promoting a stronger corporate governance environment across the region. Hawkamah’s women leadership programmes, training courses, advocacy and profile raising are all encouraging diversity. Its CEO, Ashraf Gamal El Din, says: ‘Supporting regulations and policies will absolutely bring more women in governance roles and are very important.’

Meanwhile, similar initiatives are taking off in neighbouring countries in the Middle East. The Jordan Institute of Directors (JIoD) has partnered with Amam Ventures (a women-led venture capital firm) to support the next generation of female board members through the Get On Board programme.

In Bahrain, the platform Diversity on Board is focusing on two key challenges – the network gap and lack of board preparedness among potential women candidates. Its founder, Leena Al Olaimy, says: ‘Often when a recommendation for a board director is asked for, most men would recommend a man because of who comes to mind. We need to close the network gap by widening the pool of suitably qualified women.’

Lebanon, meanwhile, ranks higher in terms of women’s representation in the workforce, but they are kept out of the board room by regulatory barriers. Directors on Lebanese boards are required to have a stake in the company, which means there are no independent directors, a situation that largely blocks women from access. Organisations such as Excellence in Governance – Lebanon (EIG-L) and the Lebanese League for Women in Business (LLWB), in partnership with the International Finance Corporation, are building Lebanon’s female leadership pipeline through a training programme known as Women on Boards and in Business Leadership. 

The world is changing

It is important for boards to broaden their composition to tackle the steep increase in risk generated by rapid technological disruption and the changing demographics of customers, markets and workforce.

The shift away from conventional appointments to board directorships to one of greater board equity will demand dynamic individuals who are experienced, responsible and collaborative. It will also require a more agile environment where challenging issues can be confronted and opposing opinions encouraged.

Women are found in abundance in leadership roles in academia, government and non-profit organisations, where an empowering environment has cultivated a pool of talented and skilled individuals in leadership roles who can be considered for future board positions. The same needs to be true in business too.

More information

Find additional materials from ACCA on the theme of diversity and inclusion, including the current webinar series, on ACCA’s D&I web page