If Hong Kong companies plan to diversify their boards, they will need to restructure more than their recruitment processes, argues Rebecca Walker Chan, Project Manager, CSR Asia.

Exacerbated by uneven gender ratios and antiquated social norms, opportunities for women to participate, much less succeed, in business are still quite limited. In the 2017 WEF Global Gender Gap Report, of the 25 Asia Pacific nations surveyed, gender equity ratings of 13 nations fell and at an average rate of 8%. The gender diversity in some of Asia’s leading economies is the lowest compared to other parts of the world. It is 2018, and the glass ceiling (a phrase coined in 1978) seems as unbreakable as ever. Indeed, the economic gender gap has continued to widen and without concerted efforts from every business sector, the WEF estimates it will take 217 years before we see it close.

The gender gap

Gender parity is fundamental to whether and how societies thrive. There is an excellent, clear, values-based business case for promoting gender diversity: women are one-half of the world’s population and deserve equal access to health, education, economic participation, earning potential and political decision-making power. Ensuring the healthy development and appropriate use of half of the world’s total talent pool has a substantial impact on the growth, competitiveness and future-readiness of economies and businesses.

However, even by 2018, no country has closed their overall gender gap and the economic losses from disparity are easily quantifiable. For example, the East Asia and the Pacific regions reportedly lose between US$42 billion and US$47 billion annually due to the overall limited access to employment opportunities for women. Furthermore, a recent McKinsey Global Institute report shared that advancing women’s equality in Asia Pacific could add US$4.5 trillion to their collective annual GDP in 2025 (see Figure 1), a 12% increase over the business-as-usual trajectory.

If the numbers show that we can all benefit from more gender diversity in the workplace, why is it still such a foreign concept, especially in Asia? The gender balance of a company can offer an assortment of knowledge and skills, however research from organisations like management consulting firm Boston Consulting Group indicate that the career obstacles women face, such as being overlooked for promotions, tend to be institutional, with deep roots in the organisation’s culture. They also have found that reforming this culture and creating true gender parity requires participation by both men and women, particularly given that most senior leadership teams are predominantly male.
One relatively straightforward way to measure and demonstrate gender diversity is to look at gender balance within an organisation’s leadership. In fact, research shows that companies with a larger percentage of women in executive positions have a 34% higher total return to shareholders than those that do not. The more diversity of thought, perspectives, experiences and skills a board collectively possesses, the better it can oversee moves into riskier territory in an informed and useful way – and to assist management in making bold decisions that are likely to pay off.

These studies on female leadership show that, while there are increasingly more women on boards worldwide (28% in 2016, up from 18.3% in 2015), Asia is lagging behind (see Figure 2). Indeed, Singapore and Hong Kong’s progress pales in comparison with global counterparts such as the UK, where female representation on FTSE 100 Index boards has tripled since 2009 to 26.8%, and is now voluntarily targeting 33% by 2020.

Slow progress

Progress has been made by some leading Hong Kong–listed companies, notably CLP Holdings, HSBC Holdings, Link Real Estate Investment Trust and MTR Corporation, which all increased the number and percentage of female board directors over the last five years. However, there has been no significant increase in the overall proportion of board positions held by women since the Hong Kong Stock Exchange introduced its comply-or-explain rules on the disclosure of diversity policies. Why is that?

By looking more closely at those sitting on boards, the answer becomes apparent. In spring 2017, Deloitte conducted their own survey of 300 board members and C-suite executives at US companies with at least US$50 million in annual revenue and 1,000 employees. One notable finding was that most board recruitment practices have not kept pace with the desire and need for greater board diversity. They also highlighted that outdated recruitment practices and a ‘boys club approach’ has led to current members often seeking candidates who tend to be like themselves – men with upper management experience. This attitude, combined with low turnover on boards, not only hinders movement toward greater diversity, it can also lead to myopic views of operations and impaired ability to oversee innovative strategies and adjust to trending risks.

Indeed, despite knowing the positive effects of greater board diversity – companies with it are more likely to have strong financial performance and fewer instances of bribery, corruption, shareholder battles and fraud – some directors remain unconvinced about the overall value diversity brings to a company. Those uncertain directors are almost always men. In a 2017 article about corporate board diversity, Fortune shared that male directors have displayed more resistance to the corporate diversity push in general. In a survey by PwC, of the 27% of directors who said too much attention is given to gender diversity, 97% of those respondents were men. While these studies were conducted in the US, is it fair to assume that attitudes towards gender diversity among male board members are the same in Asia?

If Hong Kong companies plan to diversify their boards, they will need to restructure more than their recruitment processes. Bringing people with diverse skills, perspectives and experiences to the board – as well as women, and racial and ethnic minorities – requires more robust processes than those currently used by most boards (see ‘Best practice suggestions’).

Accelerating change

Leading asset owners and global advocacy groups, like the 30% Club, aim for women to comprise a minimum of 30% of board seats globally. In 2016, the 30% Club Hong Kong launched a campaign to increase the percentage of women directors on Hang Seng Index-listed company boards to 20% by 2020, working toward the long-term goal of 30%. However, at the current pace, this target will not be met globally until 2027, and likely years later in Hong Kong. By then, even more economic losses from gender disparity will have been felt by even more women, as they continue to face a glass ceiling that should have been shattered years ago.

Rebecca Walker Chan
Project Manager, CSR Asia
The author can be contacted at: rebecca.chan@csr-asia.com. Copyright: CSR Asia

SIDEBAR: Best practice suggestions

Some suggested actions to create a lasting change (from McKinsey, Blackrock and Deloitte) include those listed below.

  • When recruiting, consider not only individual member profiles but also assess the board as a team that works best when complementary characteristics and capabilities are in place or can be put in place.
  • As a woman often juggles four times the amount of unpaid work as her male counterparts, companies should take steps to help women by expanding family friendly working practices such as policies promoting parental leave and flexible working hours.
  • Articulate the benefits of diversity policies, stating why they were introduced and how they assist in building the longer-term value of the company.
  • Avoid relying on recruiters and cronyism, and instead look beyond resumes and check-the-box approaches to recruiting women that fully consider a candidate’s outlook, experience and fit.
  • Change attitudes and cultural biases toward women by using cutting-edge and innovative approaches. To start, select and equip both male and female champions to lead cultural change within the organisation to face conscious and unconscious discrimination in the workplace.
  • Embed gender diversity into operations from top to bottom, with clear managerial commitment to equality in the workplace.
  • Develop processes to back up that standard, the provision of flexible working conditions to ensure that employees can achieve work–life balance, and programmes that explicitly provide mentorship, skills building and networking for women.
  • Improve the transparency of diversity reporting and encourage disclosure of nomination processes that ensures diversity is reflected in any candidate list.
  • Redesign succession plans that create seats for those who are truly different, for example someone with no board experience but a strong cybersecurity background or someone who more closely mirrors the customer base.
  • Utilise a data-driven analytics tool that assesses management’s strategies, the board’s needs and desired director attributes to help define the optimal board composition.
  • When recruiting new board members, consider who best can determine that management is taking the right risks to innovate and win in the marketplace.