It is a truism that today's most successful companies have management teams that are younger, more diverse and globally-oriented. Indeed, it is that desire for diversity in boardrooms that, in my view, produces better decision-makers and stronger companies. In Asia, however, the situation is both complex and encouraging. Although the number of women on for-profit corporate boards varies widely in the region, the outlook for increased participation by women board members in many Asian countries is positive.Encouraging diversity
While the Scandinavian countries have set a high bar at 30 per cent (see chart) female participation on for-profit corporate boards, the UK and the United States still lag behind. Compared to them, many Asian countries look pretty good. In addition, 2013 regulatory initiatives in countries like Hong Kong and India (see below) will doubtless encourage increased board diversity.
Being a board member at a badly managed company is too risky for many highly qualified executives (male and female), but as corporate governance improves in Asia's emerging economies, companies should be able to attract more women to their boards.
Women's board participation in Asia ranges from 14 per cent in Australia to a paltry 1.1 per cent in Japan. Thailand has 9.7 per cent, Hong Kong 9.5 per cent and China 8.4 per cent.
Board participation by women is expected to improve in Asian countries where it is currently not as high, thanks to some recent regulatory requirements. For example, last year India's Parliament passed into law a new Companies Act mandating that certain classes of public companies have at least one woman on their boards. As a result, search firms there have been flooded by mandates from top companies to legally comply.
In Hong Kong all companies listed on the Hong Kong Stock Exchange are now required to respond to a new Code Provision about board diversity, providing a statement explaining their diversity policy in their annual reports. The country may allow a broad definition of 'diversity' ranging from gender to career experience, but nevertheless the provision at least forces boards to address their level of diversity to their shareholders.
At times the response to these initiatives is that the available pool of high-quality experienced women is simply insufficient, but non-profit organisations such as Women on Board in Australia and the Women's Foundation in Hong Kong are proving the naysayers wrong by identifying well-qualified women and raising their profiles to corporate board chairs and CEOs.
For example, The 30% Club, sponsored by the Women's Foundation, is striving to increase the representation of women on boards in Hong Kong to 30 per cent, and runs an ambitious program to promote women on boards. This includes building the pipeline of women qualified for board membership and spreading the word to board chairs and other influencers.
The 30% Club has also taken the initiative in disseminating a Voluntary Code of Conduct for Hong Kong executive search firms. This Code lays out steps for search firms to follow to promote diversity throughout the search process, from accepting a brief through to the final designation of successful non-executive directors. In the past, board chairmen often made the initial contact with a board candidate and recommended the candidate for an interview with the nominating committee. This meant that the board was comprised of friends of the chair. Ideally, companies should retain search firms to identify independent candidates and make recommendations directly to members of the nominating committee.
Cecilia Tsim, Managing Partner of Odgers Berndtson, Hong Kong who took a leadership role in drafting the Code, said: "Familiarity and comfort level often dictate the selection of non-executive directors, particularly with women NEDs, so the few known names often circulate to all of the boards. Using search firms enables the board to uncover hidden gems. There is certainly an adequate number of professionally accomplished women in the Hong Kong workforce to spread around the boards in multiple sectors without resorting to the 'usual suspects'."
Due diligence required
Still, no professional executive wants to be on the board of a badly behaving company. Lax corporate board governance in countries like Indonesia, Malaysia and China may make executive women there reluctant to seek board seats.
Take China, for example, where women's participation in business fares well compared to other emerging economies, but where disciplined governance is sometimes lacking. China's labour force participation is higher than that in the United States and the United Kingdom according to a recent study conducted by global consulting firm Booz & Co. It is socially acceptable and expected for women with small children to be in work, and 25 per cent of the country's entrepreneurs are female – in fact, half of the world's self-made female billionaires are in China.
Given this state of affairs, you might expect that women's board participation should be higher than Norway's. But executive women, particularly those with experience at Western multinationals, are not eager to join the boards of Chinese companies. Senior roles in state owned enterprises are effectively government posts. The Chinese Communist Party has only 25 per cent women and a quick look at the Central Politbureau Standing Committee of the Communist Party tells you everything you need to know about the success of women penetrating the upper reaches of Chinese politics. Holding a corporate managing director position is part of the career experience of a successful Chinese party bureaucrat. At state-owned enterprises important decisions are made by the CEO and party members on the board, with input from other board members often being pro-forma.
At privately-held companies, weak corporate governance may be a bigger risk. Being on the board of a company that is caught committing fraud is hardly an attractive proposition. Besides running financial risk from shareholder suits, board members could see their own reputations damaged.
Despite the pitfalls and cultural mores of countries across Asia many current initiatives and trends are helping women take their rightful place at the board table. Surely, that is a positive step forward.
Michael Drew, Partner & Head Technology & IT Services at Odgers Berndtson in London, talk...
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