To diversify boards, avoid ‘cookie-cutter’ approach to hiring, says SGX RegCo CEO
By NAVENE ELANGOVAN
The Business Times, 14 November 2023
IN DIVERSIFYING their boards, companies should not adopt a “cookie-cutter approach” to hiring candidates, but look for candidates that meet their unique needs.
And while new entrants with diverse views can “upend established group dynamics”, the board will have to integrate them while consciously encouraging healthy board dynamics, said Tan Boon Gin, the chief executive officer of Singapore Exchange Regulation (SGX RegCo).
Tan was speaking at the Singapore Institute of Directors’ (SID) Nominating and Remuneration Committees Chapter webinar on Tuesday (Nov 14), where he addressed the issue of board diversity and renewal.
Besides finding the appropriate candidates and integrating them into the board, another challenge is also finding ways to measure companies’ progress in achieving board diversity, he noted.
To this end, a report on board diversity disclosures will be launched by the Council for Board Diversity later this week, which will allow SGX RegCo to identify companies that are lagging behind in board diversity and explore ways to improve overall and individual company performance, he added. “I think it will be useful reading, and a helpful guide, and I commend it to your attention.”
Tan, who is also a member of SID’s governing council, said that SID can help companies find appropriate candidates for their boards through its board match and board listing search tools.
SID’s Listed Entity Director programme for first-time directors also has a module on board dynamics to help new entrants integrate with other board members, pointed out Tan.
In his speech, he said that diversity in boards is valued, but “not for its own sake”. He added: “We want diversity to enhance good decision-making by the boards through the inclusion of additional perspectives that might not otherwise have been considered.”
He explained that SGX RegCo has introduced rules to encourage greater diversity in board membership. This includes rules introduced last year to mandate the disclosure of board diversity plans and targets, as well as the hard-coding of the nine-year tenure limit on independent directors introduced earlier this year.
“Both sets of rules are designed to work in tandem to encourage companies to renew and refresh their boards to ensure that they have the necessary skills, talents, experience and diversity,” said Tan.
Besides regulatory action, he noted that there were several other catalysts for greater diversity, including shareholder preference.
Tan said that a more diverse board tends to attract higher levels of shareholder support. He pointed out that SGX RegCo’s three most recently appointed board directors come from “fairly uncommon backgrounds”. For example, one is a lawyer who has experience with startups, and another is a venture capital investor who used to work in private equity. The third appointed board director is a former politician.
All three received the highest positive votes of any director put up for re-election at SGX RegCo’s most recent annual general meeting, supporting the view that shareholders want more diverse candidates, said Tan.
Structural necessity also requires boards to be more diverse, he added. Noting that the world has changed, Tan said that there needs to be “more of the different” to navigate a new global environment.
Those of the same background can come with their own limitations and biases that affect their understanding of the world as well as their decisions. Greater board diversity can provide alternative perspectives that “check (our) thinking”, he said. “Having said that, I do acknowledge that the process of achieving greater diversity won’t be straightforward.”
Tan said that with regulatory reforms, he wanted to see real change and renewal across the directorship landscape. “We don’t want to see a game of musical chairs that won’t help the companies in their decision-making, won’t benefit the shareholders in delivering value, and won’t uplift the quality of our market.”