More meaningful to get boards to set diversity goals, report progress

    By RAE WEE 

    The Business Times, 27 January 2021

    Singapore

    TO move the needle on board diversity in Singapore, companies could strive towards "self-declared targets" and report their progress against these goals. This could be more meaningful than the introduction of official requirements, said Shai Ganu, global practice leader for executive compensation at Willis Towers Watson (WTW).

    Speaking at a webinar on board diversity organised by the Singapore Institute of Directors (SID) on Tuesday, Mr Ganu said Singapore's companies are from from where they need to be in terms of board diversity.

    "We need something really fundamental, particularly on the gender diversity angle, to achieve the results that we as a society should aspire for."

    By asking companies to set targets, he said, change would be much more likely as "every time you make a commitment publicly, you will need to stick to that commitment".

    Based on a study conducted by WTW - covering 704 companies with primary listings on the Singapore Exchange as at June 30, 2019 - just 11 per cent of board seats were held by women. Additionally, 45 per cent of Singapore-listed companies do not have a female on the board.

    Mr Ganu's suggestion came in response to a question on whether Singapore should also consider implementing quotas on board composition of companies, as has been done in the United States and Germany.

    Last December, Nasdaq filed a proposal with the US Securities and Exchange Commission to adopt new listing rules related to board diversity and disclosure. Among other things, most Nasdaq-listed companies would need to have, or explain why they do not have, at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an under-represented minority or LGBTQ+.

    Meanwhile, Germany's cabinet earlier this month approved a draft law that would require German-listed companies with executive boards of more than three members to have at least one woman and one man on those boards.

    Luo Dan, an independent director at Yeo Hiap Seng who was also a panellist at Tuesday's webinar, said having a quota could be used as a "catalyst" to drive a change forward. After all, she said, the effort of local communities on board diversity issues "does not seem to move the needle".

    But others pointed out that introducing such quotas may also result in unintended consequences, such as tokenism.

    Michelle Cheo, chief executive and executive director of Mewah International, said she had been in conversations in which female directors were ridiculed for being able to rise up the ranks only due to the need for representation, and not because of their qualifications.

    She added: "In order for board diversity to work, the opinions and suggestions by each and every member of the board have to be taken in seriousness, and it cannot be tokenism."

    Both Mewah International and Yeo Hiap Seng topped the table for mid-cap companies in a newly launched Singapore Board Diversity Index last September. The index was developed by WTW in partnership with SID. The index ranks primary-listed companies on the SGX on the basis of how diverse their corporate boards are, and awards them points in eight areas out of a maximum of 40.

    At the same time, WTW's Mr Ganu noted that board diversity is not necessarily a determinant of good corporate governance or effective boards.

    "Board diversity brings different perspectives and experience to the board's deliberations, but good corporate governance is a continuous process and reflective of overall board proceedings," he said.

    Additionally, given the complexities of how diversity is measured, it would not be optimal to draw a conclusion based on any one particular finding or area presented by studies, said Nihal Kaviratne, lead independent director at StarHub. The telco ranked among the top 10 for large-cap companies in the Singapore Board Diversity Index.

    The study by WTW, for instance, was limited by information that was quantifiable and in the public domain, Mr Kaviratne said. But when it comes to selecting a board, other factors such as stewardship styles, values and beliefs are also considered.

    "Not everything... is quantifiable," he added. "The measures may not be physical, objective, or in the public domain. They may be expert and experienced judgements and assessments involving a series of reference checks and in-depth discussions with candidates.

    "It is complex, which is why boards have experienced and competent nomination committees to make the selection."