Board Gender Diversity in ASEAN IN PARTNERSHIP WITH WRITTEN BY About IFC IFC—a sister organization of the World Bank and member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work with more than 2,000 businesses worldwide, using our capital, expertise, and influence to create markets and opportunities in the toughest areas of the world. In fiscal year 2018, we delivered more than $23 billion in long-term financing for developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity. For more information, visit www.ifc.org. © International Finance Corporation 2019. All rights reserved. 2121 Pennsylvania Avenue, N.W. Washington, D.C. 20433 www.ifc.org The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. 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The findings, interpretations, views, and conclusions expressed herein are those of the authors and do not necessarily reflect the views of the Executive Directors of International Finance Corporation or of the International Bank for Reconstruction and Development (the World Bank) or the governments they represent. 2 | BOARD GENDER DIVERSITY Board Gender Diversity in ASEAN Table of Contents List of Abbreviations and Acronyms............................................................................... 5 Foreword......................................................................................................................... 6 Acknowledgements......................................................................................................... 7 Executive summary......................................................................................................... 9 Key findings............................................................................................................................................................. 9 The business case for board gender diversity................................................................12 Why is board gender diversity so important?............................................................................................. 12 How can firms ensure that diversity drives performance?.................................................................... 13 Chapter 1: Board gender diversity in ASEAN..................................................................14 1.1 Current state of play in ASEAN ................................................................................................................. 14 Chapter 2:Drivers of board gender diversity in ASEAN .................................................21 2.1 Country-level factors that drive board gender diversity.................................................................. 21 2.2 Company-level factors that drive board gender diversity.............................................................. 26 Chapter 3: Impact of board gender diversity on company performance......................33 3.1 Impact on company financial performance..........................................................................................33 3.2 The link between board gender diversity and financial performance........................................ 38 Chapter 4: Obstacles to advancing board gender diversity ......................................... 43 4.1 Country-level obstacles preventing women from rising to senior positions.......................... 43 4.2 Company-level obstacles preventing women from rising to senior positions....................... 48 Chapter 5: Opportunities for advancing board gender diversity..................................51 5.1 Country-level opportunities for advancing board gender diversity............................................. 51 5.2 Company-level opportunities for advancing board gender diversity......................................... 56 5.3 The way forward: diversity breeds diversity........................................................................................ 63 Appendix 1: Snapshot of country metrics..................................................................... 66 Appendix 2: Detailed methodology for statistical analysis ......................................... 70 4 | BOARD GENDER DIVERSITY LIST OF ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank SG Singapore APEC Asia-Pacific Economic Cooperation SGX Singapore Exchange ASEAN Association of Southeast Asian Nations SSE Sustainable Stock Exchange CEO Chief Executive Officer SSGA State Street Global Advisors CFO Chief Financial Officer STEM Science, Technology, Engineering and Maths CSR Corporate Social Responsibility TH Thailand DAC Diversity Action Committee TR Thomson Reuters DWN DuPont Women’s Network UN United Nations EIU Economist Intelligence Unit UNESCO United Nations Educational, Scientific and ESG Environmental, Social and Governance Cultural Organization EU European Union US United States GES Global Economic Symposium VN Vietnam HOSE Ho Chi Minh VIOD Vietnam Institute of Directors Stock Exchange VWEC Vietnam Women Entrepreneurs Council WCD Women Corporate Directors ICDM Institute of Corporate Directors of Malaysia WEF World Economic Forum IFC International Finance Corporation ILO International Labour Organization IMF International Monetary Fund IN Indonesia MY Malaysia NAWEM National Association for Women Entrepreneurs of Malaysia NUS National University of Singapore OLS Ordinary Least Squares OECD Organisation for Economic Co-operation and Development PH Philippines R&D Research and Development ROA Return on Assets ROE Return on Equity SCWO Singapore Council of Women’s Organisations SDGs Sustainable Development Goals SEC Philippine Securities and Exchange Commission SET Stock Exchange of Thailand BOARD GENDER DIVERSITY | 5 Foreword Collectively, the nations that constitute the Association of also notes that the percentage of women on boards in the Southeast Asian Nations (ASEAN) represent a remarkable region remains low. economic success story. Many have transitioned from a legacy of poverty and conflict into powerful engines of This disparity highlights that substantive change inside growth, with rising foreign investment, stable job markets, Southeast Asia’s boardrooms can be difficult to achieve, increased domestic spending and a growing middle class. given gender stereotypes and a male-dominated culture. This report also offers concrete recommendations on ways to And yet, these nations are facing some headwinds. Some accelerate the pace of change, including the shifts in mindset challenges, such as trade volatilities and slowing growth, and attitude required to truly transform this dynamic. may capture headlines. Others, such as a lack of female presence in the boardrooms of Southeast Asian nations and IFC’s support for this research—part of a global series of throughout the senior leadership pipeline, deserve more studies on the positive effects of increased gender diversity in attention than they receive. In fact, a recent report from business leadership—is aligned with its overarching mission the International Labour Organization warns that business of driving private sector-led development to create markets growth in Asia could become severely curtailed if companies and opportunities. It is our hope that by tapping into the do not recruit and promote more women. vast potential offered by women in business, Southeast Asian companies can become stronger, more sustainable Indeed, a growing body of global evidence points to the and more attractive to investors. In turn, they will remain business benefits of greater female representation on boards powerful drivers of inclusive economic growth, helping to and in senior management. They include stronger financial continue the positive trajectory in a region that has seen performance, better corporate governance, improved millions lifted out of poverty in recent decades. disclosure and transparency, enhanced employee and community relationships, and more robust environmental reporting, among others. Vivek Pathak IFC Regional Director, East Asia and the Pacific This new report from The Economist Intelligence Unit and IFC, Board Gender Diversity in ASEAN, underscores the importance of paying more attention to the gender gap in Southeast Asia’s executive cadre and boardroom. It is a comprehensive analysis of more than 1,000 companies in six ASEAN countries plus China, exploring the impact on business performance when women have a place at the boardroom table. The report establishes a clear connection between firms with more women on their boards and better financial performance. Despite the strong business case, it 6 | BOARD GENDER DIVERSITY Acknowledgements Board Gender Diversity in ASEAN is an Economist Intelligence • Tran Anh Dao, deputy chief executive officer, Ho Chi Minh Unit (EIU) report, commissioned by International Finance Stock Exchange (HOSE), Vietnam Corporation (IFC). The findings are based on an extensive • Helen De Guzman, chair, Board Diversity and Inclusion review of the literature, company-level data analysis and Committee, Institute of Corporate Directors, Philippines interviews with leading experts in the region. The EIU • Richard Eardley, managing director, Hays, Asia bears sole responsibility for the content of this report, and • Ben Ewbank, director, Michael Page, Indonesia the findings and views expressed herein do not necessarily • Charlene Ge, vice president human resources, climate, reflect the views of IFC. The report was produced by a team control and security, Asia, United Technologies, China of researchers, economists and writers, and managed by the • Pauline Ho, assurance and people partner, PwC Malaysia; following team members: Steering Committee member, 30% Club, Malaysia Chapter • Maan Hontiveros, chair, AirAsia, Philippines EIU project team • Ada Ingawanij, former executive vice president, Thai Trisha Suresh, Project director Institute of Directors Shreya Mukarji, Project manager • Ricardo Nicanor N Jacinto, former chief executive officer Devika Saini, Economist of ICD Conor Griffin, Adviser • Marcella Lucas, chief executive officer, LeadWomen, Rodrigo Aguilera, Author Malaysia, & steering committee member, 30% Club, Ankita Banerjea, Researcher Malaysia • Harry O’Neill, partner, chief executive officer and Board IFC project team Practice, Heidrick & Struggles J. Chris Razook, East Asia and the Pacific • Tom Osborne, managing director, Hays Malaysia Corporate Governance Lead • Helen Roberts, senior lecturer, University of Otago, New Amy Luinstra, East Asia and the Pacific Gender Lead Zealand Leyal Savas, East Asia and the Pacific Corporate Governance • Mildred Tan, chair, Diversity Task Force Regarding Women Program Manager on Boards; managing director, Ernst & Young Advisory Yehia El Husseiny, Corporate Governance Officer Private Limited Loty Salazar, Corporate Governance Officer • Bui Thanh Ha, strategy and new products specialist, Hanoi Keirsten Pedersen, Corporate Governance Consultant Stock Exchange, Vietnam Alexandre Di Miceli Da Silveira, Corporate Governance • Ida Tiongson, president, Opal Portfolio Investments (Spv- Consultant Amc) Inc., and trustee, Institute of Corporate Directors, Philippines We would like to thank the following experts (listed • Nguyen Viet Thinh, chief executive officer, Vietnam alphabetically by surname) for contributing their time Institute of Directors and insights: • Grace Xiao, global head of Public Private Partnerships, • Anne Abraham, founder and chair, LeadWomen Malaysia, UCB Trading (Shanghai) Co., Ltd. and Executive Co-Founder, 30% Club Malaysia • Caroline Yang, women’s network leader, DuPont, China • Christopher Bennett, director, BPA Australasia Private Limited, Malaysia BOARD GENDER DIVERSITY | 7 • Helen Yang, managing director, Electronics & Imaging, Customer Service, DuPont (China) • Alicia Yi, managing director, Asia-Pacific Consumer Market, Korn Ferry International • Mak Yuen Teen, associate professor, National University of Singapore (NUS), Singapore For any enquiries about this report, please contact: Trisha Suresh Leyal Savas Senior Consultant, Public Policy East Asia and the Pacific Corporate Governance Program Manager The Economist Intelligence Unit International Finance Corporation E: trishasuresh@economist.com E: lsavas@ifc.org T: +65 6428 2655 T: +1 (202) 631-7053 8 | BOARD GENDER DIVERSITY Executive summary While gender gaps in labor market participation and • In other senior management positions, we found that educational attainment have narrowed, women around the listed companies in ASEAN have a better track record for world still encounter a glass ceiling when trying to reach the gender diversity. Women hold approximately 32.8 percent company boardroom, where female representation remains of senior management positions in the Philippines—the low. Policy-makers, business leaders, institutional investors highest in the region. In Thailand, women account for and women’s business organizations are increasingly paying almost 29.7 percent of senior management positions. attention to this issue and are working to improve board Indonesia has the highest proportion of female board chairs gender diversity. However, progress has been slower than (11.7 percent), followed by Vietnam (7.8 percent) and Thailand desired. Although women in some countries in Western (7.6 percent). Our findings highlight a mismatch between Europe now account for 30–40 percent of board membership women’s representation in senior management and in the in some of the largest listed firms, these percentages are far boardroom, suggesting that an additional set of barriers lower in many other regions, including Southeast Asia. exist in the region for women seeking boardroom positions. Our study advances the case that having women in business Drivers of board gender diversity in ASEAN leadership positions is good for company performance, confirmed through an analysis of more than 1,000 companies • We found that board gender diversity is influenced by in six countries belonging to the Association of Southeast company-specific factors, such as industry and owner- Asian Nations (ASEAN): Indonesia, Malaysia, the Philippines, ship structure. Numerous other drivers can also push Singapore, Thailand and Vietnam. We also included one companies towards a more gender-diverse agenda, such regional non-ASEAN member, China, to provide a point of as the presence of activist stakeholders, foreign investors comparison. In addition to identifying statistical linkages disseminating global best practices, and a diverse client that support the assertion that board gender diversity base. Although most of these drivers are less common in has a positive impact on company financial performance, ASEAN than in Western Europe, there is evidence that they we conducted a thorough literature review and extensive will gradually grow in importance as companies in the interview program with regional business leaders to region become more global. understand how board gender diversity influences company behavior. Our study found that the business case for board Impact of board gender diversity in ASEAN gender diversity is strong and relates not just to performance, but also to corporate governance, reputation and fairness. • In our analysis of the six ASEAN countries, we found that companies with more than 30 percent female board KEY FINDINGS membership were associated with greater company financial performance, compared to companies with no State of play in ASEAN women on their boards and companies where women accounted for less than 30 percent of board membership. • According to our analysis, Thailand is the most gender- In companies with no women board members, the average diverse country in the ASEAN region, with women holding Return on Assets (ROA) was 2.4 percent. In companies 20.4 percent of board seats in listed companies, followed where women accounted for more than 30 percent of by Vietnam (15.4 percent) and Indonesia (14.9 percent). board membership, the average ROA was 3.8 percent. BOARD GENDER DIVERSITY | 9 • Through our statistical modelling, we found that if a • Women in the ASEAN region are also adversely affected company’s board diversity increases from zero (an all- by cultural stereotypes about female attributes. Female male board) to at least one woman on the board, its workers in the region are often seen as having more ROA is likely to increase by 1.4 percent, keeping all other empathetic maternal qualities, deemed less suitable for factors constant. If diversity increases to more than 30 top executive positions than the aggressive, confident percent female board membership, the ROA is likely to leadership styles more often associated with men. This increase by 1.2 percent. is exacerbated by the existence of male-dominated “old- boys’ networks”, which tend to be in charge of board • Our findings support the argument that companies appointment processes. Moving towards more formal with a higher proportion of women on their board are selection mechanisms for board membership and offering generally associated with greater financial performance. aspiring female candidates greater visibility (through cross-company networks, or country-wide directories of Challenges, opportunities and existing female board members) can help to address this recommendations for greater board gender problem. diversity in ASEAN • The importance of leadership commitment and top- • Among our interviewees, changing corporate governance down change cannot be over-emphasized. Companies codes to promote board gender diversity was seen as that are committed to board gender diversity must imposing less of a burden on companies than measures communicate their intentions from the top of the such as quotas (which have been implemented in organization, supported by a clear and transparent action numerous Western European countries). Some ASEAN plan. There should also be a clear focus on establishing countries have already started to change their corporate programs and talent pipelines that identify, nurture and governance codes, including the Philippines and promote female talent, and on recruiting female leaders Singapore, both of which have added gender diversity to act as mentors and role models for a new generation language. Stock exchanges can also lead the way by of women. promoting gender diversity measures and targets among listed companies. • Finally, advocacy organizations have an important role to play, as do institutional investors that recognize the • Advancing board gender diversity also requires policies need for board gender diversity. International groups like that ensure women have opportunities to rise to senior the 30% Club and Women Corporate Directors (WCD) leadership roles. Both the regional literature and our already have a presence in the region and are actively expert interviewees highlighted the importance of promoting greater female representation on boards, and retaining women in the workforce, particularly later in in business leadership positions in general. However, their careers, when many women in the ASEAN region local women’s business organizations must also play a leave for family reasons (for example, to help children leading role, both by facilitating the placement of women prepare for major examinations, or to take care of on boards, and by working alongside governments to elderly relatives). This tends to depress women’s career help design and implement the necessary strategies to progression when they return to the workforce. Offering promote gender diversity in their national contexts. employees flexible work arrangements would be a welcome step forward, as well as establishing legislation Ultimately, much more needs to be done to reach a level to expand parental leave to include men. of board gender diversity that is commensurate with 10 | BOARD GENDER DIVERSITY women’s role in society and in the workplace in the ASEAN performance and behavior, a critical mass of women must be region. However, we found evidence at both the country in business leadership positions. This has yet to be achieved, and company levels that ASEAN countries have the which means that the biggest benefits of board gender potential to make important strides towards achieving diversity are yet to be seen. board gender diversity in the coming years, by addressing both the universal barriers that affect women around the As long as policy-makers, business leaders and societies in world and the unique cultural and structural barriers at play general recognize the importance of gender diversity across in the region. the workforce, and commit to taking action to improve it, the region’s progress to date can provide the necessary There is compelling evidence that in order for board momentum to break the glass ceiling for women on boards gender diversity to have a significant impact on company in the future. BOARD GENDER DIVERSITY | 11 The business case for board gender diversity WHY IS BOARD GENDER DIVERSITY SO Our study emphasizes that firm performance is not the IMPORTANT? only reason why governments and business leaders should embrace diversity. First, the social case for diversity is This study advances the case that board gender diversity strong enough in itself: businesses in the ASEAN region is good for company performance in the ASEAN region. have increasingly diverse workforces, where women play Making this case is essential for firms to embrace board crucial roles in almost all operational aspects, from the gender diversity as both a viable and a necessary strategy shop floor to senior management. There is no reason why for success, rather than simply a morally desirable company boards should not reflect this diversity. Second, objective. After all, change is not easy; embracing senior female leaders have similar academic qualifications board gender diversity requires a fundamental shift in to their male counterparts, which suggests that there is no corporate cultural paradigms and additional effort to find shortage of talent. talent outside of established networks. However, the rewards of board gender diversity will more than make up Finally, increasing women’s presence on company boards for this extra work. widens the talent pool from which they can draw, driving 12 | BOARD GENDER DIVERSITY operational excellence, and bringing unique insights and removing these barriers. One particular challenge is the risk fresh perspectives, which enable stronger decision-making. of tokenism—appointing women in order to fulfil a quota, For example, women may bring different leadership appease investors or make the firm appear more progressive traits, introducing a more varied and comprehensive and diverse. Firms can mitigate this risk by appointing set of competencies to the boardroom. It has also been women based on skill and merit, and by ensuring that suggested that women can (in general) be more flexible in women’s contributions are not played down or dismissed. their views, more open to different ways of thinking and Critical mass theory also suggests that the risk of tokenism less command-oriented than men, facilitating more open diminishes once women account for a certain proportion of discussion between board members, reducing groupthink board seats (in general, 30 percent). and improving relations between board members and employees. Evidence also shows that women are interested The potential for gender bias among local investors also in engaging with environmental, social and governance poses a challenge in countries where cultural norms call (ESG) issues, which are vital for enhancing a firm’s reputation women’s leadership abilities into question. The presence and impact. of international investors can help to alleviate this bias, as they are likely to view improvements in board gender HOW CAN FIRMS ENSURE THAT diversity as a positive development. Finally, there is a DIVERSITY DRIVES PERFORMANCE? risk that boards will not take full advantage of the skills and perspectives of female members. Women need to be While our analyses provide compelling evidence that board given genuine opportunities to contribute in order for gender diversity can improve company performance, board gender diversity to improve performance—for numerous barriers may prevent diversity from automatically example, appointing them to key committees and translating into better bottom lines for businesses. Firms can including them in strategic planning and decision-making ensure that diversity drives performance by identifying and processes. BOARD GENDER DIVERSITY | 13 Chapter 1 Board gender diversity in ASEAN Board gender diversity has improved across all regions over the last two decades. In the early 2000s, there were only a handful of countries in Western Europe where women held more than 10 percent of board seats. Today, many countries exceed the double-digit threshold. There is also increasing awareness among businesses, governments, institutional investors and the public about the need to build more inclusive workplaces in general, all the way up to the highest echelons of management and directorships. Diversity can provide benefits to firms and raises both the quantity and quality of female leadership. This study focuses on six countries in the ASEAN region: Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. The study also includes one regional non-ASEAN member, China, to provide a point of comparison. Most of these countries have made important strides towards achieving greater gender diversity in the boardroom. However, there is room for improvement. In many countries, for example, a large number of companies still have all-male boards. There is also a mismatch between boardroom representation and the number of women in senior management positions, revealing a further glass ceiling that needs to be overcome—even for women at the highest levels. In this chapter, we explore the scale of board gender diversity in the ASEAN region. 1.1 CURRENT STATE OF PLAY IN ASEAN regulators have taken proactive measures to ensure that businesses open their boardrooms to more women—for Companies across the world are facing scrutiny with respect example, by imposing disclosure requirements on listed to who is sitting in their boardrooms. There is also increasing firms, or by setting quotas. pressure from shareholders and other stakeholders to ensure sustainable business growth, which requires ASEAN is currently one of the most dynamic regions in the diversity of thought and experience at the highest levels of world. Women’s economic participation in the region has company management. Since the first comparative studies increased, evidenced by the fact that more and more women were conducted in the last decade, most regions have are graduating from university and entering the workforce. made important advances towards board gender diversity. However, leadership at the apex of companies still lacks However, despite this progress, women’s representation on gender diversity. Across the six ASEAN countries included in boards still falls well below their overall participation in the our study, we noted considerable variations in board gender workforce and higher education, and in some cases below diversity. According to our analysis, Thailand is the most their share of management positions. In many countries, gender diverse, with women holding 20.4 percent of board cultural norms have frustrated efforts to achieve higher seats in listed companies, followed by Vietnam (15.4 percent) levels of gender diversity. In others, governments and and Indonesia (14.9 percent). 14 | BOARD GENDER DIVERSITY Women in business leadership positions across ASEAN and China, 2017 (% of women in positions) ASEAN INDONESIA MALAYSIA PHILIPPINES SINGAPORE THAILAND VIETNAM CHINA AVERAGE Board membership* 14.9 14.9 13.5 13.2 11.9 20.4 15.4 12.7 Board roles Board chair 7.1 11.7 6.1 3.9 5.2 7.6 7.8 4.4 Executive director 13.8 -*** 14.0 12.4 11.8 19.7 11.1 9.7 Non-executive director 14.3 -*** 10.4 14.7 11.1 19.7 15.5 11.5 Independent director** 13.4 14.6 13.9 8.9 11.3 18.1 -*** 14.6 Audit committee 14.6 19.0 11.2 13.1 9.9 19.8 -*** 18.7 Other leadership roles Senior management 25.2 18.4 26.2 32.8 27.2 29.7 16.8 13.5 Source: Economist Intelligence Unit analysis. *Board of directors for all countries except Indonesia; board of commissioners for Indonesia **Independent commissioner for Indonesia ***Data gaps due to unavailability of raw data In other senior management positions, we found that listed the highest proportion of female board chairs (11.7 percent), companies in ASEAN have a better track record for gender followed by Vietnam (7.8 percent) and Thailand (7.6 percent). diversity. In the Philippines, women hold 32.8 percent of Our findings highlight a mismatch between women’s senior management positions—the highest in the region. representation in senior management and in the boardroom In Thailand, women account for 29.7 percent of senior (as depicted in the figure below), which suggests that an management positions, while in Singapore women hold additional set of barriers exist in the region for women 27.2 percent of senior management positions. Indonesia has seeking boardroom positions. Proportion of females in board, board chair and senior management positions, 2017 (%) Board of director Board chair Senior management 40 32.8 29.7 30 25.2 26.2 27.2 20.4 30 18.4 14.9 14.9 15.4 16.8 13.5 13.2 11.9 12.7 13.5 11.7 10 7.1 7.6 7.8 6.1 3.9 5.2 4.4 0 ASEAN Indonesia Malaysia Philippines Singapore Thailand Vietnam China average Source: Economist Intelligence Unit analysis. BOARD GENDER DIVERSITY | 15 At the regional ASEAN level, we found that on average, 39 percent of companies had more than 30 percent female board percent of companies had no female board members, 61 membership, and 42 percent had no women on their board. percent of companies had at least one female board member The figures for China were on par with the ASEAN average, and only 16 percent of companies had more than 30 percent especially the percentages of companies with no women on female board membership. In Thailand, the country that the board (39 percent for ASEAN, compared to 40 percent for topped our study, the vast majority (88 percent) of companies China) and companies with at least one woman on the board had at least one woman on their board. In Singapore, only 6 (61 percent for ASEAN, compared to 60 percent for China). Extent of board gender diversity across companies, 2017 (% of companies) ASEAN INDONESIA MALAYSIA PHILIPPINES SINGAPORE THAILAND VIETNAM CHINA AVERAGE If a company board includes no 39 60 37 36 42 12 47 40 women If a company board includes at least 61 40 63 64 58 88 53 60 one woman If more than 30 percent of company 16 31 11 9 6 21 18 11 board members are women Source: Economist Intelligence Unit analysis. The global state of play Western Europe remains the world leader in board from 12 percent in 2010 to 37 percent by 2016 in France, gender diversity, with women holding more than 20 and from 5 percent to 30 percent in Italy. Over the percent of board seats in many countries, and same period, the share of board seats held by women significantly more in countries such as Norway (42 in Germany increased from 13 percent to 27 percent, percent), France (40.0 percent) and Sweden (31.7 according to the OECD.2 These results stand in stark percent).1 This progress reflects a more hands-on contrast to the United States, where women hold 14.2 approach by governments, as well as favorable percent of board seats. Despite being an early cultural attitudes towards diversity across society, champion of gender equality in the boardroom, a lack the media, and agents that influence businesses, of proactive policies has resulted in the country falling such as institutional investors. behind its European peers in recent years, with studies showing either minimal growth or even a decline in The proportion of board seats held by women nearly female board representation. doubled between 2010 and 2016 among countries in the Organisation for Economic Co-operation and Progress has been slower in terms of increasing the Development (OECD). The biggest gains were number of boards with a female chair. In Western observed in a small number of Western European Europe, barely 4.4 percent of boards have a female countries that have adopted policies to promote chair, according to a 2017 study3—lower than in Africa, inclusion. By far the most proactive policy involves the Australia, New Zealand and the Middle East. In France, use of government-imposed gender quotas, first for example, just 2.7 percent of companies had female introduced by Norway in 2003. Since France and Italy chairs, despite women holding 40 percent of board established quotas in 2011, the share of board seats seats in companies listed on the SBF 120 (the main held by women in these countries has skyrocketed, stock market index). 16 | BOARD GENDER DIVERSITY No consistent trend in terms of the types of suggested that the positive impact of female board members directorships held may be most strongly felt in these positions, especially as many female non-executive directors are members of the Company boards include a mixture of executive directors, controlling family in family-owned firms.5 non-executive directors and independent directors Executive directors4 are members of a company board who also have In our analysis of gender diversity in listed ASEAN companies, management responsibilities. Non-executive directors are we found a modestly higher proportion of female non- members of the board, but are not involved in the day- executive directors, compared to female executive directors, to-day operations of a company and are not considered in the majority of the countries studied. Only Malaysia and independent (usually due to ties with controlling or other Singapore bucked the trend, while Thailand had similar relevant shareholders). Independent directors are board shares of both, as highlighted in the figure on the next page. members who have no material interests in the firm (unlike At the ASEAN level overall, the figures for executive and shareholders, former executives or directors, customers, non-executive directors were almost on par. This is an and so on). In most Western countries, having a large important difference between ASEAN and Western countries, number of independent directors is considered best practice. where the proportion of female non-executive directors is Independent directors help to promote good governance noticeably higher.6 The preponderance of family-run firms by strengthening the supervision of company executives; in ASEAN, where women are more likely to hold executive strategic direction, planning and budgeting; and compliance directorships, is the most plausible explanation for this with legal and regulatory requirements. It has been difference. BOARD GENDER DIVERSITY | 17 Proportion of females in executive, non-executive director and independent director positions, 2017 (%) Executive director Non-executive director Independent director 20 19.19 19.718.1 15.5 15 13.014.313.4 14.6 14 13.9 14.7 14.6 10.4 12.4 11.8 11.11 11.13 11.1 11.5 10 8.9 9.7 5 7.1 6.1 0 ASEAN Indonesia Malaysia Philippines Singapore Thailand Vietnam China average *There is no data available on executive/non-executive director positions in Indonesia. There is also a lack of data on independent director positions in Vietnam. Source: Economist Intelligence Unit analysis. Existing literature—such as Adams and Ferreira’s 2009 According to a 2016 survey by global executive recruitment study on board gender diversity—also suggests that women firm Egon Zehnder,10 the average age of female board may be more likely than men to sit on committees with members in Asian countries was 57.6 years, compared with 61 monitoring responsibilities, such as audit, nominating and years for their male counterparts. The age difference between governing committees; and less likely to sit on risk and male and female board members in Asia, which averaged 3.4 compensation committees. Given that women are typically 7 years, was also among the narrowest in the world. Malaysia appointed to a board by existing male board members, this was particularly notable in this regard, with an age difference may reflect a belief that women are more risk-averse than of just 0.6 years. The age difference globally was 3.4 years, men. This may be partly true , but should not be the sole 8 with average ages of 61.2 years and 57.8 years for male and reason for denying women a position on these committees. female board members, respectively. In Western Europe, the Through our analysis, we found that women accounted for age difference was 4.1 years (males: 59.1 years, females: 55 14.6 percent of audit committee membership in the ASEAN years). The United States and Canada reported smaller age region overall. Thailand had the highest share of women differences (2.9 years), but slightly higher average ages (63.7 on audit committees (19.8 percent), followed closely by years for men and 60.8 years for women). Indonesia (19.0 percent). China also had comparatively high female representation on audit committees (18.7 percent). Average age of board members for selected Asian Characteristics of ASEAN female directors countries, 2016 (years) are in line with global counterparts Female Male Overall 53.7 Indonesia 56.5 Our study did not compile data on the characteristics of 56.3 female board members in the ASEAN region (such as age 59.8 Malaysia 60.4 or educational attainment), but other global surveys have 60.3 60.2 captured this information. Research suggests that aside from Singapore 62.7 62.4 minor differences, female board members in ASEAN tend to 53.2 China 55.3 be younger than their male counterparts, and they tend to 55.1 have business-related degrees.9 0 20 40 60 80 Source: 2016 Global Board Diversity Analysis (Appendix), Egon Zehnder. 18 | BOARD GENDER DIVERSITY In terms of qualifications, male board members in some board members. Higher tertiary enrolment rates for women ASEAN countries tend to have higher academic qualifications in all six ASEAN countries in this study and in China suggest than their female counterparts. This contrasts with some that the pool of female talent extends to the workforce as a European countries, such as the United Kingdom, where whole. women have higher levels of education, on average. In 11 Singapore, for example, higher proportions of male board Despite having a lower share of board seats, the members had master’s and PhD degrees compared to characteristics of women in boardrooms in the ASEAN female board members. With the exception of Singapore, region (and in China) appear to be broadly similar to those in however, differences in the numbers of women and men Western countries. While later chapters explore the unique holding bachelor’s and postgraduate degrees were not difficulties that women in the region face in obtaining a particularly large, which suggests that ASEAN countries do directorship, these similarities suggest that many of the not lack educated women to sit on their boards. In Malaysia, main factors that explain a lack of board gender diversity approximately half of all male and female board members have global relevance. The next chapter discusses these had bachelor’s degrees, and a higher proportion of female factors and explains how they influence board gender board members had master’s degrees, compared to male diversity at country and company levels. Key takeaway Although ASEAN is one of the most dynamic regions in the world and women’s economic participation has increased, leadership at the apex of companies still lacks gender diversity. According to our study, Thailand has the greatest board gender diversity in the region, with women holding 20.4 percent of board seats in listed companies, followed by Vietnam (15.4 percent) and Indonesia (14.9 percent). BOARD GENDER DIVERSITY | 19 ENDNOTES gender balance on British boards. Women on Boards Davies Review: Five year summary. Retrieved from https://assets.publishing.service.gov.uk/ 1 Deloitte. (2017). Women in the boardroom: A global perspective. Retrieved government/uploads/system/uploads/attachment_data/file/482059/BIS-15- from https://www2.deloitte.com/content/dam/Deloitte/cn/Documents/risk/ 585-women-on-boards-davies-review-5-year-summary-october-2015.pdf deloitte-cn-ra-ccg-e1-women-in-the-boardroom-a-global-perspective- fifth-edition.pdf 7 Adams, R. B., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of Financial Economics, 2 OECD. (n.d.) Female share of seats on boards of the largest publicly 94, 291–309. Retrieved from http://personal.lse.ac.uk/ferreird/gender.pdf listed companies. Retrieved from https://stats.oecd.org/index. aspx?queryid=54753# 8 Faccio, M., Marchica, M. T., & Mura, R. (2016). CEO gender, corporate risk-taking, and the efficiency of capital allocation. Retrieved from https:// 3 Deloitte. (2017). Women in the boardroom: A global perspective. Retrieved papers.ssrn.com/sol3/papers.cfm?abstract_id=2021136 from https://www2.deloitte.com/content/dam/Deloitte/cn/Documents/ risk/deloitte-cn-ra-ccg-e1-women-in-the-boardroom-a-global-perspective- 9 Egon Zehnder. (2016). 2016 global board diversity analysis. Retrieved from fifth-edition.pdf https://www.gbda.online/assets/EZ_2016GBDA_DIGITAL.pdf; Korn Ferry. (2013). Diversity scorecard 2013. 4 There is some debate about whether, in practice, non-executive and independent directors are entirely free from the influence of executive 10 Egon Zehnder. (2016). 2016 global board diversity analysis (Appendix). directors, given that they rely on the latter for information necessary for Retrieved from https://www.gbda.online/assets/EZ_2016GBDA_DIGITAL. decision-making, resulting in what is known as an “independence paradox”. pdf; https://slideplayer.com/slide/12376049/ See Hooghiemstra, R., & Van Manen, J. (2004). The independence paradox: (Im)possibilities facing non-executive directors in The Netherlands. 11 Green Park. (2017). FTSE 100 female leaders three times more likely to need Corporate Governance: An International Review, 12(3), 314–324. qualifications from a prestigious university. Retrieved from https://green- Retrieved from https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467- park.co.uk/2017/03/13/ftse-100-female-leaders-three-times-likely-need- 8683.2004.00372.x qualifications-prestigious-university/ 5 Adams, R. B., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of Financial Economics, 94, 291–309. Retrieved from http://personal.lse.ac.uk/ferreird/gender.pdf 6 Women on Boards, KPMG, & Cranfield University. (2015). Improving the 20 | BOARD GENDER DIVERSITY Chapter 2 Drivers of board gender diversity in ASEAN Advancing gender diversity requires a combination of country- and company-level initiatives. Over the past two decades, efforts to encourage board gender diversity have relied on both direct measures, such as introducing gender quotas and developing or revising corporate governance standards; and indirect measures, such as promoting greater female labor force participation, or gender equality in general. Board gender diversity is also influenced by company-specific factors, such as industry and ownership structures. Numerous other drivers can also push companies towards a more gender-diverse agenda, such as the presence of activist stakeholders, foreign investors disseminating global best practices, and a diverse client base. Although most of these drivers are less common in ASEAN than in Western Europe, there is evidence they will gradually grow in importance as companies in the region become more global. Country-level drivers Changing the game from top down, and Top-down drivers from bottom up Quotas and mandates Corporate governance Western European countries have generally taken the lead standards in imposing top-down direct measures, the most visible of which are mandatory quotas. Norway first established mandatory quotas in 2003, and a number of European Bottom-up drivers Union (EU) countries have since followed suit. Quotas Female labor force have typically been accompanied by pronounced increases participation in board gender diversity, although their impact on firm Policies on gender equality Public pressure performance is still unclear.1 Beyond quotas, other direct measures include revising 2.1 COUNTRY-LEVEL FACTORS THAT corporate governance codes. This is seen as a less burdensome DRIVE BOARD GENDER DIVERSITY top-down method of achieving board gender diversity. These codes can require companies to publicly disclose the number Advancing board gender diversity starts at the country of women on their boards, to take gender diversity into level, with governments influencing the company-level consideration for boardroom appointments, and to publicize environment through direct or indirect measures. Quotas their policies on gender diversity and their progress towards and corporate governance standards are the most common achieving it. This “comply or explain” approach—adopted in top-down policy tools for increasing board gender diversity. countries such as Canada and the United Kingdom—provides Other policy tools that aim to develop more gender- a middle ground between implementing quotas and taking a diverse societies can also indirectly influence board gender laissez-faire approach, which makes it appealing to countries diversity—for example, increasing female labor force concerned about the regulatory burden associated with participation and introducing gender equality policies. quotas and/or possible impacts on company performance. BOARD GENDER DIVERSITY | 21 The United Kingdom incorporated gender diversity disclosure the most aggressive in pursuing board gender diversity, as the requirements in 2012, and the share of board positions held first country in the region (and one of the few in the world, by women has since risen from 18.2 percent to 26.3 percent outside of Western Europe) to set a target for female board (in 2016), according to Korn Ferry (a global organizational representation. Countries like the Philippines, meanwhile, firm). This represents significantly faster growth than have seen their regulatory agencies integrate some of the in previous years. Canada incorporated gender diversity best practices from Western Europe into their corporate disclosure requirements in 2014 and experienced similarly governance codes (discussed in the box below). Thailand, rapid growth in the share of board positions held by women, which boasts the highest share of female board seats in our which increased from 18.3 percent in 2014 to 25 percent in 2016. study, has also introduced an extensive set of measures to improve diversity, largely driven by the business sector. In all Governments in the ASEAN region have been much less active three countries, most of these measures are quite recent, in promoting board gender diversity than in Western Europe, and it is too early to gauge their success (or failure). However, but a number of interesting interventions should provide the difficulties encountered by the Malaysian Government in clearer evidence in the coming years in terms of which policies enforcing its target suggests that more flexible measures may might work best in the region. Malaysia has undoubtedly been be more suitable in the ASEAN region. Malaysian, Filipino and Singaporean regulators take the lead Malaysia established an ambitious gender target of 30 firms to recommend the establishment of policies on percent female board representation, to be achieved by board diversity, including (but not limited to) gender. 2016. It was unable to meet this target, however, and The revised code particularly recommends an increase has since pushed the deadline back to 2020. The target is in the number of female directors, including female now 30 percent in the top 100 publicly-listed companies. independent directors. The code echoes much of the The government is planning to step-up its efforts to literature on board gender diversity, which argues reach this new target by “naming and shaming” publicly- that a more diverse board contributes to a reduction in listed companies that fail to appoint more women to groupthink, in turn promoting more efficient decision- their boards. This was done in January 2018. Malaysia making. The code only came into force in January 2017, so is also one of only two places in Asia (alongside Hong it is too early to measure its effectiveness in promoting Kong) where the 30% Club operates—an international board gender diversity. Our study found that 13.2 percent campaign of board chairs and business leaders that of board seats in the Philippines are currently held by promotes a (voluntary) target of 30 percent female women—a level almost identical to that of Malaysia, board representation. The Malaysian chapter of this 2 despite the absence of a target. Singapore has also organization was set up in 2015. Despite these efforts, adopted a gender perspective in its most recent revision our study found that just 13.5 percent of board seats in of its code of corporate governance, which came into Malaysia are currently held by women, raising questions effect on January 1, 2019. The new code requires listed about how quickly the targets will be met. companies to publicly disclose their board diversity policy in their annual reports, and to describe their progress The Philippine Securities and Exchange Commission in attaining their targets. The code does not set these (SEC) revised its code of corporate governance for listed targets, however; instead, it suggests using peer criteria.3 22 | BOARD GENDER DIVERSITY Thailand’s higher levels of female boardroom representation to improve women’s potential and career opportunities; may be influenced by its engagement in other initiatives and the Women Enterprise Incubation Centre, which was designed to promote female business leadership. Thailand is established to provide advice for women entrepreneurs, one of the few East Asian countries that is part of the Equal and to organize activities to develop business knowledge Futures Partnership, and it has undertaken several steps at for women in career-building and access to information and the country level to comply with the requirements of this rights.4 Although many of these initiatives are not unique initiative, which seeks to promote women’s participation to Thailand, few other ASEAN countries have established in public life, including business life (Indonesia is also a such a comprehensive set of measures, which suggests they member of this partnership). This includes creating the may be partly responsible for Thailand’s higher rate of board National Women’s Development Fund, a financial resource gender diversity. BOARD GENDER DIVERSITY | 23 Effect of country-level drivers globally: reviewing the evidence There are several country-level factors and policies that may facilitate the inclusion of women in boardrooms. Through our extensive literature review, we were able to identify some of the major factors and policies that have been highlighted across studies and their impacts on greater board diversity globally. A summary of some of the key findings is provided below. Several studies have found that quotas mandating a specific number of women on boards have an uncertain effect on board diversity. While useful in theory, some studies conclude that quotas may be too narrow a policy tool to address some of the more systemic issues of female under-representation.5 For instance, a 2011 study by IFC suggested that quotas encouraged tokenism and a lack of commitment from existing board members.6 However, a 2017 study by Solimene et al. found that the introduction of quotas supported a significant rise in the share of women on the boards of some of Europe’s largest companies.7 Corporate governance standards with recommendations on board diversity are largely believed to be positive drivers of board diversity. Adams and Kirchmaier (2013) found that the existence of corporate governance codes was positively correlated with director participation. 8 Similarly, a Thomson Reuters study (2016) found that regional trends in female board representation were driven largely by regulatory requirements.9 Gallego-Alvarez and colleagues (2010) looked at the corporate governance approach through the lens of social cohesion and economic growth. They argued that while this approach promoted social cohesion, the economic impact was only realized if corporate governance regulations led to an increase in corporate value.10 Other macroeconomic factors such as greater female labor force participation and policies that promote gender equality function as external drivers of board diversity. A 2016 study by the International Monetary Fund (IMF) found a stronger correlation between gender diversity in senior positions and the financial performance of companies in sectors where women accounted for a larger share of the labor force.11 Similarly, a 2016 study by the Asian Development Bank (ADB) found that government policies promoting gender diversity in business leadership improved the social conditions required for gender equality, which can have a trickle-down effect on board diversity.12 The benefits of labor force diversity governance practices and a weaker institutional base.13 Our study appears to corroborate this finding: Vietnam has one Unsurprisingly, countries with narrower gender gaps in the of the highest percentages of board seats held by women, labor force tend to perform better in terms of board gender and it also has the highest female labor force participation diversity, even in the absence of direct measures to enhance rate (nearly 80 percent), according to the World Economic it. A 2016 comparison study of corporate governance in Forum’s (WEF) Gender Gap Report 2017. Thailand, which Singapore and Vietnam suggested that higher female has a female labor force participation rate of 70 percent, labor force participation in Vietnam may explain the higher also has one of the highest percentages of board seats held levels of board gender diversity, despite poorer corporate by women. 24 | BOARD GENDER DIVERSITY “We tend to accommodate trends in the gender equality, and the country performs better than many international capital market, and diversity. of its ASEAN peers on many equality metrics.14 For example, We feel that not only is it the global trend, its “National Strategy on Gender Equality for 2011–2020”15 but it also adds value to the company.” sets ambitious targets for women in political leadership positions, as well as in the labor market. While there are ADA INGAWANIJ no targets for top managerial positions and board seats, FORMER EXECUTIVE VICE PRESIDENT THAI INSTITUTE OF DIRECTORS this broader focus on gender equality creates a positive environment for achieving diversity in the upper echelons of Labor force composition is not the only structural factor management, including in the boardroom. This was reflected that explains gender diversity outcomes; a country’s socio- in the results from a 2017 study,16 which found that a far larger economic environment matters as well. In particular, the share of female Vietnamese employees had positive views presence of more progressive attitudes towards women in of their companies’ policies, efforts and progress towards the workplace can help to increase board gender diversity. gender diversity than their richer Malaysian and Singaporean The Vietnamese Government has long been an advocate of counterparts. The Diversity Action Committee and Singapore Council of Women’s Organisations Singapore has made significant advances towards achieving greater female representation in the boardroom and has launched several initiatives that demonstrate its commitment to this goal. For example, Singapore’s code of corporate governance requires companies to consider diversity as an integral part of the board nomination process. Two advocacy groups in Singapore have been instrumental in raising awareness about the under-representation of women on company boards: the Diversity Action Committee (DAC) and Singapore Council of Women’s Organisations (SCWO). DAC: In August 2016, the DAC made recommendations to the Monetary Authority of Singapore to strengthen the code of corporate governance, as a matter of immediate priority. The organization developed guidelines and an action plan to achieve an ambitious three-tier target for companies listed on the Singapore Exchange (SGX): 20 percent female board representation by 2020; 25 percent representation by 2025; and 30 percent representation by 2030.17 Some companies have already reached this target: Mapletree Commercial Trust (40 percent female board representation), Singapore Post Limited (40 percent) and Parkway Life REIT (38 percent). Other companies are quickly closing the gap, including Hutchison Port Holdings Trust, Singapore Press Holdings Limited, Singapore Telecommunications Limited, Hi-P International Limited and OUE Commercial Real Estate Investment Trust (all with 33 percent female board representation). SCWO: The SCWO runs the Women’s Register—a platform for networking, education, mentorship and the promotion of female directorships for women of all ages. Its outreach arm is known as BoardAgender, and it provides a forum to raise awareness of the economic benefits of an inclusive and gender-balanced business. It recently launched the SG50 Champions of Change, calling on every business leader to promote gender-balanced businesses in Singapore. BOARD GENDER DIVERSITY | 25 2.2 COMPANY-LEVEL FACTORS THAT below lists the three industries with the highest proportions DRIVE BOARD GENDER DIVERSITY of female board members for each country in our study. The characteristics of individual companies are also From a sectoral perspective and in line with global patterns, important determinants of board gender diversity. No two companies in the financial and consumer sectors have the firms are the same, but research has shown that factors highest board gender diversity, while information technology such as the industry in which a firm operates, ownership and utilities companies have the least gender-diverse boards. structure, and diversity in leadership can determine the This is likely a result of women’s under-representation in likelihood of a company having a higher or lower proportion high-tech industries and heavy manufacturing, and greater of female board members. Understanding the impact of representation in industries that require more direct these company-level factors makes it easier to create the engagement with clients. One of our interviewees, Grace right mix of policies to drive progress towards board gender Xiao, global head of Public Private Partnerships, UCB Trading diversity, particularly if progress is observed to be slower (Shanghai) Co., Ltd., contrasted “male-dominated” sectors among certain types of firms or in certain industries. with the pharmaceuticals industry, where she noted the presence of many strong female sales representatives. Industry: The industry in which a firm operates is often associated with board gender diversity. For example, A 2009 study18 conducted in Germany and Spain found that manufacturing firms tend to have lower levels of diversity female candidates for leadership positions were seen as less than firms in the service industry. This may be because qualified in industries perceived as “male”. Some studies have manufacturing firms are more likely to have a lower share of also shown that firms closer to the final consumer—such female employees overall, as well as company cultures that as consumer goods companies—tend to perform better discourage the promotion of women into top managerial in terms of board gender diversity, reflected in the higher positions and the boardroom. In our study, we found that proportions of female board directors in such industries.19 the consumer staples, consumer discretionary, healthcare According to Deloitte (2017),20 consumer businesses ranked and financial industries were the most likely to have the among the top three industries with the most board seats highest proportions of women on company boards across all held by women in six out of seven regions, while financial countries, with women accounting for an average of 15–20 services ranked among the top three in five out of seven percent board membership in these industries. The table regions. Gender diversity across industries: top three industries with the highest representations of women on company boards, 2017 RANK INDONESIA MALAYSIA PHILIPPINES SINGAPORE THAILAND VIETNAM CHINA Consumer Consumer Consumer Industrials Healthcare Industrials Utilities 1 discretionary discretionary staples (26%) (27%) (20%) (18%) (15%) (24 %) (24%) Consumer Consumer Consumer Real estate Financials Financials Real estate 2 staples discretionary staples (20%) (20%) (16%) (15%) (24%) (20%) (15%) Consumer staples Energy Consumer staples Financials Financials Real estate Healthcare 3 (15%) (19%) (15%) (14%) (20%) (19%) (14%) Source: Economist Intelligence Unit analysis. 26 | BOARD GENDER DIVERSITY “Who is actually shopping for your food, Family ownership of a firm also tends to drive board gender shopping for the clothes for everyone? diversity in ASEAN companies, where the distinction Generally it is women. We know and we between owner and manager is, generally, less pronounced have an instinct of what the market needs. than in Western firms. An Indonesian study22 found a If you are on a board and you are all male negative link between female executives and total firm and you are deciding on, for argument’s assets and suggested that women may struggle to find sake, what shampoo to develop, or what opportunities for advancement in larger firms, but may market to target, even buying real estate, benefit from family ties with the founder or controlling buying houses, why wouldn’t they have a shareholder in smaller, family-owned firms. In Malaysia, woman? You need that point of view.” family-owned companies are more likely to have female board directors: around seven-in-10 firms are family-owned IDA TIONGSON in Malaysia, and family members account for 85 percent of PRESIDENT, OPAL PORTFOLIO INVESTMENTS (SPV-AMC) INC., AND TRUSTEE, INSTITUTE OF company board membership. 23 In countries where family CORPORATE DIRECTORS, PHILIPPINES ownership is the dominant form of company organization, this is one of the main factors contributing to higher Ownership structure: There is evidence that smaller, proportions of female board members. family-owned firms tend to have more women on their boards. 21 This is largely due to the smaller talent pools found Diversity in leadership: Our analysis highlighted the in these firms, which make female family members more importance of diversity in driving further diversity. According likely to have board positions (and in the longer term, to a study by Konrad and Kramer (2006), companies encourages the integration of women who are not family with at least three female directors undergo a cultural members). In countries where stakeholder pressure on larger change, which encourages even greater diversity.24 companies is weaker (as is the case in ASEAN), these small Interlocking directorships (where one board member family firms may be the standard-bearers for board gender serves on various boards) can also help to disseminate diversity. Our study found that in most ASEAN countries, and the values of gender diversity and best practices. In Asia, in China, firms with a single shareholder (which tends to companies with a female CEO have 22 percent female indicate family control) had higher shares of women on their board representation, compared with 7.2 percent among boards in all but two countries: the Philippines and Singapore. companies with a male CEO.25 Board seats held by women, by shareholder type compared to overall figures, 2017 (%) All firms Individual shareholder 25 21.9 20.4 20 20 14.9 15.6 15.4 15.4 15 13.5 14.1 13.2 11.8 12.7 11.9 10.5 10 5 0 Indonesia Malaysia Philippines Singapore Thailand Vietnam China Source: Economist Intelligence Unit analysis. BOARD GENDER DIVERSITY | 27 Effect of company-level drivers globally: reviewing the evidence Based on our review of the existing literature, we identified company-level drivers that can potentially influence board gender diversity, ranging from company image to the desire to attract more investors. The studies we reviewed discussed a number of these drivers, four of which emerged as the most influential across the literature. The first of these drivers is company recognition of the benefits of board gender diversity. A 2010 IFC study summarized the potential benefits of having more women on boards, including financial performance, a focus on risk management and a better understanding of consumer markets.26 Recognizing such benefits provides a much-needed push for companies to diversify their boards. Second, companies may be able to attract a variety of investors by increasing female board member- ship. Indeed, a 2017 Deloitte study found that investors were among the most influential advocates for change, and that some had even been pushing back on companies that were not doing enough to promote boardroom gender diversity.27 The third driver is company desire for a better reputation or business image. As a 2012 Credit Suisse study explained, when a company appointed more women to its board, it sent a positive signal to the market about its focus on corporate governance. It could also indicate that the company was doing well.28 In a 2008 survey of 335 European companies, 50 percent of respondents reported that a “diversity charter” had a beneficial effect on a company’s reputation.29 Finally, shareholder activism provides an impetus to appoint more women to boards. A 2011 Global Economic Symposium (GES) study found that institutional shareholders were pushing to nominate and create their own databases of diverse directors.30 Role of institutional investors United Kingdom, for example, the chair of the parliamentary Business, Energy and Industrial Strategy Governments are not the only agents of change when it Committee publicly called on the 10 FTSE 350 firms that comes to board gender diversity; external pressure from retained all-male boards in 2018 to “drag themselves out of institutional investors to have more diverse boardrooms is the dark ages”.31 US-based State Street Global Advisors also an increasingly important factor. For example, (SSGA) famously launched its “Fearless Girl” campaign (best prompted by organizations like the 30% Club, many large known for placing its statue of a girl in front of Wall Street’s investment funds have announced their intention to push bull), which explicitly threatens to vote against all companies they invest in to promote board gender nominated board members of any company that does not diversity, and to vote against the re-election of board meet its gender diversity criteria.32 Australia’s largest chairs or nomination committees that do not do enough pension fund, AustralianSuper, has also started to vote for diversity. This has exacerbated companies’ fears of against directors of companies with no female negative publicity if they are “named and shamed”. In the representation on their board. 33 28 | BOARD GENDER DIVERSITY This kind of pressure is not yet widespread in ASEAN. Indeed, many of our interviewees expressed disappointment in the passive attitude of many local institutional investors towards gender diversity. However, this pressure is likely to become more intense as discussions about gender diversity become more commonplace, and as the benefits for firm performance become more widely discussed and accepted. In particular, the need to attract foreign investors will function as an important catalyst, bringing greater awareness of gender issues to the region and helping to compensate for the lack of activism among local shareholders. As one of our Vietnam interviewees explained: “I talk with some foreign investors who invest in our listed companies and they have the view that when there are women on the board they feel the company is more efficient and they have better performance than others. According to the foreign investors who invest in our listed companies and in general, I believe that in our community in Vietnam they recognize a lot of women who are very successful in business." TRAN ANH DAO DEPUTY CEO, HO CHI MINH STOCK EXCHANGE BOARD GENDER DIVERSITY | 29 Push for more gender-diverse boards: the case of State Street Global Advisers and BlackRock In recent years, several large institutional shareholders have been pushing for greater female representation in the boardroom. Frustrated by the slow pace of change, they are taking the campaign directly to their investees and warning them that they are prepared to vote against directors if a firm does not show a commitment to increasing diversity.34 SSGA and BlackRock are two firms at the forefront of this recent campaign. SSGA defines a company with “minimal female representation” as one where less than 15 percent of the directors are women. Such companies are encouraged to address their diversity issues in order to avoid backlash from disgruntled institutional investors. SSGA has indicated that it has already voted against directors at more than 500 companies that failed to address board diversity. It has also noted gender diversity improvements at over 150 companies, achieved through either a withhold vote or engagement.35 An SSGA guidance note from 2017 placed the issue firmly within the mainstream by positioning gender diversity as a mechanism for achieving effective board leadership, which it views as “foundational to good governance and positive investment outcomes”.36 Similarly, BlackRock has used its annual publication of engagement priorities as a platform to under- score the importance of board diversity, and gender equality in particular. In 2018, the company amended its proxy voting guidelines to include an expectation that companies have at least two female directors, threatening a withhold vote for companies that chose to ignore these comments.37 According to the Harvard Law School Forum on Corporate Governance and Financial Regulation, this pressure for greater diversity in boardrooms follows some recent and notable business scandals, and is a response to the historic under-representation of women and people of color on boards. Institutional investors’ actions are also being viewed as an effort to change perceptions about their passivity by taking an active stance in pushing companies to adopt corporate governance best practices.38 Pressure to build more gender-diverse boards will also in the boardroom also has a strong relationship with the come from within companies, and from other external diversity of a company’s consumer base—an important drivers. For example, Harry O’Neill, partner, CEO and Board consideration in ASEAN, where women are increasingly Practice, Heidrick & Struggles, explained that an enlightened becoming consumers in their own right.39 A diverse board chair focused on improving board diversity could have a is more likely to meet the needs of diverse consumers, and considerable impact (later chapters discuss the positive if a company’s brand is associated with diversity, the risk impact that a business leader committed to diversity can of reputational backlash is a strong incentive to continue have on shaping a company’s agenda for inclusion). Diversity strengthening its inclusion agenda. 30 | BOARD GENDER DIVERSITY Key takeaway Governments in ASEAN have been much less active in promoting board gender diversity than in Western Europe. Malaysia has taken the most aggressive approach, and countries like the Philippines have seen their regulatory agencies integrate some of the best practices from Western Europe into their corporate governance codes. Thailand—which boasts the highest share of female board seats in our study—has also introduced measures to help it align with global standards on gender diversity. Governments, however, are not the only agents of change when it comes to board gender diversity. Pressure to build more gender-diverse boards can come from within companies and from external drivers—for example, external pressure from institutional investors to have more diverse boardrooms is an increasingly important factor. The characteristics of individual companies are also important determinants of board gender diversity. ENDNOTES 10 Gallego-Alvarez, I., Garcia-Sanchez, I. M., & Rodriguez-Dominguez, L. (2010). The influence of gender diversity on corporate performance. 1 Ingenta Connect. (2013). Diversity among Norwegian boards of Accounting Magazine, 13(1), 53–88. Retrieved from https://ac.els- directors: Does a quota for women improve firm performance? cdn.com/S1138489110700121/1-s2.0-S1138489110700121-main.pdf?_ Retrieved from https://www.ingentaconnect.com/content/routledg/ tid=bad8ace0-c071-11e7-8c2f-00000aab0f01&acdnat=1509698215_1545d6 rfec/2013/00000019/00000004/art00006 67e4c797ee2b08c6a164d3fb7b 2 See the 30% Club website at: https://30percentclub.org/ 11 Christiansen, L., Lin, H., Pereira, J., Topalova, P., & Turk, R. (2016). Gender diversity in senior positions and firm performance: Evidence from Europe 3 Glass Lewis. (2018). Singapore releases new code of corporate (IMF Working Paper 16/50). Retrieved from https://www.imf.org/external/ governance. Retrieved from http://www.glasslewis.com/singapore- pubs/ft/wp/2016/wp1650.pdf releases-new-code-of-corporate-governance/ 12 Qian, M. (2016). Women’s leadership and corporate performance (ADB 4 Equal Futures. (n.d.). Thailand. Retrieved from https://www.equal- Economics Working Paper Series No. 472). Retrieved from https://www. futures.org/country/thailand adb.org/sites/default/files/publication/179587/ewp-472.pdf 5 Adams, R., & Kirchmaier, T. (2013). Making it to the top: From female 13 Nguyen, V. T., & Nguyen, A. T. (2016). Corporate governance structures labour force participation to boardroom gender diversity. Presented at and performance of firms in Asian markets: A comparative analysis the AEA Meeting, San Diego. Retrieved from https://www.research. between Singapore and Vietnam. Organisations and Markets in manchester.ac.uk/portal/en/publications/making-it-to-the-top- Emerging Economies, 7(2). Retrieved from http://www.om.evaf. from-female-labor-force-participation-to-boardroom-gender- vu.lt/index.php?act=uploads.download&file=%2Fw3%2Flt. diversity(02d1b96d-a15a-4010-ab92-ba9a598f4efe).html vu.www4057%2Fwww%2Fcms%2Fuploads%2Ffiles%2FTuan+ Tuan+OMEE-7-2%2814%29.pdf&code=58fa812c0713981ccc615b37c0e7ad19 6 IFC. (2011). Optimising board effectiveness with gender diversity. Are quotas the answer? Retrieved from https://www.ifc.org/wps/wcm/ 14 Vietnam ranks 69th in the World Economic Forum (WEF) Global Gender connect/topics_ext_content/ifc_external_corporate_site/ifc+cg/ Gap Report 2017, ahead of all ASEAN countries in our study apart from resources/private+sector+opinion/pso_21_gender Singapore (65th), and ahead of China. 7 Solimene, S., Coluccia, D., & Fontana, S. (2017). Gender diversity on 15 Government of Vietnam. (2012). National strategy on gender equality corporate boards: An empirical investigation of Italian listed companies. for the 2011–2020 period. Retrieved from http://www.economica.vn/ Palgrave Communications, 3. Retrieved from https://www.nature.com/ Portals/0/Documents/National%20strategy%20on%20gender%20 articles/palcomms2016109 equality%20for%20the%202011.pdf 8 Adams, R., & Kirchmaier, T. (2013). Making it to the top: From female 16 Rastogi, V., Jaafar, M., Zemgulys, N., & Rawangban, C. (2017). Moving labour force participation to boardroom gender diversity. Presented at toward gender diversity in Southeast Asia. Retrieved from http:// the AEA Meeting, San Diego. Retrieved from https://www.research. image-src.bcg.com/Images/BCG-Moving-Toward-Gender-Diversity-SEA- manchester.ac.uk/portal/en/publications/making-it-to-the-top- Sep-2017_tcm93-177639.pdf from-female-labor-force-participation-to-boardroom-gender- diversity(02d1b96d-a15a-4010-ab92-ba9a598f4efe).html 17 See the Diversity Action Committee Singapore website: http://www. diversityaction.sg/about/diversity-action-committee/ 9 Chanavat, A., & Ramsden, K. (2016). Analysis of board diversity and performance. Retrieved from https://financial.thomsonreuters.com/ 18 Garcia-Retamero, R., & Lopez-Zafra, E. (2006). Prejudice against content/dam/openweb/documents/pdf/financial/analysis-of-board- women in male congenial environments: Perceptions of gender diversity.pdf role congruity in leadership. Sex Roles, 55(1), 51–61. Retrieved from https://www.researchgate.net/profile/Esther_Lopez-Zafra/ BOARD GENDER DIVERSITY | 31 publication/226770749_Prejudice_against_Women_in_Male-Congenial_ 30 Global Economic Symposium. (2011). Board diversity and corporate Environments_Perceptions_of_Gender_Role_Congruity_in_Leadership/ governance: Solution proposals from the session at the Global Economic links/0fcfd509383ab6720f000000/Prejudice-against-Women-in-Male- Symposium (GES) 2011. Retrieved from https://www.global-economic- Congenial-Environments-Perceptions-of-Gender-Role-Congruity-in- symposium.org/solutions/publications/ges-specials/ges-brief-2011-board- Leadership.pdf diversity-and-corporate-governance 19 Credit Suisse. (2016). The CS Gender 3000: The reward for change. 31 UK Parliament. (2018). Chair comments on women on boards target. Retrieved from https://publications.credit-suisse.com/tasks/render/file/ Retrieved from https://www.parliament.uk/business/committees/ index.cfm?fileid=5A7755E1-EFDD-1973-A0B5C54AFF3FB0AE committees-a-z/commons-select/business-energy-industrial-strategy/ news-parliament-2017/chair-comments-hampton-alexander-review-17-19/ 20 Deloitte. (2017). Women in the boardroom: A global perspective. Retrieved from https://www2.deloitte.com/content/dam/Deloitte/cn/Documents/ 32 Whyte, A. (2018). State Street to turn up the heat on all-male boards. risk/deloitte-cn-ra-ccg-e1-women-in-the-boardroom-a-global- Retrieved from https://www.institutionalinvestor.com/article/ perspective-fifth-edition.pdf b1b4fh28ys3mr9/State-Street-to-Turn-Up-the-Heat-on-All-Male-Boards 21 Shaffer, L. (2016). Women get a better deal at Asian family firms, but not 33 Smith, J. (2017). Australian pension funds push for more female company by much. CNBC. Retrieved from https://www.cnbc.com/2016/06/20/ directors. Retrieved from https://www.ft.com/content/fa3914c8-41b0- asian-family-businesses-give-women-more-top-roles-nus-study-shows. 11e7-9d56-25f963e998b2 html 34 Goodman, A., & O’Kelley, R. (2017). Institutional investors lead the push for 22 Darmadi, S. (2010). Board diversity and firm performance: The Indonesian more gender-diverse boards. Retrieved from https://www.russellreynolds. evidence. Retrieved from https://ssrn.com/abstract=1727195 com/en/Insights/thought-leadership/Documents/Institutional%20 Investors%20Lead%20Push%20for%20Gender-Diverse%20Boards_final. 23 Azmi, I. A. G., & Barrett, M. A. (2013). Women on boards and company pdf financial performance: A study of Malaysian SMEs. Retrieved from https://wbiworldconpro.com/uploads/melbourne-conference-2013/ 35 Kohn, A. Bieber, E., & Maldonado, M. (2018). Board diversity finance/1367487777_346-Ilhaamie.pdf developments. Retrieved from https://corpgov.law.harvard. edu/2018/08/21/board-diversity-developments/ 24 Konrad, A. M., & Kramer, V. W. (2006). How many women do boards need? Harvard Business Review. Retrieved from https://hbr.org/2006/12/how- 36 Goodman, A., & O’Kelley, R. (2017). Institutional investors lead the push for many-women-do-boards-need more gender-diverse boards. Retrieved from https://www.russellreynolds. com/en/Insights/thought-leadership/Documents/Institutional%20 25 Deloitte. (2017). Women in the boardroom: A global perspective. Retrieved Investors%20Lead%20Push%20for%20Gender-Diverse%20Boards_final. from https://www2.deloitte.com/content/dam/Deloitte/cn/Documents/ pdf risk/deloitte-cn-ra-ccg-e1-women-in-the-boardroom-a-global- perspective-fifth-edition.pdf 37 Kohn, A., Bieber, E., & Maldonado, M. (2018). Board diversity developments. https://corpgov.law.harvard.edu/2018/08/21/board- 26 Arguden, Y. (2010). Diversity at the head table: Bringing complementary diversity-developments/ skills and experiences. Retrieved from https://www.ifc.org/wps/wcm/ connect/bc15bd8048a7e686a70fe76060ad5911/IFC_PSO_19_WEB_RES. 38 Skroupa, C. (2018). From passive to active: Institutional investors promote pdf?MOD=AJPERES corporate governance. Retrieved from https://www.forbes.com/sites/ christopherskroupa/2018/08/21/from-passive-to-active-institutional- 27 Deloitte. (2017). Women in the boardroom: A global perspective. Retrieved investors-promote-corporate-governance/#3b7caf1365b8 from https://www2.deloitte.com/global/en/pages/risk/articles/women- in-the-boardroom5th-edition.html 39 ASEAN Up. (2016). The rise of female consumers in Asia. Retrieved from https://aseanup.com/rise-female-consumers-asia/ 28 Credit Suisse. (2012). Gender diversity and corporate performance. Retrieved from https://www.calstrs.com/sites/main/files/file- attachments/csri_gender_diversity_and_corporate_performance.pdf 29 IFC. (2015). Gender diversity in Jordan. Retrieved from https://www.ifc. org/wps/wcm/connect/e93318004a0d7ff195cfb7e54d141794/IFC_Jordan_ Gender_Report_Sep_2015.pdf?MOD=AJPERES 32 | BOARD GENDER DIVERSITY Chapter 3 Impact of board gender diversity on company performance To advance the business case for greater gender diversity in boardrooms, many authors have empirically studied the relationship between gender diversity and company financial performance. We add to this literature by analyzing the relationship in the six ASEAN countries and China. In our analysis, we found that companies with more women board members were associated with greater financial performance, measured using two financial metrics: Return on Assets (ROA) and Return on Equity (ROE). On average, ASEAN companies that had boards with more than 30 percent female membership had an average ROA of 3.8 percent, compared to 2.4 percent for companies with no women on the board. Similarly, companies that had boards with more than 30 percent female membership had an average ROE of 6.2 percent, compared to 4.2 percent for companies with no women on the board. These results confirm a strong business case for including more women in business leadership positions in ASEAN firms. 3.1 IMPACT ON COMPANY FINANCIAL performance and increase innovation in a company. Women PERFORMANCE on boards are also seen as contributing to improvements in firms’ environmental, social and governance (ESG) Studies have found that gender diversity in the boardroom standards, primarily through greater focus on corporate creates value and gives companies a competitive edge, and social responsibility, community engagement, human rights many have linked it with superior financial performance. and ethical conduct. Female board members are perceived as having a positive impact on a board’s monitoring capabilities, bringing Through our study, we contribute to this evidence base by different viewpoints and skill sets, successfully engaging comprehensively analyzing the impact of board gender stakeholders and introducing different leadership styles. diversity on company performance in six ASEAN countries and China. Our study combines statistical analysis of The presence of women in leadership positions is also linked company-level data with key findings from interviews with to overall employee satisfaction, which in turn leads to a more senior stakeholders to understand women’s impact on productive workforce and contributes to company growth. 1 company processes and operations, which can lead to better Regional experts add that diversity on a board can improve financial performance. BOARD GENDER DIVERSITY | 33 Indicators of company financial performance Several metrics are commonly used to measure company financial performance. These measures are broadly divided into two categories: accounting-based measures and market-based measures. Accounting-based measures are considered to be good indicators of a company’s profitability. Based on our review of the existing literature, we noted that two robust accounting-based measures are most frequently used to assess performance: ROA and ROE. Definitions of key indicators selected for our study • ROA: A short-term measure of company performance, which measures the net profit that a company earns, before interest and taxation, as a percentage of total assets. • ROE: A short-term measure of company performance, which measures net income as a proportion of total equity and captures how well a company uses investments to generate earnings growth. Company-level analysis of simple averages for ASEAN shows a strong relationship Financial performance of companies in ASEAN between greater board diversity and countries and China using simple averages, 2017 (%) company financial performance REGION/ AVERAGE AVERAGE GENDER VARIABLE COUNTRY ROA ROE We examined 1,836 companies from six ASEAN countries ASEAN (six If a company board includes no 2.4 4.2 (Indonesia, Malaysia, the Philippines, Singapore, Thailand countries) women and Vietnam) and China.2 Companies were included in If a company board includes at least 3.7 5.8 one woman the sample if they had disclosed data on gender board If more than 30 percent of company 3.8 6.2 representation for 2017. For these six ASEAN countries and board members are women China, we first examined patterns in financial performance China If a company board includes no 5.7 10.3 for companies across three levels of gender diversity: women If a company board includes at least 5.8 10.7 one woman • If a company board includes no women If more than 30 percent of company 6.0 9.9 • If a company board includes at least one woman board members are women • If more than 30 percent of company board members are Source: Economist Intelligence Unit analysis. women. ROA values for companies with at least one female board When we calculated simple averages—i.e. the mean ROE and member or more than 30 percent female board membership ROA of all companies at each level of gender diversity—we were found to be higher than ROA values for companies found that on average, companies with more women on the with no women on the board: companies where women board were associated with greater financial performance. 34 | BOARD GENDER DIVERSITY accounted for more than 30 percent of board membership We found that if a company’s board diversity were to increase had an average ROA of 3.8 percent, companies with at least from zero (an all-male board) to having at least one woman one woman on the board had an average ROA of 3.7 percent, on the board, the ROA would likely increase by 1.4 percent on and companies with no women on the board had an average average, keeping all other factors constant. If board diversity ROA of 2.4 percent. While the trend was similar in China, the was to increase to more than 30 percent female board differences were smaller compared to the ASEAN regional membership, the ROA would likely increase by 1.2 percent average. on average, compared to having 30 percent female board membership or less. Findings from our regressions support ROE values for companies with at least one female board the results from our previous analysis using simple averages member or more than 30 percent female board membership and strengthen our argument that companies with a higher were also found to be higher than ROE values for companies proportion of women on their board are generally associated with no women on the board: companies where women with greater financial performance. accounted for more than 30 percent of board membership had an average ROE of 6.2 percent, companies with at least In addition to examining thresholds for board gender one woman on the board had an average ROE of 5.8 percent, diversity, we examined whether increases in gender diversity and companies with no women on the board had an average at both the board and the senior management level were ROE of 4.2 percent. associated with greater firm financial performance. Analyzing the six ASEAN countries as a group, we found that Using a statistical model to examine the for every 10 percent increase in gender diversity (female relationship between gender diversity on representation) in board membership and senior the board and financial performance management positions combined, the ROA would likely increase by 0.7 percent and the ROE would likely increase by Next, we ran pooled regressions to analyze the statistical 1.0 percent, on average. For every 10 percent increase in impact of board gender diversity on financial performance gender diversity in senior management positions alone, we (ROA and ROE). In this approach, we analyzed ASEAN found that the ROA would likely rise by 0.3 percent and the countries as a group and controlled for country-level effects ROE would likely increase by 0.6 percent, on average. In all (using country dummies). Our findings are summarized in cases, an increase in gender diversity was positively the table below. associated with improvements in financial performance. Financial impact of board gender diversity in Overall, our statistical findings align with the views of our ASEAN companies using a statistical model, 2017 expert interviewees, who stressed the positive impact of having women on boards of directors, and in business leadership GENDER VARIABLE (KEEPING ALL INCREASE IN OTHER FACTORS CONSTANT) FINANCIAL VARIABLE positions in general, on overall company performance. For instance Harry O’Neill, partner, CEO and Board Practice, If a company board includes at least one woman 1.4% increase in ROA Heidrick & Struggles, noted that when looking at company If more than 30 percent of company board performance in general, diverse companies tended to perform 1.2% increase in ROA members are women better, compared to non-diverse companies. In his opinion, If there is a 10 percent increase in women at both 0.7% increase in ROA the board level and the senior management level 1.0% increase in ROE there had been considerable improvement in terms of gender If there is a 10 percent increase in women at the 0.3% increase in ROA representation and an increased focus on getting the right senior management level 0.6% increase in ROE numbers of women in place at an operating level. Possible Source: Economist Intelligence Unit analysis. relationships between greater gender diversity and company performance are explored further in the next section. BOARD GENDER DIVERSITY | 35 Relationship between board gender diversity and financial performance globally The global literature on the impact of board gender diversity on company performance is mixed. There are many studies that comprehensively show improvement across at least one of the indicators of performance in firms that have more women on their board. However, there are also a number of studies that have found either a negative or neutral association between gender diversity and performance. Many of these studies analyze the relationship between diversity and stock market indicators of company value, which is different from profitability/ accounting performance. Some authors, for instance, argue that the negative reaction of the market to appointing a woman to the board may be due to analyst or investor bias, which can be more pronounced in some markets and impact statistical results. A 2012 Credit Suisse report found that companies with at least one woman on the board outperformed—in terms of share price performance—those with no women on the board over the course of six years. However, this effect was witnessed post-2008 (when the global economy was not stable), relative to the 2005–2007 period (when economic growth was robust). The report concluded that relative share price outperformance by companies with women on the board may be inconsistent, but greater balance on the board brings less volatility and more stability through the business cycle.3 Adams and Ferreira (2009) studied a sample of US firms and found that female directors performed better in terms of committee attendance and participation, allocating more effort to monitoring responsibilities. However, their results suggested that the average effect of gender diversity on company performance was negative.4 In contrast, the latest research from MSCI ESG shows that companies with strong female leadership generated an ROE of 10.1 percent per year, compared to 7.4 percent for those without such leadership.5 Similarly, a 2015 study on women on the boards of Australian companies found a positive association between board diversity and company financial performance (ROE, ROA and Tobin’s q) after controlling for several firm-specific and governance variables.6 Country-level regressions show mixed countries, plus China). It was difficult to identify broad results for specific ASEAN countries patterns across ASEAN countries and China, but positive relationships between gender diversity and financial In addition to our ASEAN-specific analysis, we conducted performance were found. A summary of the key significant analyses individually for all countries in our study (six ASEAN results is provided in the table on the following page. 36 | BOARD GENDER DIVERSITY Financial impact of gender diversity at the country level using a statistical model, 2017 CHANGE IN FINANCIAL COUNTRY GENDER VARIABLE (KEEPING ALL OTHER FACTORS CONSTANT) VARIABLE If there is a 10% increase in women at both the board level and the senior management level 1.5% increase in ROA Singapore If there is a 10% increase in women at the senior management level 1.8% increase in ROE Thailand If there is a 10% increase in women at the board level 0.7% increase in ROA If there is a 10% increase in women at both the board level and the senior management level 1.6% increase in ROE Malaysia If there is a 10% increase in women at the senior management level 1.1% increase in ROE Philippines If there is a 10% increase in women at the board level 2.0% increase in ROA China If there is a 10% increase in women on audit committees 0.2% increase in ROA Note: We have only included country-level results that showed significant statistical results. As such, not all six countries are featured in this table. Source: Economist Intelligence Unit analysis We found that for every 10 percent increase in gender diversity 1.8 percent increase in ROE in Singapore. In the case of China, in board membership and senior management positions we noted a positive result when testing for the significance combined, there would likely be a 1.6 percent increase in ROE of female membership on audit committees: for a 10 percent in Malaysia and a 1.5 percent increase in ROA in Singapore. increase in gender diversity on an audit committee, there In the case of senior management positions alone, for every would likely be a 0.2 percent increase in ROA. It is important 10 percent increase in gender diversity we found that there to note that although the coefficients were small, the would likely be a 1.1 percent increase in ROE in Malaysia and a direction in all cases remained positive. Other empirical studies on Asia In the Asia region more broadly, several studies have evaluated the impact of board gender diversity on company performance. In 2015, Korn Ferry studied 10 Asia-Pacific countries and found that companies where women accounted for 10 percent or more of board membership had a higher ROE (3.6 percent) and ROA (1.3 percent) than companies where women accounted for less than 10 percent of board membership.7 In 2016, the ADB8 found similar results: higher ROE (3.5 percent) and ROA (0.9 percent) among companies with at least one female board member. However, a negative relationship has been observed in some Asian countries: the Korn Ferry and ADB studies found that board gender diversity was negatively associated with ROE and ROA in Malaysia; and an ASEAN study focused on the banking sector found that board gender diversity was negatively associated with company performance in Malaysia.9 According to the literature, these negative results could be attributed to women being more risk-averse than men, resulting in the implementation of slightly less risky strategies by boards with female members.10 BOARD GENDER DIVERSITY | 37 Drawing on information gleaned from our expert Through both a review of the existing literature and findings interviewees, Section 3.2 of this report examines possible from our own interviews, we identified the following key reasons why greater gender diversity could be associated non-financial factors. with improved company financial performance, particularly gender diversity in board membership and senior Hiring more women provides access to a management positions. wider pool of talent 3.2 THE LINK BETWEEN BOARD The presence of women on boards can add value to a GENDER DIVERSITY AND FINANCIAL company’s bottom line in several ways. First, when a company PERFORMANCE is open to hiring female board members, it automatically widens the talent pool from which it can draw. This allows To understand the link between board gender diversity and the company to attract top talent to drive operational company financial performance, and why greater gender excellence. Expanding the talent pool is especially important diversity might foster greater financial performance, it is in the ASEAN region, where more than 70 percent of senior important to consider the non-financial impacts of success executives said that companies struggled to build a steady that result in better financial performance, such as reputation, supply of top talent, according to the Human Capital decision-making, risk-taking and leadership styles. Leadership Institute (a think tank based in Singapore). A number of interviewees were optimistic about the region’s • Stronger talent pipeline talent pool, stating that there were currently a lot of women • Stronger decision-making Board gender • Increases board Financial in senior management positions. Although the numbers are diversity attendance performance • Different leadership style not as extensive as in the male talent pool, there are high • Risk-taking attitude proportions of female senior managers who could be board members. 38 | BOARD GENDER DIVERSITY Diverse perspectives in decision-making Greater female representation leads to more minimize the adverse effects of groupthink flexible leadership A gender diverse board benefits from unique insights and Women are believed to be more flexible in their views and fresh perspectives, enabling stronger decision-making. more open to different ways of thinking than men. They Gender diversity also facilitates more open discussion are also seen as less command-oriented, which helps to between board members, reduces groupthink and improves nurture a friendlier and less confrontational atmosphere, relations between board members and employees. 11 Our not only in the boardroom but also in relationships with interviews with regional experts strongly supported these employees. Interviewees confirmed that women often have findings. For example, interviewees agreed that the presence a different leadership style, generally speaking. According of female board members reduced groupthink, which they to Tran Anh Dao, deputy CEO, Ho Chi Minh Stock Exchange considered highly valuable—especially given the widely held (Vietnam), board meetings were friendlier when there were view that all-male boards often operate as a sort of “old-boys’ female board members, as women tended to gather ideas network”. Interviewees noted that even bringing a single inclusively and then arrived at effective conclusions. Women diverse perspective into an otherwise homogeneous group are also associated with comparatively different emotional can shift decision-making and prevent groupthink, which quotients and may be able to bring up perspectives that are otherwise encourages less dynamic discussions and negatively not necessarily obvious to men, who can be more focused on affects performance. Having more women on boards can also the tangible. Studies13 have claimed that certain attributes help to increase cognitive diversity, contributing to stronger are predominantly associated with males or with females, decision-making and leading to a greater understanding of while a few are considered gender neutral. Women are the needs and demands of the global market. This allows considered to be more empathetic and socially responsible, companies to sharpen their ability to spot reputational risks while men are considered to be more tolerant of stress and that may otherwise be missed entirely. more self-confident. Boards with greater numbers of women tend Women are considered to be more risk- to have better board governance averse than men Gender-diverse boards have also been found to improve It is often assumed that women are more risk-averse than corporate governance. For instance board attendance men, and that diversity produces more risk-averse behavior. improves, which means that board members are better However, it has also been argued that in top leadership informed and better equipped to make effective decisions positions, women have a risk-taking attitude that is not to drive performance. Good board attendance is often substantially different from that of their male counterparts. considered a proxy for good governance. A study by Adams For example, Chen and colleagues (2017)14 found that greater and Ferreira (2009)12 analyzed the attendance behavior of board gender diversity among US-listed firms was positively male and female directors in the United States and found associated with financial risk and with lower reputational that women were 30 percent less likely to experience risk (like tax avoidance), while Sila and colleagues (2016)15 attendance problems than their male counterparts. found no evidence of a link with equity risk. Interviewees Furthermore, the authors found that the presence of female in the Philippines acknowledged that many of the large directors contributed to a 9 percent reduction in male businesses in their country were run by women who were director attendance problems. very entrepreneurial and knew how to manage risk. BOARD GENDER DIVERSITY | 39 Greater female representation creates a Link between ESG Standards and presence of more transparent working environment women in senior leadership Having women on board committees with monitoring Environment Social Governance responsibilities—such as auditing, nomination, compensation and corporate governance committees— helps to create a more transparent corporate environment. One study found a positive link between board gender Sustainability Social & Ethical Transparency diversity and performance in firms with weak governance, Reputation Environmental Integrated which suggested that women’s commitment to monitoring standards Employee Reporting Relations & Gender Quality of Ethics & Compliance played an important role.16 Another study17 showed that Environmental Equity Practices Board Processes Reporting Human Rights firms with women on audit committees had lower audit and Dynamics CSR Initiatives fees, more effective internal controls and greater integrity in financial reporting. Although some of our regional experts Source: IFC (2018). claimed that there were no major gender differences in committee membership, others suggested that women How can firms ensure that diversity drives were more likely to assume monitoring roles due to their performance? backgrounds as accountants or lawyers, which were more suitable for such activities. Our analysis provides compelling evidence that board gender diversity can improve company performance. However, Improving environmental, social and the fact that global and regional studies have failed to governance performance find conclusive links between diversity and improved performance demonstrates that numerous barriers may There is considerable evidence that women on boards prevent diversity from automatically translating into better contribute to improving a firm’s ESG standards. A recent bottom lines for businesses. literature review by IFC 18 found positive correlations between board gender diversity and firms’ approaches to One particular challenge is the risk of tokenism—appointing environmental issues, such as environmental performance women to positions in order to fulfil a quota, appease and reporting, as well as the pursuit of environmental investors, or make the firm appear more progressive and initiatives. Gender-diverse firms were also seen to have a diverse. Motivations such as these may mean that women more positive social impact inside and outside the firm in are not appointed based on skill or merit, or that a woman’s areas such as corporate social responsibility, community contributions (however valid) are played down or dismissed. engagement, human rights and ethical conduct, as well as However, critical mass theory suggests that the risk of improving business culture, worker relations and work– tokenism diminishes once women account for a certain life balance. Firms with more female directors were shown proportion of board membership (in general, 30 percent). to have better corporate governance practices, such as internal controls, transparency, ethics and compliance. The potential for gender bias among local investors also Although not directly related to company performance, poses a challenge in countries where cultural norms these benefits can improve a firm’s reputation and standing call women’s leadership abilities into question. This can relative to its rivals. lead to investors favoring companies where boards are 40 | BOARD GENDER DIVERSITY predominantly male, which they may equate with better “Women have a different style, generally leadership. This may help to explain why companies may not speaking, of leadership. Women are see a more pronounced improvement in performance after increasing board diversity. For example, investors may have more inclusive, more open to different a perception that women lack the necessary human capital viewpoints. They are not command and and business experience to be effective board members19 control types of leaders and are more and may react negatively to their appointment. Greater likely to empower people. Those are very presence of international investors can help to alleviate this bias, as they are likely to view improvements in board gender good traits and with more women in diversity as a positive development. leadership, you are going to have that kind of culture. It is a culture that gets Lastly, there is a risk that boards will not take full advantage down to the organization and people feel of the skills and perspectives of female members. Women need to be given genuine opportunities to contribute in more. I think it creates an environment order for board gender diversity to improve performance. that brings out the best in people. I think Once women have assumed their seats on a board, it is it motivates people. That’s another important to appoint them to key committees (such as audit, finance and strategy committees) and to include reason why having a better balanced them in strategic planning and decision-making processes in leadership produces better results.” order to fully leverage their skills. A 2008 study by McKinsey HELEN YANG & Company20 identified nine leadership behaviors that were MANAGING DIRECTOR critical for improving organizational performance and found ELECTRONICS & IMAGING that women were more likely than men to demonstrate CUSTOMER SERVICE, DUPONT (CHINA) a number of these behaviors, including being a good role model, inspiring others and engaging in participative decision-making. Facilitating opportunities for female board members to actively implement leadership behaviors such as these will help to translate board gender diversity into improved company performance. Having board gender diversity can also help instil a sense of belonging in female employees. According to Grace Xiao, Global Head of Public Private Partnerships, UCB Trading (Shanghai) Co. Ltd, "diverse leadership actually helps morale, helps people feel they belong to the company". BOARD GENDER DIVERSITY | 41 Key takeaway Overall, companies with a higher proportion of women on their boards are generally associated with greater financial performance, measured through both ROA and ROE. On average, we found that ASEAN companies that had boards with more than 30 percent female membership had an average ROA of 3.8 percent, compared to 2.4 percent for companies with no women on the board. Similarly, companies with more than 30 percent female board membership had an average ROE of 6.2 percent, compared to 4.2 percent for companies with no women on the board. Having higher proportions of women on boards can provide numerous benefits to companies, including access to more talent, diversity in decision-making, the creation of a more transparent working environment and improvements in ESG standards. ENDNOTES 11 Yeney Widya Prihatiningtias. (2012). Gender diversity in the boardroom 1 IFC. (2018). Women in business leadership boost ESG performance: and firm performance: Evidence from Indonesian publicly listed financial Existing body of evidence makes compelling case. Retrieved from firms. Retrieved from http://www.canberra.edu.au/researchrepository/ https://www.ifc.org/wps/wcm/connect/0c46a0b8-cc3b-4da0-8dcf- file/a669fbb3-5a71-e95b-ac65-7fc71b83691c/1/full_text.pdf bde5af9ac166/PSO42.pdf?MOD=AJPERES 12 Adams, R. B., & Ferreira, D. (2009). Women in the boardroom and their 2 Based on the availability of data for all the variables required to conduct impact on governance and performance. Journal of Financial Economics, our analysis, we selected 104 companies from Indonesia, 286 from 94, 291–309. Retrieved from http://personal.lse.ac.uk/ferreird/gender.pdf Malaysia, 85 from the Philippines, 170 from Singapore, 232 from Thailand, 232 from Vietnam and 727 from China to include in our sample. 13 Andrews, S. (2013). Women, leadership and emotional intelligence. Retrieved from http://www.cedma-europe.org/newsletter%20articles/ 3 Credit Suisse. (2012). Gender diversity and corporate performance. TrainingOutsourcing/Women,%20Leadership%20and%20Emotional%20 Retrieved from https://www.calstrs.com/sites/main/files/file- Intelligence%20(Dec%2013).pdf attachments/csri_gender_diversity_and_corporate_performance.pdf 14 Chen, L. H., Gramlich, J., & Houser, K. A. (2017). The effects of board gender 4 Adams, R. B., & Ferreira, D. (2009). Women in the boardroom and their diversity on a firm’s risk strategies. Accounting & Finance. Retrieved from impact on governance and performance. Journal of Financial Economics, https://onlinelibrary.wiley.com/doi/full/10.1111/acfi.12283 94, 291–309. Retrieved from http://personal.lse.ac.uk/ferreird/gender.pdf 15 Sila, V., Gonzalez, A., & Hagendorff, J. (2016). Women on board: Does 5 Lee, L-E., Marshall, R., Rallis, D., & Moscardi, M. (2015). Women on boards: boardroom gender diversity affect firm risk? Journal of Corporate Finance, Global trends in gender diversity on corporate boards. Retrieved from 36(C), 26–53. Retrieved from https://econpapers.repec.org/article/ https://www.msci.com/documents/10199/04b6f646-d638-4878-9c61- eeecorfin/v_3a36_3ay_3a2016_3ai_3ac_3ap_3a26-53.htm 4eb91748a82b 16 Adams, R. B., & Ferreira, D. (2009). Women in the boardroom and their 6 Vafaei, A., Ahmed, K., & Mather, P. (2015). Board diversity and financial impact on governance and performance. Journal of Financial Economics, performance in the top 500 Australian firms. Retrieved from https://nest. 94, 291–309. Retrieved from https://www.sciencedirect.com/science/ latrobe/wp-content/uploads/sites/35/2016/04/Vafaei.-Ahmed.-Mather- article/pii/S0304405X09001421 2015-Final.pdf 17 Ittonen, K., Miettinen, J., & Vahamaa, S. (2010). Does female 7 Korn Ferry. (2015). Diversity matters: Adding colour to boards in APAC. representation on audit committees affect audit fees? Quarterly Journal Retrieved from https://www.kornferry.com/institute/diversity-matters- of Finance and Accounting, 49(3/4), 113–139. Retrieved from https://www. adding-colour-boards-apac jstor.org/stable/23074633?seq=1/analyze 8 Qian, M. (2016). Women’s leadership and corporate performance (ADB 18 IFC. (2018). Women in business leadership boost ESG performance: Economics Working Paper No. 472). Retrieved from https://www.adb.org/ Existing body of evidence makes compelling case. Retrieved from sites/default/files/publication/179587/ewp-472.pdf https://www.ifc.org/wps/wcm/connect/0c46a0b8-cc3b-4da0-8dcf- bde5af9ac166/PSO42.pdf?MOD=AJPERES 9 Tran Thi Thanhu Tu, Hoang Huu Loi, & Tran Thi Hoang Yen. (2015). Relationship between gender diversity on boards and firm’s performance 19 Dobbin, F., & Jung, J. (2012). Corporate board gender diversity and – case study about ASEAN banking sector. International Journal of stock performance: The competence gap or institutional investor bias? Financial Research, 6(2). Retrieved from http://www.sciedu.ca/journal/ Retrieved from https://www.researchgate.net/publication/260864943_ index.php/ijfr/article/viewFile/6844/4099 Corporate_Board_Gender_Diversity_and_Stock_Performance_The_ Competence_Gap_or_Institutional_Investor_Bias 10 The sample size for the Korn Ferry study was 1,000 companies for Asia- Pacific as a whole and included countries not in The EIU’s study (Australia, 20 McKinsey & Company. (2008). Women Matter 2: Female leadership, a New Zealand, Japan, India, Hong Kong and South Korea). The ADB study competitive edge for the future. Retrieved from https://www.mckinsey. had a similar sample size and similar country coverage to the Korn Ferry com/~/media/McKinsey/Business%20Functions/Organization/Our%20 International study. Insights/Women%20matter/Women_matter_oct2008_english.ashx 42 | BOARD GENDER DIVERSITY Chapter 4 Obstacles to advancing board gender diversity In this chapter, we identify and analyze key obstacles to enhancing board gender diversity in the ASEAN region, based on our review of the existing literature and targeted expert interviews. We found that women face an uphill struggle to reach the region’s boardrooms, compared to their male counterparts, due to a combination of country- and company-level obstacles that have been widely observed in global and country-specific literature. For example, cultural norms and traditions increase the risk of women leaving the workforce, influence perceptions about women’s aptitude for leadership and reduce the likelihood that women will be considered for top positions. While some of these challenges are experienced by women in other parts of the world as well, there are unique structural and cultural factors in the ASEAN region that create additional hurdles for women, such as women leaving the workforce for family reasons later in life, when they are in positions of seniority. “Old-boys’ networks” are also pervasive in the region, even in otherwise meritocratic societies like Singapore. There is no evidence that a talent gap exists between men and women in the region, which suggests that achieving board gender diversity should be a priority for ASEAN businesses. 4.1 COUNTRY-LEVEL OBSTACLES pipe problem”, usually happens mid-career, which tends PREVENTING WOMEN FROM RISING TO to depress career progression when women return to the SENIOR POSITIONS workforce. Asian women predominantly drop out of the Women who do not drop out of the workforce after having workplace due to household pressures children often face the burden of being the primary caregiver in addition to their growing workplace commitments. Advancing board gender diversity requires policies that According to interviewees, women have to surmount ensure women have opportunities to rise to senior leadership more obstacles and “juggle more balls in the air” than men, roles. Work–family balance has long been recognized as primarily because cultural norms dictate that women are a major barrier to women climbing the corporate ladder. responsible for looking after children and households. A Even in more developed countries around the world—where 2016 survey1 found that the competitive education systems childcare facilities are more widely available, and where in China and Singapore also compelled many women in parental leave is more generous—a much higher proportion senior positions to take time out of the workforce when of women than men are compelled to leave the workplace their children reached a certain age in order to help them after having children. This phenomenon, known as the “leaky prepare for major examinations. This barrier, which has been BOARD GENDER DIVERSITY | 43 referred to as the “maternal wall”, has a further impact on family members, often just before they are able to make women’s career progression. While more affluent countries the leap from senior management positions to the C-suite like Singapore are likely to offer flexible work arrangements or the board. Interviewees, particularly in China, confirmed to try and address these challenges, take-up is often low that women were expected to take responsibility for caring because these arrangements can be seen as evidence of a for elderly family members, who were highly dependent on reduced commitment to the job. them for cultural reasons. “At PwC, we did a survey of women A country’s dependency ratio is the ratio of dependents aged 28 to 40. Although 82 percent of (people younger than 15 or older than 64) to the working- Malaysian women valued flexibility at age population (those aged 15 to 64). As shown in the figure work, 47 percent felt nervous about the below, these ratios are declining for most of the countries in our study, but they remain within the range of 40–60 impact of having children on their career percent, implying a relatively high level of dependence. – what they called the ‘motherhood penalty’. [Some] 55 percent of them felt that they were overlooked for career- Age dependency ratio, by country, 2017 (%) advancing opportunities. Certain 80.0 73.7 assumptions are also made about 70.0 women – for example, superiors think 60.0 57.5 that when a woman gets married, she 50.0 can’t possibly travel or can’t be given 40.0 overseas opportunities.” 41.1 39.5 30.0 PAULINE HO 20.0 ASSURANCE AND PEOPLE PARTNER 1997 2007 2017 Indonesia 58.4 52.3 48.5 PWC MALAYSIA; STEERING COMMITTEE MEMBER Malaysia 62.9 52.0 44.1 30% CLUB, MALAYSIA CHAPTER Philippines 73.7 65.9 57.5 Singapore 41.1 37.4 38.7 Thailand 46.3 40.0 40.2 Together, these responsibilities mean that some women Vietnam 67.8 47.5 43.3 China 48.7 36.4 39.5 seeking top positions feel they have to forgo having children altogether. According to some interviewees, a large Source: World Bank Data (2017). proportion of female leaders who make it to senior levels did not have children. Universal stereotypes about female attributes and behavior persist The need to care for older members of the family, who often live in the same household, also drives workplace Unconscious bias has long been identified as a major factor drop-outs among women in the region. Earlier in women’s affecting women’s prospects in the workplace—at all levels. careers, the presence of extended family members (such Stereotypical ideas about “good” leadership frequently focus as grandparents) can be beneficial, as they can assist with on qualities traditionally perceived as masculine, which childcare. Later in their careers, however, women face undermines women’s prospects of making it into the C-suite pressure to leave the workplace to care for these elderly or on to the board. Studies focused on Asia 2 have found that 44 | BOARD GENDER DIVERSITY female workers are often seen as having more empathetic, Asia Pacific Consumer Market at Korn Ferry International maternal qualities, which are deemed less suitable for top (Singapore), noted that one would expect to see a much better executive positions than the aggressive, confident leadership gender balance at the top in Singapore, given that women styles more often associated with men. According to accounted for half the college-graduated population and were interviewees, women tended to have a different approach. very active in the business world. She identified “headwinds They tended to ask a lot of questions, asked for input and and unconscious bias” as reasons for Singapore’s current lack feedback, to include the team in decision-making, and to of gender balance in the upper echelons of business. build relationships. Gender differences in self-evaluation can compound Women also tend to be discouraged from emulating a more stereotypical assumptions about female employees and allow aggressive leadership style to get to the top, either as a men to self-promote themselves into the top positions, result of cultural norms about female behavior (for example, regardless of whether they are best suited to the role. A 2016 that it is not acceptable to be outspoken) or because they Credit Suisse report3 highlighted studies that showed that are worried about being typecast as “bossy”. Those who most female MBA students tended to self-report their own do manage to secure top positions may also be subject to performance as equal to their co-workers, while most male the misplaced belief that their promotion is the result of students reported themselves as above average. Interviewees positive discrimination, rather than a reflection of their noted that this challenge was particularly acute in Asian skill and experience. As a result, progression into the upper societies, where cultural norms mean that women tended to echelons of leadership is constrained for women, regardless play down their achievements. Charlene Ge, vice president of of whether they conform to cultural norms or reject them. HR, climate, control and security, Asia at United Technologies (China), explained that this in part reflected traditional values This challenge of unconscious bias was brought up by and women’s upbringing in the region, where they were numerous interviewees. In the context of Singapore, encouraged not to boast about themselves or behave too interviewees noted that while there had been much aggressively. Other interviewees noted that young women discussion about the importance and benefits of board often did not pursue top positions because they wanted to gender diversity, many companies were still not fully wait until they were “perfect” for the role, by which time it may convinced. Some company boards are also not comfortable be too late. recruiting directors who they do not know, or who may not hold the same views on gender roles in family and business. Interviewees noted that cultural expectations could also There is also still a perception that men are “more qualified” inhibit men from supporting female advancement at work. than women. As a result, leaders are often men, who in turn For example, negative attitudes towards male caregivers connect better with other men. Alicia Yi, managing director, can prevent men from dropping out of the workforce to look BOARD GENDER DIVERSITY | 45 after their children (which would free up women to continue argued that there is not enough female talent to create at work), while traditional ideas about male breadwinners more gender-inclusive boardrooms, and that a push for can fuel embarrassment about men earning less than their gender diversity will lead to less-qualified women being spouses. Interviewees further emphasized that women given token directorships, which will be detrimental to would never ask men to help them take care of children company performance. The evidence, however, suggests at home, because women were expected to fulfil the role that this so-called talent gap may be a myth, at least in of primary caregiver. Changing attitudes, such as these, developed countries. For example, one 2015 US study by undoubtedly presents one of the biggest opportunities to MSCI4 showed that even though a higher proportion of male achieve gender diversity in the Asian workplace. directors had C-suite experience compared with female directors, differences in non-C-suite leadership experience Is there enough talent? were negligible between the two genders, and female directors actually outperformed male directors in terms of In discussions about board gender diversity, it is sometimes educational attainment. What makes a good board member? Having token female board members is not conducive to promoting the capabilities of women in business and may even be detrimental to company performance. But, what makes a good board leader in the first place? It is difficult to make quantitative assessments about the quality of board members, except in areas such as attendance; beyond that, a company's success is not easily attributable to the contributions of individuals on the board. Nevertheless, there is broad agreement on certain qualities any good board member must have, regardless of gender, including the following: Engagement: Engagement can be measured directly in terms of attendance, but merely attending board meetings is not enough. A good board member must come prepared, understand the challenges and opportunities facing the firm, and know the ways in which they can influence decision-making. Context: Experience is vital to being an effective board member, but a growing number of women on boards means that many will be sitting in board meetings for the first time. However, even newcomers can make valuable contributions when they are sitting on the right boards—for example, boards of companies in the same industry, or with similar business models. The business’s stage of development is also important, given that the experience that benefits a large, established firm may not necessarily translate well in a start-up. Mentorship: Assuming the role of mentor is crucial for board members, who must take it upon themselves to identify and nurture talent within their firms. Good board members are committed to passing on their expertise and experience to future generations. Be brave! A good board member must be willing to speak out and change minds. However, humility is also a good trait, particularly as a newcomer, because board membership is an ongoing learning experience. 46 | BOARD GENDER DIVERSITY When we looked at the six ASEAN countries plus China, our higher workforce dropout rates among women, despite study did not reveal much evidence of a talent gap. Most of having the necessary educational qualifications. the countries in our study already have relatively high levels of female participation in the labor force, as well as a large pool Interestingly, there does not seem to be a strong link be- of qualified women with technical backgrounds, although tween board gender diversity (or female participation in the there is evidence of talent gaps in certain industries. The workplace in general) and female representation in politics. region also has higher-than-average numbers of women In our study, Thailand performed best in terms of board in senior executive positions compared to other parts of gender diversity but it has the lowest share of women in the world, as well as larger numbers of female CEOs. For parliament, as well as the lowest number of female ministers example, a 2016 study by Credit Suisse found that 5.4 percent 5 in government. In contrast, Singapore performed the worst of CEOs in emerging Asian economies were women—higher among the six ASEAN countries in terms of board diversity, than the global average of 3.9 percent. The region also had but has an above-average share of women in parliament. nearly twice as many female chief financial officers (CFOs) as Europe and a higher number of female business unit heads Parliamentary/ministerial positions, ASEAN than North America. This provides the region with a pipeline countries, 2017 (%) of talent to achieve board gender diversity. PARLIAMENT MINISTERIAL BOARD SEATS COUNTRY (% OF FEMALE POSITIONS (% OF FEMALES) SEATS) (% FEMALE) Female educational attainment figures in ASEAN also do not Indonesia 14.9 19.8 22.9 show evidence of a talent gap: female literacy rates exceed Malaysia 13.5 10.4 5.7 90 percent in all six countries, and tertiary enrolment rates Philippines 13.2 29.5 20.0 Singapore 11.9 23.0 5.6 are even higher among women than men. However, a gender Thailand 20.4 4.8 4.2 gap begins to appear when looking at participation rates for Vietnam 15.4 26.7 9.1 young workers as a whole, and this gap gets progressively Average 15.7 19.0 11.3 worse at the senior management and boardroom level. Source: UNESCO, Economics Intelligence Unit analysis. Talent pipeline, ASEAN countries, 2017 (%) FEMALE Key takeaway FEMALE TERTIARY BOARD WORKERS, SENIOR STUDENTS SEATS COUNTRY AGE 30–39 (% MANAGEMENT (% OF OF WORKERS, (% OF FEMALES) (% OF In ASEAN, women face an uphill struggle to reach the TERTIARY FEMALES) AGE 30–39) STUDENTS) boardroom, compared to their male counterparts. Indonesia 51.9 38.2 18.4 14.9 While some of the challenges are experienced by Malaysia 52.3 39.0 26.2 13.5 Philippines 55.5 36.0 32.8 13.2 women elsewhere in the world as well, there are unique Singapore 51.6 49.5 27.2 11.9 structural and cultural factors in the ASEAN region that Thailand 57.7 46.9 29.7 20.4 Vietnam 54.2 49.1 16.8 15.4 create additional hurdles for women. For example, Average 53.7 41.2 26.0 15.7 women are often expected to leave the workforce later Source: UNESCO, ILO, Economics Intelligence Unit analysis. in their careers to care for elderly family members, and At the country level, none of our interviewees cited a lack “old-boys’ networks” are pervasive throughout the of female talent as a constraint on board gender diversity region. Cultural expectations and unconscious bias are either. Indeed, in line with educational enrolment data, also prominent, region-specific inhibitors that could interviewees noted that women were as well educated (if prevent female advancement at work. not better educated) than men. However, they did report BOARD GENDER DIVERSITY | 47 4.2. COMPANY-LEVEL OBSTACLES merit. Instead, membership tends to be given to the faces PREVENTING WOMEN FROM RISING TO that fit best and are well known. SENIOR POSITIONS This approach appears to be common in the region, even Selection processes rely heavily on existing in countries that pride themselves on being meritocratic, networks and “old-boys’ networks” such as Singapore. Interviewees in Singapore noted that Singaporeans tended to assume there was no gender bias in The board member selection process contributes to the workplace, but that statistics on gender balance at the the persistence of the glass ceiling in ASEAN countries. C-suite level did not bear this out. Ida Tiongson, president, Interviewees agreed that potential candidates tended Opal Portfolio Investments (Spv-Amc) Inc., suggested that to be identified through the region’s male-dominated the problem of “old-boys’ networks” had been exacerbated in networks, rather than through more formal search the Philippines by the fact that many of the country’s most processes, which would be more likely to identify potential prestigious schools only accepted boys until recently. Now female candidates from within a company’s ranks. This that these schools accepted girls, Ms Tiongson suggested issue was also highlighted in a 2012 Indonesian study. 6 that the power of these networks may be diminished for the Harry O’Neill, partner, CEO and Board Practice, Heidrick next generation of leaders. & Struggles, stated that while there were plenty of well- qualified women, there was no opportunity to suggest Female leaders need to be visible them for board appointments because companies did not use formal search processes. Instead, they find potential Even though ASEAN has a higher share of female CEOs and candidates from among those who board members already senior managers than other parts of the world, the cultural network with, who are predominantly men. This emphasis barriers discussed in this chapter offset the impact of these on personal friendships and connections also means that female leaders as role models for women. This problem is board memberships are not always awarded based on not limited to Asia; in the United Kingdom’s Davies Review, 48 | BOARD GENDER DIVERSITY many respondents expressed concern about a lack of senior confidence, which discouraged them from pursuing careers women to act as role models, which they felt was limiting in these lucrative fields, even if they did as well as men in the number of women in senior positions. In our study, 7 these subjects at school. interviewees like Grace Xiao, global head of Public Private Partnerships, UCB Trading (Shanghai) Co., Ltd., noted the The final chapter in this report explores opportunities to importance of role models and mentors in encouraging advance board gender diversity, taking into consideration women to aspire to senior positions (“If you can be there, I the myriad of challenges and obstacles discussed in this can also be there”). The importance of mentorship schemes chapter. The experiences of companies that have taken board and other company policies designed to encourage direct gender diversity seriously, and the experiences of countries contact between young female employees and women that are working to integrate diversity into policy-making, or men in senior positions was a recurring theme in our suggest that none of these challenges are insurmountable, interviews, and most interviewees agreed that such schemes even if change does not happen overnight. were effective in bringing more female talent to the top. Smaller, family-owned firms suffer from a slightly different visibility problem: a lack of female board members who are not family members. Female board members in these Key takeaway companies tend to come from the families that own them, creating a general perception that positions will In ASEAN, the board member selection process be awarded primarily to family members. This may often contributes to the persistence of the glass discourage other women in senior positions from aspiring ceiling. Potential candidates tend to be identified to board membership. Training and mentorship schemes through the region’s male-dominated networks, in these companies also tend to be biased in favor of family rather than through more formal search processes. members or people groomed to represent the families’ Smaller, family-owned firms—which are large in interests. Ricardo Nicanor N Jacinto, former CEO of ICD in number in ASEAN countries—also suffer from their the Philippines, noted that as many as half of the women own unique visibility problem: a lack of female in training schemes in these companies fell into these two board members who are not family members. In categories, leaving fewer opportunities for women outside these companies, female board members tend to the family to reach the top. come from the families that own them, potentially discouraging other women from pursuing senior A lack of visible female leaders is also problematic in indus- leadership opportunities. tries that are traditionally male dominated, such as those with limited client and customer interaction—an area where female leaders tend to excel. Many of these industries are in science, technology, engineering and maths (STEM) fields, where women tend to be under-represented in terms of their overall participation rate and often struggle to reach top positions. A 2015 report by the United Nations Educational, Scientific and Cultural Organization (UNESCO) on women in STEM in Asia8 highlighted how psychosocial issues such as stereotyping tended to affect women’s motivation and BOARD GENDER DIVERSITY | 49 ENDNOTES 5 Credit Suisse (2016). Thought leadership from Credit Suisse research and the world’s foremost experts. Retrieved from https://glg.it/assets/docs/ 1 Willis Towers Watson. (2016). Women leadership in Asia Pacific. Retrieved csri-gender-3000.pdf from https://www.willistowerswatson.com/en/insights/2016/09/ Women-in-leadership-in-Asia-Pacific 6 National University of Singapore (NUS), Centre for Governance, Institutions and Organisations, NUS Business School. (2012). Indonesia 2 Willis Towers Watson. (2016). Women leadership in Asia Pacific. Retrieved boardroom diversity report 2012: Female footprints in IDX-listed from https://www.willistowerswatson.com/en/insights/2016/09/ companies. Retrieved from https://bschool.nus.edu.sg/Portals/0/images/ Women-in-leadership-in-Asia-Pacific CGIO/Report/Indonesia%20Boardroom%20Diversity%20Report.pdf 3 Credit Suisse. (2016). CS Gender 3000: The reward for change report 7 UK Government. (2011). Women on boards. Retrieved from https:// analysing the impact of female representation in boardrooms and senior assets.publishing.service.gov.uk/government/uploads/system/uploads/ management. Retrieved from https://www.credit-suisse.com/corporate/ attachment_data/file/31480/11-745-women-on-boards.pdf en/media/news/articles/media-releases/2016/09/en/csri-gender-3000. html?t=55_0.437909142359756 8 UNESCO Bangkok. (2015). A complex formula: Girls and women in science, technology, engineering and mathematics in Asia. Retrieved from 4 Lee, L-E., Marshall, R., Rallis, D., & Moscardi, M. (2015). Women on boards: http://www.unescobkk.org/resources/e-library/publications/article/a- Global trends in gender diversity on corporate boards. Retrieved from complex-formula-girls-and-women-in-science-technology-engineering- https://www.msci.com/documents/10199/04b6f646-d638-4878-9c61- and-mathematics-in-asia-1/ 4eb91748a82b 50 | BOARD GENDER DIVERSITY Chapter 5 Opportunities for advancing board gender diversity Despite existing barriers that prevent women from rising to senior business positions in ASEAN countries, there are numerous opportunities to make progress towards achieving greater board gender diversity. Certain policies are critical to this effort, such as expanding parental leave to include men, and changing codes of corporate governance to include gender diversity disclosures. Companies and business leaders must also commit to improving diversity (for example, through mentoring and sponsorship programs), and must be proactive in promoting its benefits to their peers. Lastly, women can establish intra- and cross-company networks to facilitate peer-to-peer support and promote their skills and experience. In this chapter, we identify and analyze key opportunities to enhance board gender diversity in the region, at both the country and company levels. Many companies in ASEAN countries already have success stories, having prioritized gender diversity and taken concrete steps to chip away at the glass ceiling. However, much more needs to be done to ensure that women take their rightful place on company boards. 5.1 COUNTRY-LEVEL OPPORTUNITIES In the ASEAN region, Filipino regulators have already added FOR ADVANCING BOARD GENDER gender diversity language to their codes of corporate DIVERSITY governance. Other countries in our study, however, are yet to follow suit. For example, gender diversity targets and Corporate governance codes are the most requirements have not been included in Singapore’s revised cost-effective public intervention code of corporate governance (effective 2019), although it does encourage firms to enhance their search processes in Among interviewees, changing corporate governance order to “go beyond their immediate circles of contacts”.2 codes to promote board gender diversity was almost This highlights an opportunity for regulators in the region universally seen as the key mechanism for increased to adopt a more proactive approach to gender diversity, female representation in boardrooms. To a large extent, particularly as local investors have not taken an active role this is because relying on corporate governance was seen themselves in driving change. Interviewees suggested that as imposing less of a burden on companies than measures local investor bases, whether institutional or retail, tended such as quotas. A 2012 Global Economic Symposium study 1 to be more passive in the region as a whole, and not just with also argued that including gender diversity language in regards to gender diversity. They highlighted opportunities these codes reinforced companies’ images as competitive for investors to assume a more active role in promoting board and innovative. Changes to corporate governance codes gender diversity, emphasizing the importance of securing have produced extremely encouraging results in European institutional investor buy-in. For example, institutional countries like Finland, which has achieved high levels of investors can be encouraged to enquire about diversity at board gender diversity without imposing quotas. the annual general meetings of companies with all-male BOARD GENDER DIVERSITY | 51 boards or limited female representation (for example, where Even with stricter codes, however, non-listed firms will still women account for less than 30 percent of board members). face far fewer requirements in terms of what they need to disclose publicly, and what they should aspire to in terms “[In Thailand] gender diversity awareness of diversity. This means that the impact of changes to and improvement does actually coincide corporate governance codes may take longer to trickle down with thorough improvement of the to smaller, family-owned firms, which are a significant part practice of corporate governance because of the business landscape in the ASEAN region. Alicia Yi, we have been working on this for the past managing director, Asia Pacific Consumer Market at Korn 20 years actively. So, the regulators are Ferry International (Singapore), noted that the focus on really supporting, investing and educating gender diversity in the region’s family-owned firms remained all companies on good corporate underdeveloped, and that while none of these firms were governance practices and principles. explicitly “against” diversity, they did not tend to be strict The companies have the roadmap if they about carrying out due diligence when selecting board want to improve corporate governance members. Instead, they often appoint people whom they or if they want to practise what are know and trust, rather than searching for candidates who the elements. It is not only the cultural meet the board’s requirements in terms of the business and side, but it is also on the education and market as a whole. This problem extends to the selection of advocacy of the regulators.” female board members. Mak Yuen Teen, associate professor at the National University of Singapore, noted that many ADA INGAWANIJ FORMER EXECUTIVE VICE PRESIDENT, THAI non-executive directors were part of or related to the INSTITUTE OF DIRECTORS founder family. The power of networks: the 30% Club Malaysia is the only ASEAN country in our study with a formal, government-driven corporate gender target. In 2004, it introduced a national policy to increase women’s representation to at least 30 percent of decision-making roles in the public sector. In 2011, the Malaysian cabinet extended the policy to the private sector, mandating that women hold 30 percent of senior management positions in companies with more than 250 employees. In 2015, the country set up a chapter of the 30% Club—a global initiative that aims to achieve at least 30 percent female board membership on FTSE 100 boards, the critical mass of female representation needed to perpetuate further diversity. The club supports sustainable, business-led voluntary change designed to improve the current gender imbalance on boards. In Malaysia, members include chairs and business leaders committed to bringing more women onto Malaysian boards. In July 2017, the 30% Club launched a mentorship program with PwC Malaysia, where women identified as “board-ready” are paired with experienced directors or existing board members. The program aims to mentor 100 women by 2020. According to Pauline Ho, PwC Malaysia’s people partner and steering committee member of the 30% Club Malaysia, the club tackled demand and supply-side factors by focusing on three pillars: the boardroom pillar, through which the club tackled the demand issue by organizing awareness-building roundtables with board or nomination committees; the talent pipeline pillar, through which the club identified board-ready female candidates and worked with individuals in capacity-building and mentorship programs; and the research pillar, through which the club sought to collect data and identify further opportunities for diversity through collaboration with research organizations (for example, gathering data on board members who may be stepping down in order to plan for suitable female replacements). 52 | BOARD GENDER DIVERSITY Family-friendly policies are needed, as are seen elsewhere in the world, with the exception of certain changes to social and cultural norms Scandinavian countries). Some of our interviewees noted the stark differences between maternity and paternity leave The global and regional literature, as well as our interviewees, as particularly problematic, with many companies offering highlight the need for policies that will help women in ASEAN far fewer days of paternity leave. Existing legislation in the countries manage responsibilities as both business leaders countries in our study confirms that men have extremely and parents. As the previous chapter explained, having limited access to paternity leave. While all ASEAN countries children can be less of a challenge in Asia than in other parts of offer female workers at least 60 days of paid maternity the world—for example, because extended family members, leave—and up to as much as six months in Vietnam—only such as grandparents, often live in the same household Indonesia, the Philippines and Singapore offer any form of and can help with childcare. As a result, some interviewees government-mandated paid paternity leave in the private described the environment as conducive to women working sector. This highlights an opportunity for governments in in many ways. Interviewees from Malaysia also discussed the the region to establish legislation that provides parental importance of the country’s supportive workplace provisions, leave to both women and men, signalling that responsibility including flexible working hours for parents and equal pay, for childcare is shared between parents, rather than being an which often tended to go beyond statutory requirements. exclusively female responsibility. Nonetheless, it is still primarily women who face the double burden of working and caring for children, along with the Declining birth rates in many countries in the region may additional responsibility of taking care of elderly relatives. also help to reduce family responsibilities for women and This combination of family responsibilities takes a toll on the increase opportunities to stay in the workforce. Among the amount of time and effort women in the region can dedicate countries in our study China, Singapore and Thailand all had to work, which in the longer term affects their likelihood of fertility rates below two children per woman, as depicted in reaching top positions in the C-suite or the boardroom. the table below,3 and Indonesia and Malaysia were not far behind. In China, the now abolished One-Child Policy has helped to change attitudes towards women and ensure that Paid parental leave, by country girls receive many of the same opportunities as boys. Length of paid Length of paid Country maternity leave paternity leave Indonesia 3 months <3 weeks Total fertility rate, 2016 Malaysia 60 days No paid leave Total fertility rate Philippines 6 weeks <3 weeks Country (children born/woman) Singapore 16 weeks (120 days) <3 weeks Indonesia 2.3 Thailand 90 days No paid leave Malaysia 2.0 Vietnam 4-6 months <3 weeks Philippines 2.9 China 90 days No paid leave Singapore 1.2 Source: UN Gender Stats (2018), World Policy Centre (2016). Thailand 1.5 Vietnam 2.0 Among the various strategies that can be implemented China 1.6 at the country level to tackle this problem, policies that Source: World Bank (2016). support men to play a larger role in childcare are crucial. As discussed earlier, this will require a significant evolution in Interviewees also suggested that changes could be made cultural attitudes, which is unlikely to be fully realized within to education systems to increase the number of women a generation (as evidenced by the slow pace of change in STEM fields. Maan Hontiveros, chair, Philippines AirAsia BOARD GENDER DIVERSITY | 53 (Philippines), noted that the Filipina CEO Circle is already There is less support for quotas focussed on schools and participating in lectures and seminars in order to encourage more women into science While there has been some interest in implementing quotas and technology fields. in the region, the challenges encountered by Malaysia as it introduces its target have made it harder to garner region- Thailand’s novel approach wide support. There does appear to be a consensus that female talent pools are large enough to support the use At the nexus of company and investor interaction, stock of quotas, but there is concern that inadequate search exchanges are uniquely positioned to influence capital and nomination processes may mean that quotas merely markets and further the aim of achieving greater female increase the risk of tokenism. representation in boardrooms, and in senior leadership positions more broadly.4 The United Nations’ (UN) Overall, interviewees had mixed opinions about quotas. Sustainable Stock Exchange (SSE) initiative helps stock Some explained that they were not explicitly in favor of exchanges around the world develop practices that formal quotas because they felt this achieved the aim of align with the Sustainable Development Goals (SDGs), board gender diversity in the “wrong” way. Instead, they including the gender-specific targets. felt guidance and encouragement from regulators would be a more positive development, including asking all-male In March 2018, the Stock Exchange of Thailand (SET) boards to explain their lack of diversity. signalled its commitment to board gender diversity by participating in the “Ring the Bell for Gender Equality However, other interviewees suggested that all-male boards 2018” campaign, run by stock exchanges worldwide. SET were likely to stay that way unless they were forced to make President Kesara Manchusree led business leaders in a change. For example, a number of interviewees suggested ringing the bell at the opening of the afternoon market that nothing would change if there was no penalty for trading session in Bangkok and announced that the 5 resisting board gender diversity, and if companies were not SET encouraged companies to appoint more women open to the idea that diversity improved performance. This to their boards of directors and top management led some interviewees to argue that change may not come positions—a move that would help to grow and sustain soon enough without the use of formal quotas, and that businesses in Thailand. The SET has also collaborated with “waiting” for attitudes towards diversity to change would academic institutions such as Kasetsart University and not translate into results. Chulalongkorn University to commission research studies related to board diversity in Thailand’s publicly listed firms.6 A Malaysian review suggests that this is a valid concern: only 185 out of 870 (21.3 percent) companies surveyed in Two Thai listed companies, Thai Airways International 2015 disclosed their board diversity policy following changes PCL and Central Group, are already among the more to corporate governance in the country.8 As a result, some than 1,000 companies worldwide that have signed the interviewees suggested that quotas should perhaps be “CEO’s Statement of Support” for UN Women’s “Women’s encouraged, which would at least enable research and Empowerment Principles”. These principles offer debate on whether or not they work. benchmarks for business leadership, fair treatment of women and men at work, and ensuring the health and well-being of female employees and promoting their education and training, among other things.7 54 | BOARD GENDER DIVERSITY Country-level initiatives promoting board gender diversity, 2018 Country/Initiative Indonesia Malaysia Philippines Singapore Thailand Vietnam China Presence of corporate governance recommendations Presence of official targets for board diversity Law mandates paid/unpaid maternity leave Law mandates equal remuneration for females and males for work of equal value Law mandates non-discrimination based on gender in hiring Non-discrimination clause mentions gender in the constitution > 20 percent seats held by women in the parliament Source: World Bank Data (2018), Economist Intelligence Unit analysis. Stock exchanges can do what governments attention from investors, which could incentivize other have yet to exchanges to follow suit. Having a female stock exchange director can also help. The previous director of the Stock Through their financial regulators, governments can play Exchange of Thailand, Kesara Manchusuree (2014–2018), a key role in establishing the groundwork for board gender was notable for her efforts to promote ESG standards for diversity by making changes to corporate governance codes. listed firms.10 However, as we have seen, these efforts are still in their Stock exchanges can also participate in global efforts to infancy in ASEAN. Rather than wait until regulators promote gender diversity, such as the Ring the Bell for recognized the importance of promoting board gender Gender Equality ceremony that takes place every year on diversity, the directors of national stock exchanges can take International Women’s Day. Last year, 65 stock exchanges the lead in promoting disclosure of gender diversity targets, around the world participated in this event, including those pay parity, parental leave and flexible work policies, and can in the Philippines, Singapore and Thailand.11 This ceremony help to foster networking and training for female leaders.9 is partly organized by the Sustainable Stock Exchanges Stock exchanges that make active efforts to improve board initiative—a UN-led effort to promote sustainable gender diversity are also likely to get positive publicity and investment and advance the ESG agenda. BOARD GENDER DIVERSITY | 55 Make them known: the importance of (such as local stock exchanges and business chambers) can directories and data also be important sources for regular updates to gender- related data. Publicizing the efforts of women who already sit on boards can be a simple, yet effective way of expanding the female “The female leadership barrier needs to talent pool for companies seeking to fill vacant board be addressed by focusing on presenting seats. IFC recently published Sri Lanka’s first directory of opportunities rather than placing women this kind: Women on Boards of Companies Listed in the in key positions as a band-aid solution.” Colombo Stock Exchange.12 The directory lists all the women currently serving on company boards of listed firms in the MILDRED TAN country, detailing their individual executive appointments CHAIR DIVERSITY TASK FORCE REGARDING WOMEN and the industries in which they serve. In many cases, short ON BOARDS; MANAGING DIRECTOR OF ERNST & biographies (including board committee roles and business YOUNG ADVISORY PRIVATE LIMITED, SINGAPORE achievements) are also provided. Directories such as this can considerably ease the burden of finding the right women for 5.2 COMPANY-LEVEL OPPORTUNITIES board positions. FOR ADVANCING BOARD GENDER DIVERSITY Beyond directories, greater availability of gender- disaggregated data could help advocacy groups, researchers Change must begin from within the and the media to understand the current levels of gender company, and senior leaders need to play a diversity, and to track progress over time. At present, much bigger role of the research on gender diversity in the region comes from one-off studies, whose data and findings lose relevance over At the company level, it is vital that the leadership supports time. National statistical agencies should play their part in board gender diversity and proactively adopts strategies in producing indicators on gender, but other organizations pursuit of this goal. According to a 2016 study by McKinsey 56 | BOARD GENDER DIVERSITY & Company, CEO commitment was one of three “game with leading business executives, recruitment agencies changers” that helped certain firms rank in the top tier for and business associations could be organized to share gender diversity. The study found that a committed CEO— objective data and insights on the benefits of board gender male or female—ensured that gender diversity became a diversity, including its impact on company performance. strategic priority for the firm, and that senior managers Maan Hontiveros, chair, Philippines AirAsia, highlighted the were on board with this priority (although the trickle-down important work that directors’ associations already do in effect weakened at the middle manager level). A 2011 study setting up such workshops and seminars. by the Global Economic Symposium specifically highlighted 13 the importance of a male “champion of change”, referencing There are also a number of other opportunities to improve a strategy by Australia’s Human Rights Commission to board gender diversity at the company level in ASEAN recruit male CEOs to be advocates for gender diversity in countries. For instance, formalizing and improving search their companies’ leadership. and nomination processes for board positions would ensure that these processes were more transparent and Our interviewees similarly emphasized the importance of inclusive. Boards and their nominating committees must leadership commitment and top-down change, recognizing consciously broaden their search criteria and present that business leadership commitment in particular is a a more diverse pool of female and male candidates for common feature of best practices. An unequivocal statement consideration. Interviewees noted that boards should also of intent, supported by a clear and transparent action plan challenge their nominating committees and management and communicated from the top of the organization, was teams to seek board or leadership candidates who were not identified as the first and most important step towards similar to the current profile of leaders. Alicia Yi, managing achieving organizational change. As leaders of organizations, director, Asia Pacific Consumer Market at Korn Ferry boards must create an inclusive culture that is open to International (Singapore), highlighted the importance of diversity and discussion, and must commit to advancing encouraging companies to more actively seek out diverse change on their agendas. There should also be a clear focus talent at every level. She suggested that companies could on establishing programs and talent pipelines that identify, achieve this in numerous ways, including holding senior nurture and promote female talent, which requires leaders leaders accountable for achieving diversity at every level of to understand the barriers to women’s career development management, monitoring and encouraging diversity, and and take the necessary steps to break them down. training people in understanding the importance of diversity. Finding this support in companies with traditionally Encouraging mentorship programs within companies is minded, male-dominated leadership can be challenging, also an important mechanism for increasing the number as it requires a strong understanding of the merits of board of women in senior management. Some interviewees from gender diversity. According to some interviewees, general companies like United Technologies (China) and Heidrick managers who have studied abroad tended to have a more & Struggles noted that women were more likely to reach international view and were more likely to be open to the idea senior positions if they had participated in such a scheme. of having women in senior leadership positions. Generally Mentorship programs can inspire female leaders to seek speaking, however, male founders and leaders tended to be out the necessary encouragement and training to pursue traditional, which resulted in companies being managed in a directorship, as well as putting them on the radar for more traditional ways. Despite this, there are opportunities eventual promotion to the board. Having a female mentor to build critical support for board gender diversity among and a male champion was seen as a particularly powerful business leadership in the region. For example, workshops combination. BOARD GENDER DIVERSITY | 57 “To move into a more senior role, most of pool to choose from when appointing board members in us probably have a good boss, mentor or the future. Possible policies include providing flexible work coach to facilitate the move—someone hours, promoting gender equality throughout the business who can sponsor you, in a way, to and running diversity events. move ahead in your career. Generally, companies will arrange some sort of In companies where such efforts are limited, women can set mentorship program, with people from up their own cross-company networks to assist prospective outside and internally.” female board members in advancing their careers through peer-to-peer support. This strengthens the likelihood of GRACE XIAO GLOBAL HEAD OF PUBLIC PRIVATE PARTNERSHIPS, reaching the critical mass of female directors needed to UCB TRADING (SHANGHAI) CO., LTD. achieve greater board diversity and greater workplace diversity overall. For example, one Australian study14 showed that boards were more likely to reach the target Pipelines and networks for women are of 30 percent female membership when they included a crucial game-changers director who sat on another board that had already reached that target. In ASEAN, where male networks are heavily Companies can actively develop a long-term pipeline of entrenched in society, the creation of female networks may female talent, focusing on both internal and external be a very effective way to gain ground, particularly if women candidates with the right expertise, rather than those are open to opportunities beyond their own firms. with previous board experience. After identifying these candidates, companies can provide dedicated board training “I belong to an organization called the and take steps to avoid “leakage”—for example, by starting Filipina CEO Circle, and one of our aims a dedicated return-to-work program for women who have is to try and bring more women into the taken time off. Many large companies already do this kind C-suite. I am making a personal push to of work on the management side, attempting to identify get more women into our engineering talented candidates for the C-suite. For example, Pauline Ho, department and into the cockpit, and assurance and people partner, PwC Malaysia, and steering over the last two years we actively committee member of the 30% Club, Malaysia chapter, started recruiting women and getting described “engagement sessions” undertaken by the pipeline them interested in a career in aviation, as initiative working group of the 30% Club at large companies, pilots and engineers.” where they talked to CEOs and encouraged talented women who could potentially be in the C-suite in the medium term, MAAN HONTIVEROS and could potentially become board candidates in the longer CHAIR PHILIPPINES AIRASIA (PHILIPPINES) term. Similar initiatives could be launched with a specific focus on future board members, not just in large companies, listed companies and multinationals, but in any company that saw the value in diversity. Interviewees also discussed the importance of introducing policies that would help to retain female employees and hopefully provide the company with a larger candidate 58 | BOARD GENDER DIVERSITY DuPont’s three-pronged approach in China DuPont, a global chemicals company, has cultivated an organizational culture that strives to achieve healthy work–life balance for all employees. In particular, global offices run the DuPont Women’s Network (DWN), which is dedicated to attracting and retaining women by increasing their networking opportunities. Participation is voluntary and open to all employees across the globe. According to Caroline Yang, DuPont Women’s Network leader in China, the DWN focussed on three dimensions of support for its female employees: • Competence: Providing employees with training and mentoring sessions led by senior leaders or external speakers, often divided by workstream or function. • Life sharing: Creating spaces for employees to share personal experiences with one another, such as how they maintain work–life balance and navigate difficult situations. • Networking: Designing opportunities for employees to broaden their networks beyond their business units and engage with similar companies in the region. By the end of 2016, DuPont in China had created a steering committee of senior business leaders who officially contribute to the DWN on a regular basis. Ms Yang believed that DWN in China had been able to reduce unconscious bias against women, improved their confidence to pursue more senior roles and increased opportunities for women to move into senior management positions. Most countries already have some type of national create awareness. This could encourage more boards in the directors’ network in place, where female directors Philippines to embrace board diversity, particularly gender can play a role in promoting diversity. For example, the diversity. Institute of Corporate Directors of Malaysia (ICDM) has a group of female directors. Malaysia has also benefited Vietnam is the most recent country to establish its own from the Women Director Programme (WDP), which helps institute, the Vietnam Institute of Directors (VIOD), which women move into senior leadership positions through was set up in April 2018. It will take time to draw up concrete networking and leadership development workshops and strategies for board gender diversity, but the country has events, exposing potential candidates to directorship tasks. already taken some important steps. As noted by Tran Anh Helen De Guzman, chair, Board Diversity and Inclusion Dao, deputy CEO, Ho Chi Minh Stock Exchange, the Vietnam Committee, Institute of Corporate Directors, Philippines, Chamber of Commerce had a specific council for women, noted similar efforts undertaken by the Philippines’ Institute which conducted leadership programs; and Vietnam had of Corporate Directors, including introduction of a board specific organizations for women in each city and in each diversity and inclusion policy to improve compliance and company, in accordance with labor laws. BOARD GENDER DIVERSITY | 59 Advocacy groups can also promote board The 30% Club has already set up a chapter in Malaysia, but gender diversity there is no word on whether further Asian chapters are planned. In the meantime, Singapore’s Diversity Action Dedicated diversity groups and councils have already helped Committee (DAC) offers a good template for how advocacy to promote board gender diversity in various countries. 15 groups could operate in a Southeast Asian context. The DAC This includes specialist advocacy organizations such as the is led by the CEO of the Singapore Exchange (SGX), who was Thirty Percent Coalition and 2020 Women on Boards in the appointed by parliament, ensuring that the committee’s United States, and the 30% Club in the United Kingdom, all recommendations will reach the highest levels of the private of which have implemented various initiatives dedicated to and public sectors. It has established a six-step plan to achieve increasing board gender diversity. For example, the Thirty its ultimate goal of 30 percent female board representation Percent Coalition’s “Adopt a Company” letter campaign 16 by 2030, which includes adding a board diversity disclosure targeted more than 150 major listed companies with no requirement to the code of corporate governance, helping women on their boards and managed to get 22 of them to companies gain in-depth understanding of the benefits of recruit women into board positions. In response to apathy diversity, growing the local conversation about women on at the federal level regarding board gender diversity, 2020 boards, and working with and supporting organizations Women on Boards decided to lobby state governments in committed to board diversity. The DAC has already formally the United States and succeeded in passing a resolution in recommended various gender-related changes to the code of Illinois that urged companies to have a minimum number of corporate governance, although these were not considered women on their boards. in the latest revision. Mildred Tan, chair of the Diversity Task Force Regarding Women on Boards and managing director of Ernst & Young Advisory Private Limited, also referenced Women Corporate Directors: the role the DAC’s “Statement of Good Practice in Executive Search played by global women’s networks for Board Directors”, which provides a set of guidelines for the deliberate and objective selection of female board At present, there are relatively few advocacy organizations candidates to ensure the best fit between the board and the in ASEAN, although the region does host chapters of candidate’s skill set, experience and personality. various international organizations. One example is Women Corporate Directors (WCD), a US-based global While the creation of the DAC is undoubtedly a step in the right network of female corporate directors, including CEOs, direction, interviewees noted that there were opportunities to board members and C-suite executives. The WCD aims to go further in terms of pushing for gender diversity disclosures, increase female representation on boards and grow the increasing awareness and prioritizing board gender diversity. pipeline of qualified female board members through Investor groups can also play an important role and are advocacy and mentorship. WCD currently has 80 chapters becoming increasingly aware of the need to incorporate worldwide, including in Indonesia, Malaysia, the Philippines board gender diversity into their agendas. The Australian and Singapore, as well as China. A second example is the Council of Superannuation Investors, for example, has called International Federation of Business and Professional for 30 percent female board representation and has recently Women (BPW), which has global memberships of around a recommended against re-electing directors in companies with quarter of a million women business leaders. It focuses on limited board gender diversity. networking, skill-building and advocacy to promote the role of women in the economy and has various local Finally, local women’s organizations can play an important federations, including in Singapore and Thailand, as well as role in promoting board gender diversity by providing associate clubs in Malaysia, the Philippines and China. networking opportunities and advocating in favor of equal 60 | BOARD GENDER DIVERSITY opportunities for women in the business world (even if this advocacy is not strictly focused on boardroom Examples of local women’s business organizations representation, like the DAC). Almost every major country in COUNTRY NAME the region has at least one organization of this kind, which helps Indonesia Indonesian Business Women Association to encourage female collaboration and build a more profound National Association for Women Entrepreneurs of Malaysia understanding of local issues facing women in business, Malaysia (NAWEM) which may often be missing from global organizations. Philippines Women’s Business Council Philippines Many of them co-operate with regional or international Singapore Singapore Council of Women’s Organisations (SWCO) Bangkok Now, Federation of Business and Professional organizations like Asia-Pacific Economic Cooperation Thailand Women of Thailand (APEC) or are local branches of global groups like BPW. Vietnam Vietnam Women Entrepreneurs Council (VWEC) Sources: Multiple. LeadWomen in Malaysia: preparing women for positions on the board Formed in 2011 (the year the Malaysian Government announced a 30 percent target for women on boards), LeadWomen provides a platform that empowers women to grow and develop as leaders and role models. The organization is making the board director recruitment process in Malaysia more innovative by bringing together potential female candidates and corporations, facilitating the placement of capable women into senior leadership and board positions for private, not-for-profit and publicly listed companies.17 LeadWomen began as one of the execution partners for a government initiative that trained more than 800 women to be board-ready through the Women Directorship Programme. With a focus on increasing the number of women in board director positions, LeadWomen now provides a one-stop solution for boards looking for high-quality candidates and candidates seeking board directorship positions. It works closely with a variety of partners (including federal, local and state governments) to organize training and networking events, enhancing the visibility of women leaders for board opportunities. Some of its popular events include “Power Lunches” and “Power Networks”, which bring key decision- makers together with female board candidates, increasing women’s visibility and likelihood of getting placed on boards. The CEO of LeadWomen, Dr Marcella Lucas, highlights the organization’s signature Women Directors Programme, which equips women with the technical and soft skills needed to participate and succeed on a board. The program covers the following areas: • The roles and responsibilities of a board director • Insights on corporate governance and enterprise risk • Financial stewardship • Understanding board dynamics (culture, behaviors, personalities) and gender dynamics • Creating a positive board presence. The program culminates in a simulated board meeting, where board directors serve as observers and provide live feedback. This is followed by a networking lunch with companies that are actively looking for female directors, as well as a profiling coaching session to help candidates prepare for board position applications. This year, the organization is looking to expand its footprint globally and has launched the first Global Women on Boards Programme with its multilateral organizations having also taken important steps. For example, the European Commission has introduced a “Women on the Board Pledge for Europe”, which calls for 40 percent of board seats to be held by women by 2020; and the OECD has introduced its own “Gender Recommendations”, which encourage policies to promote gender balance on boards and in senior management. BOARD GENDER DIVERSITY | 61 These efforts highlight an important opportunity for ASEAN to With or without such legislation, companies in the ASEAN establish its own regional agenda for board gender diversity, region must be receptive to requests for flexible work, including setting benchmarks for member states to aspire to, particularly from their female employees, who often have to and encouraging the establishment of advocacy groups to manage more family responsibilities than men. This should support and promote this agenda. include providing child-friendly working hours, or work hours that can fit in with other family commitments; working from Make work flexible and help women return home; teleworking; or arrangements to work part-time on a to work temporary basis. Furthermore, companies should publicize their willingness to accept flexible work and highlight Making working life flexible enough to accommodate the business case for this (i.e. to retain talented female parental and other responsibilities can go a long way employees) in order to avoid any impression that women are towards keeping women on the career path so that they getting an “unfair advantage” from these arrangements. can eventually aspire to board membership. Although many European countries now have national legislation In cases where female employees choose to leave work, that facilitates flexible work, in almost all cases this is done “returnships” are being embraced as an increasingly popular with the company’s consent, which it may refuse to give for way to ease women’s re-entry into the workforce. These operational reasons. In the United Kingdom, flexible work are high-level internships, designed to help experienced legislation introduced in 2014 allows all employees (not just senior professionals return to work after an extended career parents and carers) the legal right to request flexible working break. They are usually undertaken on a temporary basis arrangements. 18 (three to six months), with the possibility of being hired 62 | BOARD GENDER DIVERSITY permanently at the end of the placement. Returnships also suggest that ASEAN has the potential to make important help to alleviate age discrimination in the hiring process, strides towards achieving board gender diversity in the which one recent study found was strongly biased against coming years, by addressing both the universal barriers that women in particular. Returnships are still in their infancy, 19 affect women around the world and the unique cultural and even in Europe and the United States, and are mostly limited structural barriers at play in the region. to sectors such as finance, consulting and technology. However, they represent a particularly attractive option for Demonstrating a visible commitment to board gender ASEAN companies, given the region’s higher risk of women diversity is of critical importance. There is evidence that leaving the workforce while in positions of seniority. diversity tends to promote further diversity, prompting more widespread and inclusive searches for talent among a company’s own ranks. Once a critical mass of diversity has been achieved, the push for even greater diversity tends to Key takeaway become automatic. Alicia Yi, managing director, Asia Pacific Consumer Market at Korn Ferry International (Singapore), There are opportunities to support and improve board explained: “Board diversity tends to be reflective of overall gender diversity, including overhauling parental leave company practices. If a company is progressive at the board policies and changing codes of corporate governance level, the chances are it is more progressive at the more to require gender diversity disclosures. Declining birth senior level, and in how it develops leadership. How it looks rates in many countries in the region may also help to at talent and diversity is obviously one of the areas in which reduce family responsibilities for women and increase it excels." opportunities for them to remain in the workforce. The validity and usefulness of formal quotas is still Younger male board members appear to be more open to widely debated, and a preference for corporate gender diversity than their senior colleagues, which is a governance solutions persists across the region. positive sign that ingrained cultural norms may be gradually changing. Helen De Guzman, chair, Board Diversity and At the company level, it is vital that leadership Inclusion Committee, Institute of Corporate Directors, supports board gender diversity and proactively Philippines, noted that “despite comments about the adopts strategies to increase the proportion boys’ club, the main opposition to gender diversity on a of women on boards and in senior leadership. board comes from the senior members, the older ones. If Companies can also actively develop a long-term you have younger men on the board, they are more open pipeline of female talent, focusing on both internal to women directors.” Even if attitudes are beginning to and external candidates with the right expertise. change, continuing to communicate the benefits of board There is also scope for advocacy organizations in the gender diversity—particularly to male board members, ASEAN region to play an important role. both young and old—is critical to achieving greater female representation in the boardroom. 5.3 THE WAY FORWARD: DIVERSITY BREEDS DIVERSITY Creating an encouraging environment can also help young female leaders to become more assertive, and to aspire to Much more needs to be done to reach a level of board gender leadership positions that they feel are within their reach. diversity commensurate with women’s role in society and in the workplace in the ASEAN region. However, numerous Raising awareness about the benefits of board gender successful initiatives at both country and company levels diversity is essential in the ASEAN region, so that leaders BOARD GENDER DIVERSITY | 63 can begin taking steps to move their countries and their that this study will help advance the business case for companies in the right direction, and to quicken the pace having more women in the boardroom, and in business of change where progress is already being made. We hope leadership positions in general. 64 | BOARD GENDER DIVERSITY 11 Sustainable Stock Exchanges Initiative. (2018). 2018 ring the bell for ENDNOTES gender equality. Retrieved from http://www.sseinitiative.org/gender_ equality_2018/ 1 Global Economic Symposium. (2012). Board diversity and corporate governance. Retrieved from https://www.global-economic-symposium. 12 IFC. (2018). 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Retrieved from https://www.nber.org/papers/ 9 Sustainable Stock Exchanges Initiative. (2017). How stock exchanges can w21669 advance gender equality. Retrieved from https://www.comunicarseweb. com.ar/sites/default/files/sse_gender_equality_2017_report.pdf 10 Capital Finance International. (2017). CFI.co meets the president of the stock exchange of Thailand: Kesara Manchusree. Retrieved from https:// cfi.co/corporate-leaders/2017/09/cfi-co-meets-the-president-of-the- stock-exchange-of-thailand-kesara-manchusree/ BOARD GENDER DIVERSITY | 65 Appendix 1: Snapshot of country metrics Indonesia 40% ASEAN Indonesia average (%) ( %) Companies with at least one female on the board Board membership 14.9 14.9 28% Board chair 7.1 11.7 Companies with only one female on the board Senior management 25.2 18.4 Independent commissioner 13.4 14.6 Audit committee 14.6 19.0 Companies with an equal number of males and females on the board 3% Note: Other board positions not available for Indonesia. Top three industries with the highest percentages of women on boards: CONSUMER INDUSTRIALS REAL ESTATE STAPLES 26% 20% 15% Malaysia 63% ASEAN Malaysia average (%) (%) Companies with at least one female on the board Board membership 14.9 13.5 Board chair 7.1 6.1 Senior management Executive director 25.2 13.8 26.2 14.0 Companies with only one female on the board 40% Non-executive director 14.3 10.4 Independent director Audit committee 13.4 14.6 13.9 11.2 Companies with an equal number of males and females on the board 0.3% Top three industries with the highest percentages of women on boards: HEALTHCARE FINANCIALS ENERGY 27% 20% 19% 66 | BOARD GENDER DIVERSITY Philippines ASEAN Philippines Board membership average (%) 14.9 (%) 13.2 Companies with at least one female on the board 64% Board chair 7.1 3.9 Senior management Executive director 25.2 13.8 32.8 12.4 Companies with only one female on the board 32% Non-executive director 14.3 14.7 Independent director Audit committee 13.4 14.6 8.9 13.1 Companies with an equal number of males and females on the board 2% Top three industries with the highest percentages of women on boards: INDUSTRIALS FINANCIALS CONSUMER STAPLES 20% 16% 15% Singapore 58% ASEAN Singapore average (%) (%) Companies with at least one female on the board Board membership 14.9 11.9 Board chair 7.1 5.2 Senior management Executive director 25.2 13.8 27.2 11.8 Companies with only one female on the board 43% Non-executive director 14.3 11.1 Independent director Audit committee 13.4 14.6 11.3 9.9 Companies with an equal number of males and females on the board 0% Top three industries with the highest percentages of women on boards: CONSUMER REAL ESTATE FINANCIALS DISCRETIONARY 14% 14% 14% BOARD GENDER DIVERSITY | 67 Thailand ASEAN Thailand Board membership average (%) 14.9 (%) 20.4 Companies with at least one female on the board 88% Board chair 7.1 7.6 Senior management Executive director 25.2 13.8 29.7 19.7 Companies with only one female on the board 29% Non-executive director 14.3 19.7 Independent director Audit committee 13.4 14.6 18.1 19.8 Companies with an equal number of males and females on the board 1.5% Top three industries with the highest percentages of women on boards: CONSUMER CONSUMER FINANCIALS DISCRETIONARY STAPLES 24% 24% 20% Vietnam ASEAN Vietnam Companies with at least one female on the board 53% average (%) (%) Board membership Board chair 14.9 7.1 15.4 7.8 Companies with only one female on the board 31% Senior management 25.2 16.8 Executive director Non-executive director 13.8 14.3 11.1 15.5 Companies with an equal number of males and females on the board 2% Note: Other board positions not available for Vietnam. Top three industries with the highest percentages of women on boards: CONSUMER CONSUMER REAL ESTATE STAPLES DISCRETIONARY 24% 20% 19% 68 | BOARD GENDER DIVERSITY China ASEAN China 60% average ( %) (%) Companies with at least Board membership 14.9 12.7 one female on the board Board chair 7.1 4.4 Senior management Executive director 25.2 13.8 13.5 9.7 Companies with only one female on the board 37% Non-executive director 14.3 11.5 Independent director Audit committee 13.4 14.6 14.6 18.7 Companies with an equal number of males and females on the board 1.4% Top three industries with the highest percentages of women on boards: CONSUMER UTILITIES HEALTHCARE STAPLES 18% 15% 14% BOARD GENDER DIVERSITY | 69 Appendix 2: Detailed methodology for statistical analysis Data source and sample selection Firm_Perform = β0 + β1*genderpercent + β2*fsize + β3*fage + β4*levratio + β5*pershareholder + β6*bsize + β7*bindep + We used data purchased from Thomson Reuters (TR), β8*MY + β9*TH + β10*SG + β11*PH + β12*IN + β13*VN + Ɛ 1) ( which has a repository of company-specific gender data available from 2012 to 2018. However, gender data for any In the above regression equation (1), Firm_Perform refers to a one company is only available for a single year (i.e. gender company’s financial performance, measured by Return on data for one company may have last been updated in 2012, Assets (ROA) and Return on Equity (ROE). fsize is the natural while data for other companies may have been updated only logarithm of total assets considered as a proxy for company once between 2013 and 2018). We noted that the largest size, while fage is the natural logarithm of number of years sample of companies with both gender and financial data since the date of incorporation of the company. levratio is the came from 2017. To ensure that our sample was consistent ratio of a company’s total debt to total equity and has been over one year, we decided to focus our analysis on only those considered in its natural logarithmic form. pershareholder is companies with gender data available for 2017. the percentage share of the largest shareholder, while bsize is the natural logarithm of the total number of directors on The final sample selected for our descriptive analysis the board of the company. Lastly, bindep is the proportion consisted of 2,308 companies. The total sample size used in of independent directors on the board of directors. MY, the statistical analysis was 1,836 companies. We removed TH, SG, PH, IN and VN are the country dummy variables. companies from the sample that were missing data points genderpercent refers to different proxies of gender diversity in that were required for our statistical analysis (e.g. debt to a company, defined in the table below. equity ratio, which is a control variable in our regressions). For our statistical analysis, we created separate data sets GENDER VARIABLES ( %) DEFINITION by country, industry and so on from this sample of 1,836 Percentage of female Number of female board members directors on the board divided by total number of board companies. In terms of geographical coverage, our statistical directors * 100 analysis covers Indonesia, Malaysia, the Philippines, Percentage of female Number of female board members Singapore, Thailand, Vietnam and China. executive directors on classified as executive directors the board divided by total number of executive board directors * 100 Methodology: regional-level analysis Percentage of female Number of female board members non-executive directors classified as non-executive on the board directors divided by total number of non-executive board directors To arrive at a regional-level analysis, we combined the gender * 100 and financial data of seven countries: Indonesia, Malaysia, Percentage of female Number of female board members the Philippines, Singapore, Thailand, Vietnam and China. In independent directors classified as independent directors on the board divided by total number of the case of Indonesia, data for boards of commissioners was independent board directors * 100 combined with board of director data for the analysis. We Percentage of females Number of female members in senior management in senior management divided used cross-sectional ordinary least squares (OLS) regression positions by total members in senior management * 100 models, including control variables, to examine whether gender diversity in these seven countries was statistically In addition to examining the relationship between company associated with company financial performance. We also financial performance and women in the above-mentioned included country dummy variables in the model. 1 positions, we analyzed the relationship between company 70 | BOARD GENDER DIVERSITY financial performance and the presence of a woman as chair the relationship between company performance and these of the board. To test this relationship, genderdummy was variables, each variable is said to have an impact on financial introduced as a dummy variable in the regression equation. performance in one way or another. GENDER VARIABLES (DUMMY) DEFINITION Company age: This age is frequently used in corporate governance studies as it is predicted to have a positive Presence of a woman as To capture the presence of a woman chair of the board as chair of the board of directors relationship with company profitability and value. This can in the company, genderdummy is a dichotomous variable that equals 1 if be attributed to greater learning as the company gains the firm has a female chair of the board and 0 otherwise more experience. Companies can invest in research and development (R&D), hire more resources and specialize, thereby allowing for more profits and enhanced value. Company performance: dependent variables Numerous studies have considered company age as a control variable. For our study, we considered company age in its We included two accounting-based measures of financial natural logarithmic form, which has been used in numerous performance: ROA and ROE. ROA is calculated as the other studies as well. percentage of net income divided by total assets of the same year, while ROE is calculated as the percentage of net income Company size: This size is also frequently used in corporate divided by total equity of the same year. governance research as a control variable. However, the literature shows mixed results when assessing the direction Proxies for gender diversity: independent variables of the relationship between company size and financial performance, as prior studies present contradictory We included gender diversity as the explanatory variable in evidence. Some studies suggest that larger companies our regression. First, we tested the proportion of women on enjoy higher growth and company value due to easy access the board of directors and then expanded this to include the to credit and economies of scale. For our study, we included proportion of women in executive director, non-executive company size using total assets, considered in its natural director and independent director roles. We used the logarithmic form. Studies suggested using the natural proportion of women in senior management positions as a logarithm form to normalize the data and minimize the proxy. We then expanded our study to analyze the presence value of standard deviation. of women as board chairs (dummies). Financial leverage: Leverage is used to evaluate the We used each of these proxies to test whether higher propor- gearing or long-term financial stability of a company. As tions/the presence of women in various business leadership leverage directly influences company performance, we positions leads to better financial performance for a company. decided to include it as one of the control variables in our study. We noted that some studies measured leverage by the Control variables natural logarithm of the ratio of total assets to total debt. Other studies used the ratio of total debt divided by equity. Based on our review of the existing literature, as well as We followed the second approach. We considered leverage in data availability across all countries, we selected certain its natural logarithmic form to mitigate the effect of outliers. aspects of corporate governance and ownership structure to include in our regression model as control variables. Percentage shares of largest individual shareholder: A While the literature presents mixed views on the nature of number of studies provide evidence of a significant positive BOARD GENDER DIVERSITY | 71 association between shareholdings of large investors For Indonesia, the observed range for ROA was between -15 and corporate performance. Investors with large share percent and 2 percent. We similarly removed any data point ownership are believed to have strong interest in maximizing for ROA that fell well beyond this range. a company’s value while in pursuit of their financial goals, making it an important variable to include. To prevent any data manipulations, we decided against scaling down extreme values and preferred to consider data Board size: The association between the number of people values as they were. holding seats on the board and the company’s competitive advantage appears to be a debatable issue in the literature. Robustness checks Some studies suggest that smaller board sizes lead to better financial performance, while others argue that Introducing additional dummy variables: In order to there is a negative association between the two variables. check the robustness of our estimations, we employed Nonetheless, we noted that board size is incorporated in four alternative proxies for gender diversity. We then ran most studies as a control variable. our model separately using company additional dummy variables. However, the sets of company performance and Independent directors: In the case of independent control variables remained the same in the model. We also members on the board, empirical evidence presents included country dummies. Our regression equation is as ambiguous results. Some studies suggest that independent follows: directors are positively related to company performance, while others reveal a negative relationship. Independent Firm_Perform = β0 + β1*genderdummy + β2*fsize + β3*fage directors are considered valuable in the role of guiding and + β4*levratio + β5*pershareholder + β6*bsize + β7*bindep + overseeing company financial reporting practices, but a β8*MY + β9*TH + β10*SG + β11*PH + β12*IN + β13*VN + Ɛ  (2) number of studies report no significant relationship between the proportion of independent or non-executive directors In the equation, genderdummy refers to different dummy and company performance. To control for any possible variables of gender diversity in a company. They are defined effects, we decided to include this variable in our study. as follows: Removal of outliers VARIABLE DEFINITION Presence of at least genderdummy is a dichotomous variable To ensure that our findings were not skewed as a result of one woman on the that equals 1 if the company has at least one board woman on the board and 0 otherwise outliers of ROA and ROE, we used the graphical method genderdummy is a dichotomous variable of scatter plots to remove outliers in our data sets. We Women account for that equals 1 if the company has more than more than 30 percent 30 percent female board membership and 0 considered the range in which most data points were of board membership otherwise present, and data points at extreme ends of this range were removed. However, the ranges differed from one variable to Next, we combined data for board of director and senior another, and from one country to another. management positions and ran additional regressions as another robustness check, using the following equation: In the case of China, for example, we removed any company’s data point for ROA that fell beyond the observed range of Firm_Perform = β0 + β1*genderpercent + β2*fsize + β3*fage -25 percent to 4 percent. We selected these values because + β4*levratio + β5*pershareholder + β6*bsize + β7*bindep + maximum data points were clustered around this range. β8*MY + β9*TH + β10*SG + β11*PH + β12*IN + β13*VN + Ɛ  (3) 72 | BOARD GENDER DIVERSITY Here, genderpercent refers to the percentage of women and moderating variable is statistically significant, the in both board and senior management positions in the category is considered to be a moderator variable and thus company. It is defined as follows: moderation is supported. If it is not statistically significant, the category is not considered to be a moderator variable VARIABLE DEFINITION and moderation is not supported. Percentage of women Number of females in both board of director in both board and and senior management positions, divided by Moderating variable: industry type senior management total number of people in both board of director positions and senior management positions * 100 The following regression equations were developed when considering industry type as a moderating variable. The Categories for analysis proxies for gender diversity, with company performance and control variables, remained the same. In addition to modelling for the various senior leadership positions of women in each country, we also analyzed the Firm_Perform = β0 + β1*genderpercent + β2*fsize + β3*fage impact of women in business leadership positions on a + β4*levratio + β5*pershareholder + β6*bsize + β7*bindep company’s financial performance across companies with + β8*MY + β9*TH + β10*SG + β11*PH + β12*IN + β13*VN + different characteristics. We tested these characteristics βi*industrytypej*genderpercent + Ɛ  (4) as moderating variables in the regression, examining the relationship between gender diversity and company Firm_Perform = β0 + β1*genderdummy + β2*fsize + β3*fage financial performance. These categories are defined as + β4*levratio + β5*pershareholder + β6*bsize + β7*bindep follows: + β8*MY + β9*TH + β10*SG + β11*PH + β12*IN + β13*VN + βi*industrytypej*genderdummy + Ɛ  (5) • Industry type: Consumer discretionary, industrials, materials, healthcare, etc. Here, industrytypej in the interaction term is introduced • Shareholder type: Companies where the largest as a dummy variable. It refers to different industry shareholder is an individual groups such as consumer staples, materials, consumer • Company size: Large companies versus small discretionary, healthcare, financials, real estate, utilities, companies. telecommunications and information technology.2 Moderating variable: shareholder type We used quartiles to determine high and low ranges of company size. Companies with metrics falling in the 75th The following regression equations were developed when quartile and above were categorized as “large”, while considering shareholder type as a moderating variable. The companies with metrics falling in the 25th quartile and below proxies of gender diversity, with company performance and were categorized as “small”. We assessed company size using control variables, remained the same. total assets. Firm_Perform = β0 + β1*genderpercent + β2*fsize + β3*fage To introduce these categories as moderating variables in + β4*levratio + β5*pershareholder + β6*bsize + β7*bindep our analysis, an interaction dummy of the gender diversity + β8*MY + β9*TH + β10*SG + β11*PH + β12*IN + β13*VN + variable and a moderating variable were added into the βi*shareholdertypej*genderpercent + Ɛ  (6) equation. If the interaction between the gender variable BOARD GENDER DIVERSITY | 73 Firm_Perform = β0 + β1*genderdummy + β2*fsize + β3*fage Firm_Perform = β0 + β1*genderpercent + β2*fsize + β3*fage + β4*levratio + β5*pershareholder + β6*bsize + β7*bindep + β4*levratio + β5*pershareholder + β6*bsize + β7*bindep + Ɛ + β8*MY + β9*TH + β10*SG + β11*PH + β12*IN + β13*VN +  (10) βi*shareholdertypej*genderdummy + Ɛ  (7) Firm_Perform = β0 + β1*genderdummy + β2*fsize + β3*fage Here, shareholdertypej in the interaction term is introduced + β4*levratio + β5*pershareholder + β6*bsize + β7*bindep + Ɛ as a dichotomous variable. It equals 1 if the firm’s largest (11) shareholder is an individual investor, and 0 otherwise. In our country-level analysis, we further expanded our study Moderating variable: company size to analyze the presence of women on audit committees. We used each of the gender proxies to test whether higher The following regression equations were developed when proportions of women in various business leadership considering company size as a moderating variable. The positions leads to better financial performance by a company. proxies of gender diversity, with company performance and We ran these regressions based on data availability for each control variables, remained the same. country, resulting in varying sample sizes. Firm_Perform = β0 + β1*genderpercent + β2*fsize + β3*fage Categories for analysis + β4*levratio + β5*pershareholder + β6*bsize + β7*bindep + β8*MY + β9*TH + β10*SG + β11*PH + β12*IN + β13*VN + In addition to modelling for the various senior leadership βi*firmsizej*genderpercent + Ɛ  (8) positions of women in each country, we also analyzed the impact of women in business leadership positions on a Firm_Perform = β0 + β1*genderdummy + β2*fsize + β3*fage company’s financial performance across companies with + β4*levratio + β5*pershareholder + β6*bsize + β7*bindep different characteristics: + β8*MY + β9*TH + β10*SG + β11*PH + β12*IN + β13*VN + βi*firmsizej*genderdummy + Ɛ  (9) • Industry type: Consumer discretionary, industrials, materials, healthcare, etc. Here, firmsizej in the interaction term is introduced as a • Shareholder type: Companies where the largest dummy variable. It refers to company sizes such as large shareholder is an individual companies and small companies. 3 • Company size: Large versus small companies. Methodology: country-level analysis For our sub-categories, we used quartiles to determine high and low ranges of company size. Companies with metrics To arrive at a country-level analysis, we assessed the data set falling in the 75th quartile and above were categorized as for each country separately. Seven countries were assessed: “large”, while companies with metrics falling in the 25th Indonesia, Malaysia, the Philippines, Singapore, Thailand, quartile and below were categorized as “small”. Vietnam and China. A similar regional cross-sectional OLS regression model was used to examine whether gender We created separate data sets for each category and ran diversity in each of these seven countries was statistically regressions for each country and each category separately. associated with company financial performance. The For instance, for large companies in China (using ROA as the control variables and gender diversity proxies remained the financial variable), we filtered out and selected only those same. companies that met the criteria (75th percentile and above). 74 | BOARD GENDER DIVERSITY We then ran each regression using this data set as the base financial variables. Conversely, we found that when we sample. introduced industry as a moderating variable while testing the relationship between ROA (financial variable) and Moderating variables to better explain relationships gender diversity in board of director and senior management between diversity and company performance positions, industry type had a significant impact on this relationship in the telecommunications sector, but the effect was negative. The results were, therefore, inconclusive. We What is a moderating variable? noted similar trends when introducing shareholder type and company size as moderating variables. A moderating variable is a third variable that could have an effect on the relationship between an Overall, however, the relationship between gender diversity independent variable and a dependent variable. If and financial performance was predominantly positive, the results of a regression after introducing this third compared to instances of a negative relationship overall. variable are significant, there is said to be a contingent effect of the moderating variable on the relationship ENDNOTES between the dependent and independent variables. 1 China is considered a base country because it has the maximum number of observations. The direction of the relationship could be either 2 The industry type “industrials” has been considered as a base category positive or negative. because it had the maximum number of observations. 3 “Medium” company size has been considered as a base category because it had the maximum number of observations. To account for additional variables such as industry sector, company size and shareholder type when analyzing the relationship between company performance and gender diversity, we introduced moderating variables into our analysis. Although many of these relationships were statistically significant, it should be noted that in most cases the effect was small, resulting in weak interpretations across the categories analyzed. The key takeaway from our analysis using moderating variables was the predominantly positive relationship between greater gender diversity and stronger financial performance, measured using both financial metrics: ROA and ROE. For instance, we found that when we introduced industry as a moderating variable while testing the relationship between ROA and ROE (financial variables) and gender diversity in board of director and senior management positions, industry type had a significant impact on this relationship in the telecommunications sector. The relationship was noted to be positive in the case of both BOARD GENDER DIVERSITY | 75 For any enquiries about this report, please contact: Trisha Suresh Senior Consultant, Public Policy The Economist Intelligence Unit E: trishasuresh@economist.com T: +65 6428 2655 Leyal Savas East Asia and the Pacific Corporate Governance Program Manager International Finance Corporation E: lsavas@ifc.org T: +1 (202) 631-7053