Women on boards, no quotas

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💡This week: The latest board diversity numbers in Singapore are encouraging, showing continued progress in women’s participation as directors of the country’s largest listed companies.

Women held 21.5 per cent of board positions on the 100 largest Singapore-listed companies as at end-2022, according to data compiled by the Council for Board Diversity. That was a 1.4 percentage point improvement from the 18.9 per cent share at the end of 2021.

It’s notable that the progress has come without the use of the “Q word”: quotas.

In the early years of the Council – before 2015, when it was first known as the Diversity Task Force and later the Diversity Action Committee – quotas were the source of many lively discussions.

There was strong support for quotas from some corners, mostly because quotas are effective in raising the numbers. But there has also been scepticism about whether quotas will drive real change, or simply create the illusion of progress. In Norway, for example, there was a “golden skirt” phenomenon: a small number of women filled many board seats. In India, one analysis suggested companies were letting women into boardrooms; but only to fill unimportant positions.

Among the strongest opponents of quotas in Singapore are women. For many of them, getting the numbers via a quota would be an empty achievement that would deny women the legitimacy of succeeding on their own merits.

In keeping with the principle to not impose quotas, regulations have focused not so much on getting women appointed to board seats but on creating opportunities for women to be considered. For instance, the nine-year cap on independent director tenures has been steadily strengthened over the years. While this is primarily driven by the desire to improve the independence of directors, its side benefit is that it will support regular renewal in the boards. Each time a new director has to be found, there is an opportunity for a woman to be in the running.

The approach hasn’t been as effective outside the large companies, though. Among Singapore-listed companies that do not fall within the largest 100, women’s participation on boards was just 12.8 per cent in 2022.

How can Singapore keep the momentum going? Watchdogs and advocacy groups must become more sophisticated in how they assess gender diversity in the context of corporate governance. The Council’s twice-a-year statistics have been helpful in tracking progress, but they are still very basic metrics that do not shed light on whether women’s participation on boards are carried out in the right spirit. The data might need to be supplemented with analysis about whether companies’ diversity policies are rigorous; whether stakeholders are engaged and accounted for in determining the skills and experiences that are important for the board; whether board candidates are identified through a sufficiently independent process and so on. What is measured gets noticed.

It might be worth waiting for quality progress, but only if quality truly exists.

🌱 Top ESG reads:

1. Negative attention surrounding UOB’s financing of a unit of coal miner Adaro Energy Indonesia shows why banks should be more transparent about their activities in hard-to-abate sectors, says Janice Lim.
2. Expect to see considerably more activity from energy company SP Group in Vietnam solar as it approaches a target for growing that market.
3. China’s Ant Group converted a syndicated credit facility into a US$6.5 billion sustainability-linked loan in 2022. This is the largest such deal in Asia.
4. Malaysia must double its investments into renewable energy transition – to at least US$375 billion – to hit its goal of carbon neutrality by 2050.
5. Divestments from carbon-intensive industries won’t achieve any real impact on the climate, says Tribeca Investment Partners’ Todd Warren.

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