20 by 2020: Board Diversity is a Necessity
The island city-state of Singapore is often held up as a paradigm of a successful multicultural society. Its population of 5.7 million is made up of roughly 74% Chinese, 13% Malays and 9% Indians. The remainder, Eurasians and other foreigners, represent almost all religious faiths – Buddhism, Christianity, Islam, Taoism, Hinduism, Sikhism and Judaism. All this ethnic mix is crammed into an area of a little over 700 sq. km, making Singapore stand out as one of the most multicultural, diverse and densely populated cities in the world. Yet while diversity seems to be apparent almost everywhere, there is one area where it is still evidently lacking – the boardroom.
A recent report by the Human Capital Leadership Institute (HCLI) and BoardAgender showed that much work still needs to be done to improve diversity on Singapore’s boards. Singapore’s Minister for Culture, Community and Youth, Grace Fu, who attended the launch of the report at the Singapore Exchange Auditorium on January 26, stressed the urgency and importance of having more women represented on company boards. In addition, she stated “board diversity, particularly gender-diversity in this case, is a necessity, not a nice-to-have.”
In her speech, Fu urged companies to increase female representation on their boards and called for half the companies listed on the Singapore Exchange -- especially those without any female directors -- to take steps to appoint one female director to their board.
Representation in Singapore
Figures from the Diversity Action Committee (DAC) indicated that representation of females in the boards of top 100 listed companies in Singapore stood at 12.2% as of June 2016, and the total representation of women on all companies listed in Singapore was just 10.3%. Although these figures have improved from those of past years, they continue to suggest much progress is still needed to improve diversity on Singapore’s boards.
At a global level, Singapore’s board gender diversity numbers still lag behind those of major international capital markets. According to Sustainable Stock Exchanges’ Initiatives 2017 report and the European Commission 2016 Fact Sheet, female directors’ representation stood at 27.2% in Germany, 27% in the United Kingdom, 20% in the United States and 15% in Hong Kong. Among the major capital markets, Singapore is second to last, before Japan, which counts just 1.5% of female representation on boards.
According to the HCLI study, a diverse board enables companies to harness an array of perspectives, expertise, and opinions that allow them to read and act on signals of change more accurately and adaptively in a volatile and uncertain environment. Female directors bring different approaches to the boardroom, which are often complementary to those of male directors.
Due to differences in the way male and female directors perceive similar problems, female directors offer a check-and-balance mechanism against blind spots in decision making by a board that is dominated by entrenched male directors.
Promoting diversity on boards requires concerted effort and interventions from stakeholders. BoardAgender and the People’s Action Party (PAP) Women’s Wing have recommended that diversity target setting be a mandatory component of the Singapore Code of Corporate Governance. To start, both organizations urge boards to adopt a target of achieving 20% female representation by the year 2020 and to raise that number progressively to 30% by the year 2030. Considering that the current female directorship representation stands at a mere 10.3%, the gap that needs to be bridged is massive, but not impossible.
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