The writer, a former chair of the HongKong Stock Exchange’s Listing Committee, is China chairman of Freshfields Bruckhaus Deringer
We should be beyond debating whether having women on boards is a good thing. The arguments for this are already well known: gender diversity helps companies avoid groupthink, provides diversity of ideas, better reflects your customer base . . . and, of course, it is the right thing to do.
But knowing that is not the same as making it happen, particularly in Hong Kong. We must take a different approach here if we are to have any hope of catching up with our international peers. Among the 50 Hang Seng index constituent companies, women occupy just 13.6 per cent of board positions and 11 HSI companies have all-male boards. By contrast, women make up 33.5 per cent of FTSE 100 board members and 28.6 per cent of S & P100 boards in the US. The figure stands at 25.3 per cent in Malaysia and 18.4 per cent in Singapore. In India it is mandatory to have at least one woman on a board, and nearly 16 per cent of directors there are women.
Research continues to support the value of board diversity. Most recently, Cass Business School in London surveyed 16,763 public mergers and acquisitions globally over 20 years and concluded that boards with female representation of 30 per cent or more outperform all-male boards over both the short and long term. Large institutional investors including State Street and BlackRock support board diversity and have promised to vote against slates of all male directors.
In Hong Kong, we have hosted countless events to raise awareness of the benefits of gender diversity on boards and to train board-ready women. We thought peer pressure, nudging, calling out all all-male HSI boards and their company secretaries and even making a hold-no-punches, funny video would spur action. It did not.
In January last year, the Hong Kong Stock Exchange upgraded the need for every listed company to include a diversity policy in its corporate governance report from a “comply or explain” requirement to a Listing Rule. A few months later it also issued guidance that effectively calls out all-male boards among applicants for initial public offerings. But with more than 2,460 listed companies, it would take 2,400 years to achieve 30 per cent female representation if we relied on new listings to redress the balance.
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This is a governance issue. In 2020, no one can seriously believe that there are not enough qualified women or that they are all already sitting on boards. Nor is it acceptable to think that one woman per board is enough. Research has shown that three is the magic number for women to be effective on boards. Seven years ago at an Asia business summit, I opposed gender quotas. I hoped that, over time, Hong Kong-listed companies would bring about their own change. Yet soft targets have not been met and I do not see significant change happening any time soon. All I can foresee is that Hong Kong falls further and further behind on a measure that is increasingly a critical component of governance.
It is time to impose quotas for gender diversity on boards, as Norway did in 2008 and more and more countries are doing now. I now believe this is the only way to go for Hong Kong. We should make it compulsory that every listed company in the territory have a board that is 40 per cent female by 2026.
A six-year transition period would allow companies to plan and build internal pipelines. A 40 per cent standard would allow us to stand proud among our international peers and move us toward the ultimate goal of full parity.
In today’s world, where uncertainty, volatility and disruption are normal, we need all the talent we can find. That means tapping all of our people not just half. A hard target of 40 per cent women by 2026 would make a real difference.
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