This article first appeared in The Edge Malaysia Weekly on March 20, 2023 - March 26, 2023
For years, the month of March has been dedicated to highlighting the injustices women face in society, while calling for equality and basic human rights to be accorded to the fairer sex.
The large-scale women’s rights marches that are now held around the world annually reflect how far this social revolution has come. Within the corporate landscape, a similar revolution is taking place in boardrooms. However, one could say that the progress has not been as rapid.
The Securities Commission’s (SC) Malaysian Code on Corporate Governance (MCCG) in 2017 stated that the board of large public-listed companies (PLCs) should have at least 30% women directors.
In January last year, Bursa Malaysia updated its listing rules, mandating that PLCs with a market capitalisation of RM2 billion and above (as at Dec 31, 2021) have at least one female director by Sept 1, 2022, and the remaining PLCs by June 1, 2023. This is a step down from the MCCG.
As at March 1, 2023, the SC’s statistics show that the percentage of women on the boards of PLCs on Bursa Malaysia stands at 29.7% for the top 100 companies and 22.1% overall, which is just shy of the 30% target that needs to be met in three months’ time.
A total of 150 PLCs still have all-male boards, while 259 out of 869 PLCs have met the 30% target.
Chair of the 30% Club Malaysia Datuk Ami Moris commends the SC for its progressive nature and integrating this ruling in the code as far back as 2015. But because it was just an encouragement, it never got enforced until last year.
One of the biggest gripes that companies have about meeting the target is the belief that there is a lack of suitable female candidates to sit on the board, says Ami. But in fact, there are many other factors at play.
The habit of relying on existing networks to look for candidates is one. Doing so may be convenient, but comes at the expense of diversity.
“Let’s say the nominating committee consists of all men and the process of onboarding new board members is not established and governed with accountability and transparency. What tends to happen is that there is a reliance on word of mouth within one’s inner circle,” she says.
Ami is the former CEO of Maybank Investment Banking Group and is currently an adviser on business and sustainability for Maybank. She was appointed chair of the 30% Club in 2021. The 30% Club aims to improve diversity on Malaysian corporate boards and senior management through various programmes. It is part of a global movement founded in the UK.
“If the net is cast wide enough and you look at places that you wouldn’t normally look at, you’ll find not just women but also people of other educational backgrounds, social backgrounds, ethnicities, orientations and qualifications,” she says.
Ami adds that board members do not necessarily need to be a former CEO or chief financial officer. Those who have sustainability and digital cybersecurity qualifications, for example, may not have the requisite years of serving on a board. But they certainly will bring a lot more competency, understanding and insight to the table.
Another major challenge is the patriarchal biases and the “boys club” culture. Datin Mina Cheah-Foong, managing director of InNature Bhd, the retailer and distributor of The Body Shop products in Malaysia, Vietnam and Cambodia, says this includes the likes of having after-work meetings at a bar or a golfing range to discuss board matters.
“We need to change this whole concept of networking, which is exclusionary. How many women do you see on a golf course? The culture is patriarchal. I think change starts within the family, where men need to be supportive of women,” says Cheah-Foong.
Given the pressure by regulators and investors, some companies may appoint female board members as mere tokenism, which is called “pinkwashing”.
But if boards bring women on just as a token or box-ticking exercise, the consequence of failing in governance and in delivering rigour and resilience in their organisations will definitely appear at some point in time, says Ami.
“You can’t keep that level of tokenism for a very long time, because every board member should bring in a different competency or skill set, and if it’s tokenism, it will show up. It’ll be transparent and then they would be forced to put a little bit more thought into [board appointments].”
An important thing to note is that globally, the conversation around diversity has already become more pronounced. It has shifted from just focusing on gender diversity to active discussions on how to create a diverse board and uphold diversity, equity and inclusion (DEI) practices, including in top leadership positions.
This means looking at diversity in areas like ethnicity, socioeconomic status and geographic regions, for instance.
But, ultimately, to really implement DEI practices, companies need to invest in collecting data to observe where the gaps are and address them.
“The focus is always on the glass ceiling, but never bringing the conversation down. To me, we need to look at the corporate ladder. Data globally shows that the very first rung of the corporate ladder is broken. It’s that very first rung that covers the promotions, such as from executives to managers, where less representation of women has been observed,” says Ami.
“And if an organisation wants to break that glass ceiling, it must make sure it has the data. Show that the management is accountable and invested in that process of getting data to show why it is that fewer women get promoted.”
Over the last couple of years, various studies have shown that practising DEI or diversity on boards has positively impacted a business’ financial and mission-based outputs.
Companies with at least one-third women representation correlate with 38% higher median return on equity compared with boards with no women representation, according to the Malaysia Board Diversity Study and Index by the Institute of Corporate Directors Malaysia done in 2021.
In March, Morgan Stanley examined 1,875 companies on the MSCI World Index and found that those with greater gender diversity outperformed those with less diversity by 1.6% in 2022. McKinsey found in 2019 that companies with ethnic, cultural and gender diversity outperformed by double-digit percentages those that are less diverse.
Meanwhile, an analysis by investment research and asset manager Arabesque in March last year found that the most diverse 20% of the world’s 1,000 biggest companies were more aligned with a goal of capping global warming at 1.5°C above the pre-industrial average by 2050.
There will be rumblings on the ground, of course, as to whether DEI is against merit-based hiring or promotions, which could be seen as unfair.
This is where equity comes into play. An individual from a rich family who lives in the city will have access to more opportunities than an individual from the B40 (low income) group in a rural area, for instance. Likewise, a differently abled person will have to face more hurdles in many areas.
These factors have to be considered, especially during the recruitment process, because these talents will bring different kinds of perspective to the table. This is important for businesses, said Datuk Amirul Feisal Wan Tahir, managing director of Khazanah Nasional Bhd, at the DEI Conversation virtual panel by the 30% Club Malaysia earlier this month.
“[We need] diversity of thought. But the best ideas come from a diverse point of view. Diversity of thought avoids group think. It’s quite necessary in terms of any business decision … We have to equip our companies to serve the customers in the right way. DEI is not a nice-to-have. It’s central to how a company is run,” said Amirul. He believes that it is possible to have merit-based recruitment while also considering DEI factors.
On the other hand, there are DEI practices that have triggered debate, such as the extension of maternity leave, as was done by the Malaysian government last year, and Berjaya Corp Bhd’s latest boardroom shuffle, which has led to the formation of an all-women board of directors for the group.
Ami says boards must have an optimal mix of talent who can steward companies to unleash innovation, create distinct competitive advantages and strengthen resilience.
“We advocate for diversity in boardrooms and at all levels of any organisation as studies show that more diverse, equitable and inclusive companies deliver better returns over time. While gender diversity is the most visible, there are other forms of diversity to be incorporated and invested in such as age, ethnicity and domain expertise.”
Meanwhile, a survey in February by the Associated Chinese Chambers of Commerce and Industry of Malaysia showed that more Chinese employers preferred to hire men in response to the extension of the maternity leave.
Cheah-Foong’s response to this is to have parental leave instead. New mothers will need time off to recover, of course, but some women are eager to go back to work after they are well. At the same time, some men may want to stay home and take care of the baby, she says.
“Who’s to say that men don’t want to participate in the child’s early life? He cannot breastfeed, but who’s to say that he cannot be a good caregiver? Why not have parental leave and leave it up to them to decide who gets the extra months? This evens out the playing field and benefits both men and women.”
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