Viewpoint: Time is right for board diversity in Hong Kong
The world is facing increasingly difficult and complex challenges with rapid changes across all areas of business globally – from consumer behaviour to workforce culture. Addressing these issues will require the full spectrum of talent available.
Diversity is now not only an equity issue, but one vital to finding solutions, and is a key driver for better business outcomes and good governance. High-performing and diverse boards operate to their fullest potential when they tap into a broad range of people from different ethnicities and races, sexual orientations, age groups, religions, and disability status.
Gender is one of these key diversity markers. Having more senior women as leaders filters down into the whole economy and can help contribute to wider debates on issues such as pay equity, workplace policies and other critical barriers facing women.
Hong Kong lagging on boardroom gender diversity
Despite this importance, lack of board gender diversity continues to be a challenge. In the world’s top largest financial centres, the UK leads with 39.1% (FTSE 100) female board representation, followed by 32% (S&P 500) in the US and 19.7% (SGX 100) in Singapore.
Hong Kong, with just 16.9% female board representation among Hang Seng Index-listed companies, has been lagging far behind in closing the board gender diversity gap.
But this glacial pace seems poised to change. Last December, the Stock Exchange of Hong Kong and Hong Kong Exchanges and Clearing (HKEX) announced new regulatory changes to end single-gender boards – existing listed companies with single-gender boards will have to appoint at least one director of a different gender by the end of 2024, while new IPO applicants with single-gender boards will no longer be permitted from July 2022.
The new HKEX listing rules will undeniably improve board gender diversity in the short to medium term as it has created at least 1,300 director seats for women by the end of 2024.
How Hong Kong can seize opportunity to improve boardroom diversity
To fully capitalise on this opportunity, companies need to change their current approach to board appointments. Many listed companies in Hong Kong seek to appoint directors from within existing, primarily male-dominated networks, making it challenging for them to find a sufficient number of female board candidates.
Yet Hong Kong is teeming with highly talented women in a wide range of sectors. To tap into this talent pool, boards and companies should broaden their networks, look to support first-time female executive and non-executive directors, look beyond the typical candidate profiles, and consider women outside the city.
They should also consider employing an executive search firm with a track record of delivering a diverse range of suitable candidates and provide a clear brief, including diversity targets. These changes also represent an opportunity for companies to empower their own high-calibre female executives to serve as independent non-executive directors (INEDs) on external boards.
Board-nominating committees can play a more active role in succession planning, setting targets for and identifying diverse candidates, and transparently evaluating the board’s needs and performance to boost the number of female directors.
At The Women’s Foundation, we are urging companies to adopt this multi-pronged approach and have been long-time advocates for more diverse boards since launching the 30% Club Hong Kong in 2013. One of our main goals is to build the pipeline of women in executive and non-executive roles. We run a Boardroom Series for Women Leaders which aims to build the pipeline of women – connecting them to the right people and equipping them with the skills necessary to transition to the boardroom. We also support the Board Diversity Initiative, a group of asset owners and asset managers working together to improve board diversity among Hong Kong-listed companies.
These regulatory changes will encourage boards to do the right thing, but appointing just one female board member is not enough to shift a culture. In the long term, if Hong Kong really wants the strongest corporate governance, we must aim for 50% women on our corporate boards, in management and in the workforce, so the clear next step is for all companies to set meaningful targets of at least 30% by 2027.
In times of increased volatility due to COVID-19, the climate crisis and geopolitical factors, it is even more important that boards around the world embrace a strong corporate governance regime. Stakeholders including customers, investors, employees and suppliers look at how an organisation influences sustainability efforts and contributes to overall wellbeing, both at local and global levels.
Hong Kong cannot miss this opportunity to make the city a leader on board diversity.