Companies that appoint women directors to their boards deliver better results in terms of corporate governance and financial performance, a study by NUS Business School has found.

The annual study on boardroom gender diversity in Singapore, now in its third year, found a clear positive connection between board diversity and company performance, measured by Return on Assets and Return on Equity.

Report author Dr Marleen Dieleman, Associate Director of the Centre for Governance, Institutions & Organisations (CGIO) at NUS Business School, said the study showed that companies who appointed a new woman director recorded improved RoA and RoE for the next three years, making a strong business case for the appointment of women directors.

The time has come to move from creating awareness to action

Dr Marleen Dieleman,
report co-author, NUS Business School

An empirical analysis of the relationship between the proportion of female directors and firm performance also showed that more gender diversity on boards has a positive effect on firm performance, though not on market value.

“We also found a positive relationship between gender diversity and corporate governance quality. Altogether, these findings provide a strong business case for boardroom diversity in Singapore,” said Dieleman, who co-authored the study with Dr Meijun Qian and Muhammad Ibrahim of NUS Business School.

Diversity ranking

The authors examined 677 Singapore Exchange (SGX) listed companies to produce the Singapore Board Diversity Report 2013, supported by BoardAgender, UBS and SGX, which was launched on November 14.

femalesonboards280Female representation on SGX-listed company boardsFor the first time the report also introduced a gender diversity ranking, which measures not only the number of women in corporate boards but also their leadership roles.

Friven & Co (now: CCFH) and Malacca Trust Limited topped the ranking, while other companies that scored well included Banyan Tree Holdings, Straits Trading Co. and Cosmosteel Holdings.

Overall, of the 677 locally-listed companies studied, 7.9% or 377 of the total number of board directorships were women. Some of them held more than one directorship in a listed company.

While this is slightly higher than last year’s figure of 7.3% and 6.9% in the first report released in 2011, Dieleman said movement had been at a snail’s pace and more needed to be done to promote gender diversity in corporate boards as there is already a strong business case for the benefits of doing so.

“The time has come to move from creating awareness to action,” she said. “I am happy that more people are discussing this, including in government and board rooms.”

Work-life balance

Singapore’s Acting Minister for Manpower, Mr Tan Chuan Jin, who was the guest-of-honour at the report’s launch, said that while “in Singapore we have a level playing field, the report makes dismal reading. Though we are moving in the right direction, women continue to be under represented in leadership positions.”

report280As women make up half the labour force, there was poor performance at board level among Singapore Exchange-listed companies, he noted.

Tan said that as many women often struggle to find the balance between work and home, men must have a greater share of parenthood responsibilities so that women are better able to shoulder more responsibility at work and rise to more senior roles.

At the same time employers should provide human resource policies to enable staff to balance work and family, and encourage women to aim high, he added.

Tan highlighted that while studies had shown that greater gender diversity at the board level is good for companies, such diversity also leads to more innovation.

Presenting the highlights of her findings, Dr Dieleman said that the number of women directors in Singapore’s listed companies lags behind most of its regional peers, with Indonesia leading the region with 11.6% female directors, Malaysia 8.4% and Hong Kong 9.4%.

Most developed countries have more than 15% women directors, a level twice that of Singapore.

Slow progress

“Malaysia and Australia are moving ahead faster due to government action,” Dr Dieleman pointed out. Given the slow progress in Singapore, it will be 2026 before Singapore reaches Australia’s current level, she added.

Meanwhile, some of the largest companies in Singapore still have all-male boards, with the proportion of companies without a single woman on their boards remaining high at 58.2%, only marginally down from last year.

boardglobally280Female representation in boardrooms globallyThe study found just 13 companies with three or more women on the board, with one of them, Mewah International, having four women board directors.

Listed-companies with sovereign wealth fund Temasek as a substantial shareholder had greater number of women with 8.4% female directors, while family-owned firms did even better with 8.8% female directors.

Women continue to be even more underrepresented in leadership positions with just 4.6% of CEOs and 3.4% of board chairpersons being female, which is similar to last year’s findings.

“Gender diversity remains a challenge in Singapore’s boardrooms. While this report shows some improvements, there is still much room for progress,” SGX Chief Executive Officer Magnus Bocker, said in a message in the report.

“I urge companies to aim for not just the small incremental changes we have seen from the findings of the report, but for bigger and bolder steps forward to heighten business effectiveness and strengthen governance practice.”

Ms Laura Hwang, President of the Singapore Council of Women’s Organisations and Co-Chair of BoardAgender, noted that while progress for better representation of women on boards has been made, it continues to be very slow.

“For watchers of these statistics, it’s been like watching grass grow – you know it’s happening but you can’t quite see it moving,” she said.

“We cannot afford the time it takes for nature to let the grass grow, while world-wide competition grows for market-share, for talent, for innovation and new visions, for how to negotiate better outcomes for all sections of society, and for inclusive success.”