Biz Sch News 10 March 2015

Diversity Makes a Positive Difference

A recent study on diversity in Asia Pacific boardrooms established that companies that have at least 10 per cent of their board seats held by women perform better financially.

Diversity CGIO NUS

The report, published by Korn Ferry and NUS Business School’s Centre for Governance, Institutions and Organisations (CGIO), “Diversity Matters: Adding Colour to Boards in APAC” examined 1,000 companies in 10 Asia Pacific major economies for the financial year 2012/2013.

The findings indicate that strong gender diversity on boards often coincided with strong corporate performance. Boards with 10% or more female directors enjoy, on average, a 3.6% higher return on equity and a 1.3% higher return on asset than boards with less than 10% of female directors.  This is true of companies in all the individual countries in APAC, with the exception of Malaysia.

NUS CGIO DIVERSITY report

Despite these upsides, the study also confirmed that Singapore lags behind the region – with a woefully small number of women in the boardroom, the island state was ranked seventh  out of the 10 APAC economies studied. Just 7.4 per cent of directors in Singapore are female, below the regional average of 9.4 per cent and more than half – 52 per cent – of boards in Singapore had no women at all and a further, 31 per cent had just one.

Only four of the 100 surveyed boards in Singapore had at least three women.

Region-wide however, the number of all-male boards in 2013 decreased, while the average female percentage on Asia Pacific boards rose to 9.4% from 8.0% in 2012. Figures vary across the region with Australia, New Zealand and China having the highest proportion of female directors respectively.  But more needs to be done to change mind-sets and address the under-representation of women on boards in Asia.

In Asia, the issue of gender diversity is particularly relevant as more women in the workforce find themselves having to deal with entrenched attitudes that tend to pose a barrier to their advancement. Presenting the report, Associate Professor Marleen Dieleman, Associate Director of CGIO, pointed out that directors are often recruited from the circles of associates or so-called “old boys’ networks” where women are excluded. She termed this the “golf-course effect” which could explain why there are fewer female directors. However, she believes that “there is significant potential for companies to benefit from greater gender diversity in their boardrooms.”

To learn more about the report or view the full report, click here.