Women on boards in Hong Kong: Not a women's nor compliance issue

International Women's Day, held on 8th March each year, gives us the opportunity to celebrate the tremendous achievements of women in society, while calling for greater gender equality. This year's theme of 'Make it Happen' encourages effective action for advancing and recognising women.

Although there has been some progress in the last year, the latest findings from the Women on Boards: Hang Seng Index 2015 research are a stark reminder that much more needs to be done to 'Make it Happen' in the boardrooms of Hong Kong's blue chip companies.

Representation of women on boards reaches double digits for the first time

According to the recently released research, the representation of women on the boards of Hong Kong's top 50 companies is 11.1%, reaching double digits for the first time, up from 9.6% last year. Out of a total of 655 directorships on Hang Seng Index, 73 are held by women.

The last year saw the biggest annual increase (1.5%) since 2009 when we started to track this issue. Enlightened companies like HSBC (who is top of the league table with 35.3% women on its board) and The Link Management (ranked 2nd at 30.8%) are leading the way.

Moreover, the number of all-male Hang Seng Index boards has declined from 16 to 14, an all-time low of 28.0%. At first glance, it would seem that the needle is indeed moving at a faster pace. However, a closer examination of the data is not so encouraging.

Hong Kong is lagging behind

When Hong Kong's results are examined within an international context and given the multitude of initiatives promoting more women on boards in Hong Kong, the results are very disappointing. The positive changes this year are mainly driven by five companies while nearly three-quarters of companies have seen no improvement.

One disturbing metric is that there has been virtually no real movement on both the number of companies with female executive directors and the number of executive directorships held by women.

There are only 13 companies appointing women as executive directors whereas the number of female executive directors also crept up by just one, from 16 in 2014 to 17 women in 2015. The number of female executive directors is an indicator of the female pipeline and whether companies are creating the right environment for women to reach the top.

Those chairmen and boards who lament the lack of female talent to choose from in Hong Kong could start by looking within their own organisations.

Despite Hong Kong experiencing the greatest annual percentage increase of women on boards thus far and performing slightly better than several counties in Asia, say Singapore as its close competitor on many aspects, its trajectory is flat and its growth is well below that of global counterparts – most notably UK (23.0%), US (19.2%), and Australia (19.2%).

These three markets have seen significant growth in the last five years, even without the implementation of quotas.

Hong Kong business leaders fail to see the business case

In recent years, there have been a number of meaningful initiatives (e.g. director training programmes, Hong Kong Exchanges & Clearing's code provision on board diversity, establishment of the 30% Club, etc.) aimed at increasing the representation of women on listed boards.

Unfortunately, this concerted and multi-pronged effort has not accelerated the pace of change. The latest research findings do not give us the assurance that this year's uptick will be sustained in future years as there is little evidence of deliberate and strategic action to increase gender diversity on Hong Kong's top boards.

Hong Kong is a city that embraces change and is known for having a 'can do' competitive spirit. Yet, when it comes to women on boards, there appears to be resistance to change, despite momentum on this issue in many other markets and the growing body of international research linking gender diversity on boards to better corporate governance and performance.

Many business leaders in Hong Kong continue to dismiss the issue of gender diversity on their boards, pointing to the broader diversity of their directors in terms of functional or experiential diversity.

According to a forthcoming book "Challenging Boardroom Homogeneity: Corporate Law, Governance and Diversity" as described in the recent Harvard Business Review "Women Directors Change How Boards Work" by Laura Liswood, not only do women directors bring different perspectives, experiences, and style of engagement to the boardroom, they contribute to "enhanced dialogue, better decision making, including the value of dissent," and "more effective risk mitigation and crisis management, and a better balance between risk-welcoming and risk aversion behaviour." Clearly, women on boards is good for business.

The data clearly shows that there continues to be cultural and structural barriers facing women – denying them full participation in Hong Kong's economic growth and excluding them from key decision-making positions.

Hong Kong's business leaders remain complacent, failing to see the business case and ignoring repeated calls to action. This should raise alarm bells - as companies who ignore these issues are at risk of not staying relevant or competitive in today's global market.

Women on boards is a key business issue

We urge Hong Kong's business leaders not to think of board diversity as a women's issue nor a compliance issue – but a key business issue, that of building the best 'top team' for a company to remain relevant and competitive, one that rejects 'group think' and embraces a diversity of perspectives, including that of its client base, its employees, and the wider market.

Here are some suggestions for all companies, not only those on the Hang Seng Index:

1. Review findings of the Women on Boards: Hang Seng Index 2015 report, share them with their board and consider the possible opportunities for their company.

2. Set specific female representation goals and targets for the board and management.

3. Ensure women are included in candidate slate for every board appointment.

4. Try to appoint at least one additional female director in the next year.

5. Consider giving your female senior managers the opportunity to serve as a non-executive director in your company or at another company.

6. Formulate a relevant board diversity policy and create the right environment for change.

While we celebrate the significant achievements of women in the workplace and in wider society, the latest research findings remind us that much more needs to be done. If Hong Kong is truly a world-class city, with Hong Kong's top companies competing on the global stage, our leaders need to take the gender diversity of their boards seriously.