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.”
Why does it matter to companies?
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.”
Investors pushing the DEI case
Capital is walking the talk when it comes to implementing DEI practices among PLCs, says 30% Club Malaysia chair Datuk Ami Moris. Institutional investors and asset managers are evaluating a business’ diversity performance and including it as part of their ESG scoring methodology.
“DEI is clearly a metric within the S or G of ‘ESG’, so companies can’t get away from it. [This requirement] will then flow to individual investors as well. They would take cue if fund [houses] are prioritising this, especially if it’s in their voting guidelines,” she says.
“For example, EPF (Employees Provident Fund) said it would vote against any director’s reappointment if the company does not have any women directors on its board. That will be something that individual investors will see as important for their own investment decisions.”
Minority Shareholders Watch Group (MSWG) CEO Devanesan Evanson says generally, institutional investors have recognised that gender diversity is good for the board and they may shy away from all-male boards.
“Different institutional investors will have different mandates as to how to deal with all-male boards. At MSWG, we have questioned all-male boards on their non-inclusivity. And, we will vote against the appointment of a male director onto an all-male board,” he says.
“Both local and foreign institutional investors take the ESG perspective seriously when making an investment decision. Apart from ESG considerations being the right thing to implement morally, lack of such considerations can also affect the profitability of a company. Not following ESG practices results in much bad press, which can also impact the reputation and branding of the company. This may result in investors staying away from such companies.”
The challenge, he adds, is ascertaining whether the woman director is truly independent, “so that she may bring an objective independent voice to deliberations, without fear or favour. The challenge is that she may fulfil the definition of an independent director in form but not in substance. But this is true for all independent directors. The risk and likelihood of tokenism are real”.
Men are also an important part of diversity
As a company that sells personal care products, InNature Bhd naturally has more women leaders within the company, with 80% of its board made up of women, and 83% making up its key senior management.
Managing director Datin Mina Cheah-Foong says the company has always tried to inculcate its “love all, serve all” motto and came to realise quite early on that in order to do that, its staff need to walk in each other’s shoes to embrace diversity. This includes having men on the board, she concedes.
“If you are not using the products, how would you understand how it is used? What women really want from their lipstick is not just colour, but something that is moisturising and long-lasting. Men don’t realise this, they just see a pretty colour on luscious lips,” she quips.
“But it works the other way around too. We sell deodorants and a man told me he loved it in the spray form. I asked why and he said it’s because the rollable deodorant yanked on his armpit hair, which is something that women don’t think about because we’re accustomed to shaving our pits!
“This is something that women are completely oblivious of. All of these things only come about when there is diversity within the team. So, as a business imperative, it makes a case for itself.”
Cheah-Foong takes it a step further by also addressing unconscious biases within the organisation, such as making sure the language of communication is inclusive and everyone feels welcome in the workplace.
“We sell to everybody, whether to men, women, boys, girls, lesbians, transgenders or gays; we are all-inclusive,” she says.
“When we talk about diversity, we never talk about the LGBTQ community because it’s against the law. On the one hand, we talk about DEI, but on the other hand, it isn’t spoken about in a holistic manner. It’s a big challenge for our country as a whole and we really should be considering all of this, especially in Malaysia, because we don’t go far enough.”
This could be done by providing unisex bathrooms, for instance, she says. “Staff is the one thing that I’m not prepared to compromise on. Because when we’re talking about equity, we’re talking about people and everybody is equally important. Everybody works hard.”
Mentoring the next generation of women
The 30% Club has a Board Mentoring Scheme, in which mentors are assigned mentees to train the latter to take on leadership and board roles. One of the mentors is Chong Chye Neo, independent non-executive director of Bursa Malaysia Bhd.
Women tend to put too much pressure on themselves to know everything about the business operations within a short time. Instead, they should accept that directors contribute in different ways based on their individual experiences and competencies, she says.
“Networking outside the formal board setting is something men do better than women, based on my observations. As such, I encourage women to have conversations with fellow directors, both men and women, outside the formal setting to get more unrestrained views on matters pertaining to the industry, the culture and politics within any organisation,” says Chong.
“I have not sat on boards with less than 30% women but I have been on such board committees. I am actually very wary of joining a board if I am to be the only woman as I would be uncertain if I am the token female on the board or if the organisation is serious about adopting diversity as a culture.”
The chairman of the board has an important role to play as well, she adds. “My observation is that in a male-dominated board, the voice of the minority, especially a sole woman, would likely be drowned. As such, it is important for the chairman of the board to play the role of moderating participation so that the board benefits from the experience of all directors.”
Chong mentored Ahila Ganesan, an independent non-executive director of Velesto Energy Bhd. Ahila says Chong always made time for her despite being extremely busy, and was very open about sharing experiences and giving guidance on how best to leverage her skills and areas of interest.
Chemistry with the other members of the board is crucial. Ahila explains that chemistry does not necessarily mean like-mindedness, as diversity of thought is at the forefront of any good board. It is also about the ability to put forth perspectives in an open manner to be debated and considered by all.
In the same cohort is Low Ngai Yuen, independent non-executive director of GDEX Bhd and OCK Group Bhd. She says she strives to ensure that she adds value to every board she is appointed to.
“It does take time for boards to recognise the merits of diversity in having different external expertise. I actively pursue strong relationships with the management outside of board meetings with full disclosure to act as a sounding board, offering a different point of view and bringing different types of exposure,” says Low.
Low was mentored by Datuk Kong Sooi Ling, an independent non-executive director of IOI Corp Bhd, whom she describes as being “incredibly invaluable”. Low shares that when she took on her second board appointment, Kong was there to support her.
“She was also a tremendous help in providing insights into how some boards pay attention to different priorities and how it is important to ask the right questions,” says Low.
A significant challenge, says Low, is that she was often reminded that her seat at the table was only because of Bursa Malaysia’s benchmark of having 30% women representation on boards. However, she emphasised that no woman should be made to feel the reverse discrimination of a patriarchal system.
“Businesses need to reflect the diversity of their consumer demographics. While it feels as if I need to prove myself harder and set the bar higher, it is better than not getting this chance at all, and I’m going to give my best.”
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