THE board gender diversity (BGD) concept was initially introduced to the Malaysian Code of Corporate Governance (MCCG) in 2017, with improvements made in 2021.
Listed corporations on the Main and ACE Markets now are required to have 30% female representation on their board pursuant to Practice Statement 5.9 of the MCCG.
However, the Securities Commission (SC) has made it known that board appointments must be based on merit, skills, and experience.
It further hints that BGD is not merely a window dressing exercise.
The idea of BGD in the corporate world gained traction as applied business research pointed to performance improvements due to female board appointments.
The reasoning behind this proposition is that female directors bring unique human traits and generate greater resources for corporations, including better monitoring of the chief executive officer’s performance and alignment with shareholders’ interest.
Many of these business findings validated the fact that there is a correlation between the addition of female directors and improved firms’ performance.
However, these findings do not indicate a causal relationship.
Correlation does not depict a causal relationship, and businesses must exercise caution so as not to draw misleading conclusions.
Social media and business consultants have not been helping in these efforts with their tendency to sensationalise business findings.
In any event, board nomination committees must ensure that the pursuit of BGD does not override meritocracy in selecting suitably qualified and experienced board members.
This is not a box-ticking exercise for the sake of meeting regulatory or social pressures; that is not the intention of MCCG 2021.
Moreover, such acts defeat the purpose of ensuring the board consists of the best talent available, and any such practices must be roundly denounced by shareholders and other stakeholders.
According to the Institute of Corporate Directors Malaysia (ICDM), true board diversity goes beyond gender diversity.
It suggested that a suitably constituted board should comprise directors with broad thoughts, experience, and perspectives and that it cut across age, culture, and expertise. Such boards exhibit cognitive diversity, promote diversity of thinking, and are more innovative and effective in solving problems.
They function as an antidote to group-thinking as well.
It is also wise for corporations to shape boards that promote the culture of creating and exchanging ideas and engaging in healthy debate to help generate idea diversity.
Such a collegial atmosphere at board level can undoubtedly help to ease women’s participation and elevate women’s status in the many male-dominated boardrooms.
The pool of capable female talents for future progression as board candidates requires expansion too.
It demands a holistic approach involving internal and external stakeholders, such as corresponding social infrastructure improvements that can help free many talented women presently confined to homemaking roles.
It is the right thing to do.
Women have ample capacity together with proven capabilities to play a meaningful role in corporate boardrooms, and of course, they want it to be done fairly and transparently.
They want to play an effective role in boardrooms and at the senior management level.
The MCCG 2021 has made it compulsory to include gender diversity as part of listed corporation DNA by seeking the inclusion of women both at board and senior management level.
The need for such regulation would not exist if and only if board appointments were not overwhelmingly gender biased in the past.
Additionally, boardrooms must be filled with the best talent available from a broad spectrum of skills, experiences, and thoughts that can dot the i’s and cross the t’s.
Sukh Deve Singh Riar is a business and financial advisor and Dr Shafi Mohamad is an expert in corporate governance. The views expressed here are the writers’ own.