KUALA LUMPUR: A greater diversity on corporate boards should be one of the key priorities for companies, says Sultan Nazrin Muizzuddin Shah.

       “Numerous studies demonstrate a whole range of benefits – from greater board diversity and increased female representation,” said the Sultan of Perak.

       “These include improved company reputation, better financial performance, lower risk-taking and reduced fraud.”

       He said much attention had been paid to this issue with quotas being introduced.

       “But under-representation of women and minority groups continues. And while all-male boards have become rarer among public-listed companies in the West, they are still common elsewhere,” he said yesterday at the launch of a book on “Corporate Governance and Ethics” written by Nik Norzrul Thani, Mohamad Izahar Mohamad Izham and Liya Saffura Ab Rashid.

       Sultan Nazrin also touched on the need for an effective, well-balanced and ethical board of directors, which is “a major aspect of good corporate governance”.

       “Its other central component is rigorous reporting structures. This includes the ‘harder’ financial auditing, and ‘softer’ environmental, social and governance (ESG) metrics,” he said.

       ESG metrics, he said, had become a standard and expected part of company reporting.

       “They are increasingly viewed as an essential element of good corporate governance. This reflects the changing climate in which companies operate,” he said.

       He noted that the interests of stakeholders were now being taken more broadly into account – far more than used to be the case.

       “This includes direct shareholders, who may have become ‘activists’ with concerns about ESG issues. It includes employees. So potential employees, for example, may compare companies’ records on sustainability and social issues when deciding which to join,” he said.

       Consumers, he said, were perhaps the most important stakeholders of all.

       “Across numerous business sectors, from agriculture to clothing, consumers now take a much greater interest in the products they buy than was the case in the past. Consumers today are concerned about a wide range of environmental impacts, from deforestation to pesticide use.

       “They are concerned about the treatment of workers. And they are concerned about other human rights and social aspects. Increasingly, they expect the companies they buy from to make effort to address these issues, and to report on these efforts,” he said.

       Nik Norzrul Thani said he and his co-authors advocated the view that essentially while the policies of corporate governance could be deemed the “hardware”, it was ethics that constituted the “software” to ensure effectiveness and efficacy of any codes or policies of corporate governance.