HKEx wakes up to fact that board diversity is good business
Shalini Mahtani says proposed reporting standard may lead to real change
The Hong Kong stock exchange announced last Friday that it is proposing a change to the corporate governance code which, if enacted, will affect all companies listed on its exchange. It proposes requiring all companies to establish a policy on board diversity and to report on this in their corporate governance and interim reports. Listed companies will need to comply; if they don't, they will need to explain why they haven't.
This is a huge milestone for Hong Kong. It's a recognition that the recruitment of board directors on the basis of meritocracy, plus diversity, tends to result in better corporate performance, as is evident from research around the world.
The move will raise governance standards and encourage transparency about company boards. The approach is similar to steps taken last year in Australia. It is also in line with the global trend of countries encouraging (and in some case mandating) companies to adopt board diversity.
When companies think about diversity of perspectives, they look at the experience and skills of board candidates but they also tend to look at differences based on gender, culture and race, age, sexual orientation and gender identity, disability and religion. Some of these indicators are easier to quantify, and therefore to report on, than others - gender being the obvious example.
The lack of women leaders in Hong Kong has been a recurring topic of discussion. An often cited reason (by men) for the low number of women on boards is that there are too few "board-ready" women. Research just conducted by the HKEx on its 1,500 listed companies proves that this is simply untrue. There are 1,216 women who already have listed company board experience in Hong Kong and 91 per cent of them sit on only one board.
In addition, there are scores of women who have board experience in non-governmental organisations, civil society and academia, some with private-sector experience. While I am not suggesting that we encourage multiple directorships, this does shed light on the ample supply of women with board experience available today in Hong Kong.
