The State of Gender Equity on Boards
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March 26, 2021
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The low percentage of women on boards is a pressing issue in the Hong Kong business community but reporting requirements have yet to bring any significant change.

Hunt Scanlon Media

The Hunt Scanlon Media article, "The State of Gender Equity on Boards​," was written based on our paper, "#ChooseToChallenge the State of Gender Equity on Boards." The article is excerpted below. 

Around the world, countries are taking steps to encourage or mandate improved gender diversity in the boardroom. Those efforts vary by country, as does their effectiveness and impact. A new report from Russell Reynolds Associates takes a look at what is occurring in six countries, hears from female directors about what they are encountering, and provides recommendations to boards on steps they can take to improve both the diversity and inclusion of their board of directors. “The issues the directors raise run the gamut from challenges in accelerating the pace of change to diversity practices, and sustaining the pipeline of board ready talented women, to expanding the definition of what background and skills are required for a board candidate,” the report said. “All of them, however, ultimately get at giving more opportunities for women to lead in the boardroom and ushering in a culture of inclusion for new and diverse directors.” 

Corporate Japan’s lack of gender diversity is a globally recognized issue. In the 2020 global gender gap report, Japan ranked 121st out of 153 countries for female representation. The recent comments made about women in the workplace exposed the depth of unconscious bias. “Corporate Japan will now be required to set voluntary targets for female and foreign managers under a revised corporate governance code due out in the spring of 2021,” the Russell Reynolds report said. “Both foreign and Japanese investors are calling for more gender diversity at both the senior executive levels and on supervisory boards. The momentum is shifting, and the race is on for corporate Japan to improve the gender diversity in the boardroom.” 

At Least One Female Director 
The U.S. has seen a push to improve gender diversity originating in individual states, like California, which now mandates gender diversity in boardrooms. Publicly traded companies based in the state now must have at least one female board director — or face a $100,000 fine. This push has increased the number of California-based companies with at least one woman on the board from 173 in July 2019 to 282 in March 2020. While there are not yet requirements at the national level, at least 11 other states have enacted similar legislation or are considering doing so. The report says that none of the other existing statutes mandate minimum numbers of female directors; instead, they focus on mandating increased disclosure about the diversity of the board of directors, and in some instances, senior management, too.​ 

The pressure around diversity disclosures has intensified as NASDAQ has proposed new listing rules that could require companies to disclose the diversity of their directors annually, and to have at least one diverse director on the board within the next two years or explain why they are out of compliance. This is the first of its kind requirement by a stock exchange. 

​Three Hurdles 
Hong Kong, home to the world’s biggest capital market and a critical gateway to China, needs to hold itself to the highest international standards of governance to reassure and give confidence to the global investment community, according to the Russell Reynolds report. The low percentage of women on boards is therefore a pressing issue in the business community. Since 2019, the Hong Kong Stock Exchange has required companies to disclose a policy concerning board diversity through a “comply or explain” requirement, however this has not yet led to any significant changes. 

A number of influential bodies such as The Women’s Foundation and the 30% Club have long actively advocated for improved board diversity, and the current focus on ESG has encouraged many companies to review their own standards of governance. Russell Reynolds said that there is a “good pool of female board candidates in the territory, but they face three hurdles in landing a board seat: First, many state and family-owned businesses have traditionally had a strong preference for conformance and trust in the boardroom, limiting their appetite for recruiting independent board directors. Second, tenure limits are not always strictly enforced, and therefore relatively few board seats come available every year, making any change in director composition slow going. Third, only a minority of companies regularly evaluate their board composition and performance, which limits thoughtful and proactive planning of board composition, and therefore improved board diversity.” 

To read the full article, click here.