Boards far from balanced despite adding more women
HK firms have made progress on the issue of female directors but diversity in the areas of age, race and knowledge bases is still lacking
A year after Hong Kong Exchanges and Clearing announced a new rule on board diversity, and three months after its implementation, there have been more women on company boards in the city, but little improvement has been made in other areas mandated by the rule, such as a greater diversity of ages, races or knowledge bases.
In December last year, the exchange operator said that from September this year it wanted company boards to be more "balanced". Companies that failed to comply would be forced to explain.
Following the rule, many companies that did not have women directors, including HKEx itself, have appointed at least one woman to their boards.
Fund manager BlackRock reviewed the compliance record of 35 blue-chip companies since the rule was implemented and found that a little under one-third of the companies now had female directors on their boards. This was up from one in 10 before the policy was announced.
Susanna Chiu, a director of Li & Fung Development (China), said the new policy had persuaded some companies to pay more attention to the subject of female board members, but the progress on board diversity in general was not enough.
"Board diversity does not mean just talking about having more female directors," Chiu said. "Gender is only one aspect of diversity. Listed companies should also pay attention to the ages, knowledge and background of directors to achieve a balanced board."
HKEx's figures showed 67 per cent of directors in the city were aged between 41 and 60, and only 10 per cent were below 40. A study by US executive search firm CTPartners last year found that more than 1,100 directors on the Fortune 1000 boards were over 70 years old.
"It is important for companies to consider appointing younger people to their boards," Chiu said. "They may have better knowledge of new technologies and represent the views of younger customers."
Lan Kwai Fong Holdings chairman Allan Zeman, who came from Canada to set up his business in Hong Kong in 1975, is on the boards of a number of listed companies and public bodies. In 2004, he was appointed chairman of Ocean Park.
"It makes sense for listed companies and government-appointed bodies to have Westerners on their boards," Zeman said. "Hong Kong is an international city and many companies here operate their businesses worldwide. It would be good to have board members from different countries since they would bring their home countries' knowledge to the organisation."
In addition, when companies are prepared to be more open-minded towards diverse gender and backgrounds on their boards, they can attract directors from a wider pool of talent.
Clement Chan Kam-wing, the president of the Hong Kong Institute of Certified Public Accountants, said board diversity was important not just for listed companies, but also for public bodies or other industry bodies. About half of the institute's councillors were women, he said, and Ronald Kung Yiu-fai, aged just 44, was last week elected vice-president.
"It is good to have younger accountants like Mr Kung on board as he helps reflect what the younger accountants think and demand. Almost half of the 36,000 members of the HKICPA are aged below 40 and we need to have someone in the council who can speak on their behalf," said Chan.
"A diverse board will usually lead to more discussions and debate. This will eventually help produce outcomes that will better fit the needs and demands of different members."