International Women’s Day: more gender diversity on Hong Kong, mainland China firms’ boards, but still trail regional and western peers, MSCI says

Firms in the city and mainland China behind western countries, Malaysia, Singapore, Thailand and India, but ahead of Taiwan and comparable with Japan
‘There will definitely be fewer all-male boards in Hong Kong in the next two years, which should increase the percentage of female directors overall’, MSCI executive says

ESG investing

Eric Ng

Published: 11:30am, 5 Mar 2023

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The representation of women on the boards of listed companies in mainland China and Hong Kong continues to rise but remains below that in regional and western peers, according to the latest assessment by US-based financial indices and analysis tools provider MSCI.

Among companies domiciled on the mainland, women took up 14.8 per cent of board seats as of October 4 last year, up from 13.8 per cent in 2021 and 13 per cent in 2020, according to a report MSCI published this week, ahead of International Women’s Day on March 8. For Hong Kong-registered firms, the ratio increased to 16 per cent from 13.5 per cent in 2021 and 12.7 per cent in 2020.

MSCI has been tracking the gender diversity of corporate boards since 2009, by monitoring the disclosures of the 2,811 constituent companies of the MSCI All Country World Index.

The figures for the city and the mainland remain below the 25 to 46 per cent seen in western countries, Malaysia’s 31.6 per cent, Singapore’s 21.6 per cent, Thailand’s 19.3 per cent and India’s 18.2 per cent, but ahead of Taiwan’s 11.9 per cent and comparable to Japan’s 15.5 per cent.

Miranda Carr, head of applied environmental, social and governance research at MSCI. Photo: Handout

The number of companies with no women on their boards has declined, according to MSCI. The ratio for Hong Kong firms improved markedly to 17 per cent from 28.4 per cent in 2021, while that of mainland firms fell to 25 per cent from 27.4 per cent. But they still trail Singapore’s 9 per cent, Japan’s 7 per cent and India’s 2 per cent.

The improvements came after a new Hong Kong listing rule that went into effect on January 1 last year, mandated that companies with single-gender boards introduce at least one woman board member within three years. Research shows greater board diversity can help firms make better decisions and improve governance, the city’s stock exchange said.

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“There will definitely be fewer all-male boards in Hong Kong in the next two years, which should increase the percentage of female directors overall,” Miranda Carr, head of applied environmental, social and governance research at MSCI, told the Post. “The question is, do companies stop at having one female director, or will they continue to enhance board diversity?”

Given that only 20 per cent of Hong Kong and mainland companies’ senior management positions are held by women, a limited talent pool will restrict further improvements, she added.

Globally, some 24.5 per cent of the MSCI index constituents’ board seats were held by women, up from 22.6 per cent a year earlier. But only 5.8 per cent of these companies had women CEOs, up from 5.3 per cent in 2021.

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Further improvement is needed, said Maria Wilton, a member of the board of governors of CFA Institute, a global association of investment professionals. “Challenges remain, as we see the number of female CEOs, a key pipeline for board roles, at very low levels,” she said.

Over the past decade, a growing number of jurisdictions has adopted quotas for the inclusion of women on corporate boards and mandatory disclosure requirements.

Women on boards in nations like Norway, France, Australia and India have risen significantly following quota targets and legal requirements, but these have also had some negative consequences, said Kirti Lad, co-founder of the Women’s Directorship Programme.

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It is a joint-venture between Meraki Executive Search & Consulting and the University of Hong Kong’s corporate governance training programme.

“In Norway, the first to legislate quotas, some women were accelerated too early to meet these quotas and had to take a step back to go forward, which also left a question mark over quality,” she said.

In some other nations, quotas were introduced without a sufficient pipeline of senior female executive talent below the women elevated to board roles, which created succession problems, she added.

Meanwhile, only 10 per cent of Hong Kong companies report gender pay gap data, compared to 82 per cent in the United Kingdom, 20 per cent in Singapore, 12 per cent in the United States and 8 per cent in Japan, according to a report published by Equileap this week. The gender equality data provider’s study covers 3,787 listed companies in 23 developed markets.