New | Quota system to close gender gap on Hong Kong corporate boards may do more harm than good
Three years after Hong Kong Exchanges and Clearing (HKEx) adopted a rule change to promote gender diversity on corporate boards, there has been limited progress with women accounting for little more than one in every 10 of the top positions.
About 11.3 per cent of the directors of Hang Seng Index constituent companies were female, up from 9.6 per cent last year, according to a recent survey by non-profit organisation Community Business. But the rise was propelled by only "a handful of companies", and nearly three quarters of firms have made little progress in tackling the gender imbalance issue since 2009, the organisation noted.
"A concerted and multi-pronged effort by different sectors in Hong Kong in recent years has not brought about a faster pace of change, even with momentum globally on this issue," the report said.
A separate study by Community Business found that women make up 45.7 per cent of middle level staff in Hong Kong, but occupy fewer than one third of senior management roles.
"The biggest challenge is getting chairmen to think about the benefits of having women on boards," said Nick Marsh, managing director with executive search firm Harvey Nash, Asia Pacific. While women's representation in Hong Kong boardrooms continues to lag behind that of the US and most European countries, some of the city's Asian neighbours such have been taking steps to catch up.
Women make up 45.7 per cent of middle level staff in Hong Kong, but occupy fewer than one third of senior management roles
India’s stock exchange last year imposed a quota of one female director on the board of every listed firm, which has helped Indian companies overtake their Hong Kong counterparts in the number of women taking board seats for the first time in history. That has raised a question whether HKEx should follow India’s lead and implement a similar quota system.
Gaëlle Olivier, the Hong Kong-based chief executive officer, general insurance with AXA Asia, said she was against the idea of gender quotas to boost the share of women executives.
"It does more harm than good for a company to promote women only because it needs to meet corporate governance rules. The key issue lies in shifting people's mindsets and building up a pipeline of women leaders to help them go further up to the corporate ladder," Olivier said.
Norway and Sweden, which were among the first in the world to introduce quotas, have ratios of women directors above 28 per cent, placing the two nations at the top of the global rankings of boardroom gender diversity.
"But in Norway, introducing quotas resulted in a closed circle of women holding directorship positions in the country, which may not be an ideal situation," Marsh said. "Also, women themselves will not be happy if they know they are offered a particular position only because their employers have to accomplish their legal mandate."
Meanwhile, Hong Kong's stock exchange regulators are not likely to push for a stronger legislative action to shape a gender balanced board in listed companies, at least for the time being.
"I know they are supportive, but clearly, they do not want to go into a law that talks about quotas," Marsh said.
A better approach for the HKEx is to put in place transparency rules that require companies to report on the composition of both their senior management and board.
This will help expose appointments of senior management to public and media scrutiny, as well as make it easier for headhunters to find qualified women candidates, March said.
As a result of the opaque system, local executive search firms frequently look overseas when seeking to find qualified women to fill local corporate board positions. "Currently, there is a more visible pool of talent in the United States," said Marsh, whose firm has recruited Chinese-speaking women from abroad to fill spots in Hong Kong companies.
