Should Hong Kong introduce a quota to achieve better gender representation on corporate boards?
France is set to join Norway and Malaysia in adopting a quota system to ensure broader gender representation on corporate boards.
The idea has yet to gain traction in Hong Kong, nor has Britain’s slightly more passive model of setting targets found appeal.
Fleur Pellerin, the former French minister of culture and communication, said she supported the quota system as a way to accelerate the fair treatment of women.
When the system was first considered in 1999, there were only 10 female directors among the top 550 companies in France.
“There were just far too few women on the boards of companies. We have encouraged companies to add more women board members but the process has been far too slow. The quota system is the solution. Now all the big companies will need to find women to fill positions on their boards by 2017,” Pellerin said.
She said the new rules meant France would require from next year listed companies with more than 500 employees to have at least 40 per cent of their corporate board membership made up of women. Those that fail to comply will have their directors’ pay withheld. The system would be broadened to include companies with 250 employees or more by 2020.
In Britain, Cherie Blair, the chancellor of the Asian University for Women and wife of former prime minister Tony Blair, says the country has opted for a target of 30 per cent female representation on corporate boards.
“But the process is very slow. If there is no big improvement, there may be pressure to follow the trend of imposing a quota,” Cherie Blair said on the sidelines of a business conference in South Korea.
Hong Kong Exchanges and Clearing in 2012 introduced a rule requiring listed companies to support balanced gender representation on their boards. However, it stopped short of imposing a quota.
In Norway, 40 per cent of company directors are women, up from 6 per cent before the quota system was introduced in 2002. Malaysia imposed a 30 per cent quota this year in an attempt to broaden female representation.
In Hong Kong, 11 per cent of directors are women, little changed from the 10 per cent level in 2012 when HKEX introduced the board diversity rule.
Companies were asked to comply voluntarily with the diversity initiative and did not face any penalties for non-compliance, though they were required to publish the gender composition of their boards in annual filings.
While Norway is way ahead when it comes diversity in the board room, thanks to the quota rule, other countries also fare better than Hong Kong. In Britain, women make up 26.1 per cent of company boards on average, while the figures for Australia and the United States are 21.5 per cent and 20 per cent, respectively, according to a study by Business Community.
The Hong Kong Institute of Chartered Secretaries said a typical director of a Hong Kong-listed company was a 58-year-old male accountant with banking experience.
Mike Wong Ming-wai, the chief executive of the Chamber of Hong Kong Listed Companies, said the chamber did not support the quota system.
“Appointment should be made on merit and based on who can bring the most benefit to the board. If there is a quota, would the board be unable to appoint a suitable person for the sake of fulfilling the quota requirement? That would be counterproductive,” Wong said.
“Women’s career advancement in Hong Kong is very good and women are well-respected. I think that with more awareness, better education and more women making themselves available, Hong Kong’s women-on-board situation will improve.”
Keith Pogson, senior partner of EY’s Asia-Pacific financial services and founding member of the 30% Club in Hong Kong, said his club wanted to encourage women in their aspirations to the corporate roundtable, but it did not support the quota system.
“The above brings us back to whether quotas are a good thing. For Hong Kong, we have many able women in executive management positions, but clearly there is poor representation at the board if we look across the whole population of listed companies,” Pogson said.
Ivy Cheung Wing-han, president of the Hong Kong Institute of Certified Public Accountants, said the institute did not support the quota system either.
“We would like to encourage companies to adopt a balanced board composition as a good corporate governance practice. However, we do not agree with the quota system as we should first encourage companies to do it voluntarily,” she said.
She said Hong Kong might also lack suitable candidates to meet the quota requirement.
Hong Kong-born entrepreneur Clara Shih Chong-wai, a co-founder of US technology firm Hearsay Social, said companies should do more to add women to their boards because it was good business.
“The correlation between gender diversity on boards and financial performance is undeniable and universal across industries from retail to information technology,” she said.
According to research advisory organisation Catalyst, companies with the highest percentage of women board directors outperformed those with the least by 53 per cent in terms of return on equity and by 42 per cent when it comes to return on sales.
Eleanor Wan, chief executive of BEA Union Investment Management, is among the few female heads in the asset management industry.
“Of course, I support increasing female representation in company boards. I, however, am not sure if this should be done by a quota or voluntary participation. For family reasons, many females may change their focus from career to building and taking care of their families, particularly their children. There might not be many female executives in senior levels,” Wan said.