By Azam Khan
This piece was originally published on Forbes Indonesia
For Southeast Asian companies looking to enhance their financial performance, a new study reveals appointing more female commissioners has proven to help firms deliver better results.
Boards with more than 30% of female members reported an average return on assets of 3.8%, compared with 2.4% for all-male boards, according to the study by the International Finance Corporation (IFC), a member of the World Bank Group. Similarly, boards with female members also recorded a higher average return on equity at 6.2%, beating the 4.2% recorded by boards with only men.
Funded by the Umbrella Facility for Gender Equality, the study — Board Gender Diversity in ASEAN — analyzed more than 1,000 firms in China, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. Many of the firms surveyed said female board members often improve company strategy and decision-making by offering a fresh and different perspective to complex challenges. They also enable more open discussions among board members and reduce groupthink.
Of the countries surveyed, Thailand is the most gender diverse, with women holding around 20% of board seats in listed companies, followed by Indonesia and Vietnam (both about 15%). In other senior management positions, the Philippines leads the region with 33% of female business leaders, followed by Thailand (30%) and Singapore (27%).
However, almost 40% of the companies surveyed had no female commissioners, while only 16% of boards had over 30% female members. In Singapore, for example, 42% of companies had no female commissioners and only 6% had more than 30% female board membership .
Poor female representation in Southeast Asian boardrooms can be attributed to a male-dominated culture and entrenched stereotypes against women, who are often perceived as subordinates rather than leaders. A recent International Labour Organization report has already warned that business growth in Asia could become severely stunted if companies do not recruit and promote more women.
In this vein, the report has recommended ways to accelerate the pace of change. Governments and stock exchanges can influence the company environment through setting quotas and corporate governance standards. Institutional investors can push companies they invest in to have more diverse boardrooms while corporates can introduce policies, providing women with opportunities to rise to senior leadership roles.
The IFC’s research reveals that within Southeast Asian companies, board appointments tend to be dominated by “old-boys’ networks.” To counter this culture, companies can implement a more formal selection mechanism for board membership and find ways to improve visibility for female candidates.
Moving the needle in Asia will require shifts in mindset and attitude, but the potentially enormous gains from a gender-diverse workforce should more than offset the efforts.
Azam Khan is IFC Country Manager for Indonesia, Malaysia and Timor Leste, based in Jakarta.
