Diversity: Women in corporate boards
At the recent Corporate Governance Forum sponsored by the Securities and Exchange Commission, the Philippine National Bank (PNB) board and senior management team came in full force led by “Kapitan” Lucio C. Tan & his wife, PNB Director Carmen K. Tan. The topics covered were Global Reporting Initiative and Environment, Social and Governance, Anti-corruption and Women in Corporate Boards.
The Women in Corporate Boards session participants were Vivian Yuchengco of the Philippine Stock Exchange (PSE), Annette GozonAbrogar of GMA Network, Inc., Rizalina G. Mantaring of Sun Life of Canada ( Philippines), Inc., Milagros V. Reyes of Petro Energy Resources Corp. and Camille A. Villar of Vista Land and Lifescapes Inc., ably moderated by Leonora V. de Jesus of SM Development Corp.
Do we really need women in the Board? Cris Razook of the International Finance Corp. (IFC) said: “Board diversity is a value driver… If you want anything done in the Philippines, just ask a woman to do it.” He said there are gender gaps. Generally, women have less access to education, employment, business opportunities and financial services, contributing to gender inequality. Ultimately, these inequalities slow economic growth and development and perpetuate poverty, he said. The private sector has a big role to play but not all underlying causes of inequality can be addressed by the private sector. Improving gender equality is a goal of the World Bank ( WB) and IFC, he said.
What are some global facts about women at work? Based on a WB study, here are some data:
• Women’s labor force participation has stagnated — it decreased from 57% in 1990 to 55% in 2012.
• Women on average earn between 10 and 30% less than working men.
• Women are only half as likely as men to have a full-time wage jobs for an employer.
• Across developing countries, there is a 9% point gap between women and men in having an account at a formal financial institution.
As per a World Bank study, gender equality in emerging markets could result in 200 million jobs and produce $1 trillion in additional annual income provided there are jobs. Women’s economic opportunity is positively correlated with high economic growth or gross domestic product per capita, according to an International Monetary Fund study.
Let’s take a look at women in corporate boards in Asia Pacific. Mr. Razook said the regional average is only 9.4% of boards are occupied by women, with Australia having the highest ratio at 18.6% and South Korea the lowest at 2.1%.
In the Philippines, inn 2014, female board directors made up 12% of companies’ boards, on average, but with female board chairs lower at 5%. The industries with the most female board members were in the finance and consumer space, while those with the lowest were in infrastructure, manufacturing and technology.
Based on a 2007 McKinsey & Co. study, Mr. Razook said companies with more than two women on their boards outperform others in their sector. Why so? Perhaps because women are more intuitive, known also to be more caring and nurturing. Ms. Yuchengco, the “PSE queen,” said women are more detailed, even makulit (persistent) when it comes to following through. To which PNB Director Leonilo “Topper” G. Coronel, who was in our table, commented that women are “natural naggers” to get things done.
So does balanced women leadership result in better performance? Yes, according to Mr. Razook. • Better profitability — The Credit Suisse Research Institute in a six-year review found mining companies with women on the Board had a higher return on equity, lower gearing, higher price/ book value and better than average growth.
• Better governance — The Conference Board of Canada found that the more gender balanced board were more likely to ensure better communication, adhere to a code of conduct identify criteria for measuring strategy and monitor its implementation.
• Better stakeholder management — Women have been shown to outperform men on seven out of the top ten leadership qualities, and most decidedly on team building and emotional intelligence in academic research.
• Better risk management — Leeds University Business School found that having at least one female director on the board reduced a company’s chances of going into liquidation by approximately 20%. Having two to three female directors further reduced the risk of bankruptcy, the advantage eased once the board reached gender parity.
• Better accounting — The American Accounting Association Journal in a study found that female presence on a company board reduces the chance of financial restatements by close to 40%.
Someone asked: so why not have an all women board then? Wouldn’t that result in an even better performance? No! Because then we lose the DIVERSITY as a value driver, for we need different viewpoints. Moreover, it is not just gender but, as former Management Association of the Philippines and Financial Executives of the Philippines (FINEX) president Greg S. Navarro said, we should not lose sight of “competence” in choosing our board, and, if I may add “fit,” “relevance” and “specialization” to compete in this dynamic world.
Board diversity is a value driver!