Diversity in Business Report: Women Empowerment

Businesses nowadays are being challenged by volatility, uncertainty, complexity, and ambiguity.  Such challenges underscore the significant roles of the Board in strengthening business and building immunity as it steers the company towards long-term business goals while creating value and sustainable growth.

According to National Association of Corporate Directors (NACD) 2019 survey, these challenges affected expectations toward Board performance.  Of the total respondents, 86% were of view that the Board and Management should collaborate more closely in driving the organization, creating growth, and tackling new potential risks in the next five years.   Some 84% expected the Board to perform more effectively while 73% thought the Board’s leadership roles became more challenging and that everchanging business condition impeded the efficiency of Board performance.  Therefore, the Board is expected to steer the organization through series of challenges, drive growth under normal situation, and survive crises.

Board diversity is one of key elements that enable effective Board performance.  Diversity in terms of skills, experiences, competencies, and specialization is essential for the Board to gear the organization toward its objectives and purposes.  Board diversity will offer variety of views and allow exchanges in knowledge, experience, and in-depth information.  It allows the Board to make comprehensive decision for utmost benefit of the organization and enhance the efficiency of Board performance.

According to International Corporate Governance Network (ICGN), better global recognition over the significance of Board diversity could be a result of the 2008-2009 economic crisis.  Boards of numerous companies then were criticized  by shareholders, investors, and the general public for lacking independence and variety of idea, expertise, and aspect.   Lacking of diversity led to group thinking, ineffective risk management, and eventual business failure.  Therefore, the concept of Board diversity has since been encouraged.  There are two key elements that affect the efficiency of Board performance.  The first is Knowledge & Experience, which can be assessed by track record of academic and professional achievements.  The other element is Competencies & Personal attributes, which can not be considered only by work experiences.  This element can be gauged by working style, ideal, and character of the director, assessable by direct experience as well as other means such as interview or evaluation form.  These two elements greatly affect performance efficiency of each director.

Besides diversity in knowledge, experience, and character of the Board, another aspect gaining international recognition is Gender Diversity.  The role of female’s “leadership” is particularly interested and eyed in many dimensions.  This is also in alignment with the fifth goal of United Nations Sustainable Development Goal: Gender Equality.  Results of various surveys indicated that Boards with Gender Diversity could create value and competitiveness.  A report by United Nations Development Programme (UNDP) indicated that companies with gender diversity leadership tend to deliver better-than-average earnings while a joint study between DDI the Conference Board and Ernst & Young (EY) indicated that higher portion of female leadership could boost corporate earnings growth by at least 1.4 times.

In Thailand, portion of female directors and senior management at companies in the capital market has been on the rise.  As in many other countries, Thailand promotes female’s roles in the Executive Board of listed companies by stipulating in the Corporate Governance Code (CG Code).
 

Women in Business Report 2020 by Grant Thornton Thailand showed that female senior management in Thai business organizations accounted for 32%, beating global average at 27% and Asia-Pacific average at 26%.  According to statistics of Thai listed companies, there were 2,167 female directors or 20% of total 10,948 directors while 83% of Thai listed firms had at least one female director.  Some 104 companies had female CEOs (or holding top management position), comprising 78 SET-listed companies and 26 MAI-listed companies and accounting for 13.85% of all companies in the capital market. Such data reflects greater “leadership” role of female in the world of work.

In SET100, Boards of 91 companies had both male and female directors while Boards of nine companies had all male directors.  Industries with highest portion of companies with male-only directors were industrial goods (20%), consumption goods (18%), technology (14%), and property & construction (14%).

According to average data by industry of companies participated in the IOD’s Corporate Governance Report of Thai Listed Companies 2020, consumption goods had the highest portion of female directors at 27% of total Board seats.  

Although Thai listed companies are outstanding among ASEAN in terms of Gender Diversity, it remains crucial to emphasize and support continuous development of female leadership to ensure they have genuine roles in driving the organization equally and sustainably.  
 

In 2021, the Thai Securities and Exchange Commission (SEC) issued a guideline encouraging companies to establish a policy toward equal opportunity for female candidates in Board recruitment and set targets on gender diversity.  Potential target includes the stipulation of minimum female directors at 30% of Board seats.  More female directors will create greater diversity of Board elements while variety of views and ideas could lead to more prudent thinking and decision making which will in turn bolster value creation and competitiveness of the company. 

This is a fine time for the Board to review its two key elements (Knowledge & Experience, Competencies & Personal attributes), design future Board composition, and identify required knowledge or experience of new directors to ensure they are in alignment with corporate strategy over the next 3-5 years and that new directors steer the company towards sustainable growth. 

Source:

·       Guidance on Diversity on Boards, International Corporate Governance Network (ICGN) (2016)

·       Global Leadership Forecast, Development Dimensions International (DDI) (2018)

·       Fit for the Future: An Urgent Imperative for Board Leadership, National Association of Corporate Directors (NACD) (2019)

·       Corporate Governance Report of Thai Listed Companies 2020, Thai Institute of Director (IOD)

·       Women in Business Report, Grant Thornton Thailand (2020)

·       Gender Diversity and Inclusion for a Fair Business, United Nations Development Programme, Environment (UNDP) (2021)

·       Women CEO Dialogue, Prachachart Turakij (2564)

Waratnarn Ratchamusikpat
Senior CG Analyst– Training and Facilitators
Institute of Directors (IOD)