Is board diversity in Hong Kong on the rise?
In January 2022, Hong Kong Exchanges and Clearing (HKEX) announced new listing regulations to improve gender diversity among company directors. The new regulations, which state that listed issuers with a single gender board will have to appoint at least one director of a different gender by 31 December 2024, are estimated to create more than 1,300 director positions exclusively for women. However, as of February 2023, 24.8% of boards in Hong Kong still have no female directors, which means that nearly one in every four firms is likely to have an all-male board of directors.
The Hong Kong Census and Statistics department observed that almost 57% of students in business and management courses are female as of 2022, and while women make up more than half of entry-level positions, they only occupy a third of senior management positions in Hong Kong’s financial sector. Overall, women currently make up only 16.5% of issuers’ boards in Hong Kong. This begs the question: why are corporates struggling to retain female talent beyond education and entry-level roles? And what can be done to reverse this trend?
A number of studies have noticed a correlation between the presence of women on corporate boards and strong performance. While no causal relationship has been established, these studies propose that the reason for this correlation could be that more diverse groups make better decisions, since they are less likely to let the desire for group consensus overpower independent thought and unique perspectives, a social phenomenon known as “groupthink”. Without the challenging of ideas or lively debate and discussion, groupthink effectively sacrifices high-quality decision making and creativity for the comfort and uniformity of the status quo.
Secondly, gender-diverse companies are likely widening their search beyond the immediate networking circles of current employees and board members, and, therefore, are more effectively utilizing the available pool of talent compared to other companies. According to the MSCI, firms with more women on their board of directors are more likely to have higher female representation in senior management roles as well.
There are a variety of ways that firms can promote female leadership. Alongside regular employee training initiatives and reviews of company policy to maintain high-quality talent management and a respectful workplace, companies can run mentorship programmes, pairing women in senior management positions with entry-level employees to nurture talent and promote the longevity of female careers. Companies can also sponsor networking events to promote solidarity amongst different female leaders and employees in the same industry and improve access to career opportunities, and may go further as to sponsor events in universities and schools to offer such networking and work experience opportunities to female students that will set them up for long and fulfilling careers in finance.
From a public relations perspective, companies can improve the visibility of female figures in sectors such as finance by proactively arranging media opportunities for female spokespersons to publicly share their insights and expertise. Regular and active engagement in the conversation around diversity and inclusion, which could look like sponsoring research in employee diversity or collaborating with non-profit organisations that specialize in such research, will add to positive media coverage and company goodwill. Meanwhile, companies that prioritise transparency and regularly monitor the demographics of their company structure, while publicising their diversity efforts and affirmative action, will attract stronger talent and benefit from strengthened stakeholder trust.
Industry regulations such as the HKEX’s gender diversity requirements are likely to accelerate over the coming years, due to a newer generation of stakeholders that demand more accountability and social consciousness from corporates. It will be the companies that take the lead in diversity efforts that stand apart from their peers and reap the benefits. By publicly setting new goals and working towards milestones, companies can inform industry standards and be leading examples in accountability and progressive action. Hopefully, by December 2024, Hong Kong’s firms will be reporting significant changes in the gender markup of their boards, and professionals will be navigating a corporate landscape that offers a more levelled playing field for aspiring business leaders, regardless of gender.