Is Hong Kong doing enough to make boardrooms more diverse?

May 26, 2022 09:36
Photo: Reuters

The past few years we’ve seen welcome initiatives by the Hong Kong Exchanges and Clearing (HKEX) to promote more gender diverse boards in Hong Kong — acknowledging the importance of diversity in making boards more impactful and effective. Most recently it launched its board diversity repository, a tool giving anyone convenient access to listed issuers’ board diversity performance and board of directors' data.

While we certainly are heading in the right direction, Hong Kong continues to lag behind other financial centres when it comes to gender diversity at the top, and there remains much work to be done. A quick examination of the repository reveals that just 15.5% of listed companies in the city have female independent non-executive directors (INEDs), 28.8% of listed companies still have an all-male board, and a whopping 17.4% INEDs exceed a 9-year term.

With new Listing Rules in effect starting this year, companies must build gender diverse boards within the next three years — hastening the need to start appointing women leaders and changing the status of long serving INEDs. This raises the question; how can Hong Kong companies compete for the best board candidates available and fill the potentially additional 2000 new board seats? Or more broadly, what can companies in Hong Kong do to make their boardrooms more diverse and inclusive?

The importance of building a steady pipeline of board ready female talent

It all starts with establishing a clear goal and ensuring both the Chair and CEO are aligned. For this to be effective, the goal must be measurable, and time bound; for example, appoint the first new INED within one year and the next two new INEDs within the next two years. It can take up to six to twelve months from the start until the day a new INED joins their first board meeting, so companies must kick start the process now.

With a clear goal in sight, there then needs to be agreement on the leadership profile of these new hires. Depending on the type of expertise the board needs, narrow down on candidates with knowledge on ESG, cybersecurity, digital, or even the China market. This leads to the natural next step on choosing how to conduct the hiring process, whether through a head-hunter, through advisors or by investing in building a talent pipeline. Then move on to deciding which Directors to retire and start the process of the first appointment.

Particularly in Hong Kong companies often want to get to know potential hires first to see if there is a strong alignment in values and that they can positively contribute to board dynamics without any hiccups.

Taking a longer-term approach and investing in building a pipeline of board talent means companies can get to know the candidates before they need to hire. This is an approach followed by many Chairmen and CEOs who invest time into establishing connections with potential candidates.

Initiatives such as the Women’s Directorship Programme at the University of Hong Kong, are equipping women leaders to rise to the occasion by helping them develop the skills needed for the responsibilities of the boardroom. The programme is opening fresh female leaders to the board network through mentorship and training, enabling both sides to get to know each other better without the expectation of an immediate appointment.

As companies continue to come under public scrutiny and regulators double down on stricter listing rules, it will all come down to ensuring that adequate focus is put on investing in establishing a pipeline of board-ready female leaders and ensuring boards reflect the realities of the world today.

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Co-founder of the HKU Business School Women’s Directorship Programme and Founder of Meraki

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