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JUST when you thought Singapore did not need another study on board diversity, one has emerged.
This latest, however, claims to have examined not just gender diversity on boards - as several earlier reports have done - but also age and ethnic diversity.
The fourth annual Singapore Board Diversity Report, published by the NUS Business School's Centre for Governance, Institutions and Organisations (CGIO) and BoardAgender, covered 676 companies that issued their annual reports last year.
It is the first time the report has studied the impact of age and ethnic diversity in Singapore's boardrooms, with earlier editions having tracked only gender diversity.
The 2014 report found that companies that have both genders, at least two ethnic groups and two generations represented in their boardrooms have significantly higher return on assets (ROA). These enjoyed average gains of 5.1 per cent, compared to the average of 1.1 per cent at firms displaying none of these diversity indicators, the report said.
In addition, it found that ROA was higher on average for boards that were either diverse in gender, ethnicity or age.
Yet, despite these supposed benefits, the report found that boards of Singapore-listed companies were largely uniform. More than 50 per cent were all-male and had all their directors from the same generation and ethnic group.
Only 7.7 per cent of boards displayed diversity in all three categories of gender, ethnicity, and age.
Grace Fu, Minister in the Prime Minister's Office, Second Minister for Environment and Water Resources and Second Minister for Foreign Affairs, said at the launch of the report on Wednesday evening that efforts to increase board diversity need to start at the beginning.
"To improve board diversity, a critical first step is for companies to re-examine their board selection process. There is an innate tendency to group with people similar to ourselves. We see this manifested in how companies tend to be over-reliant on personal networks in recruiting board members.
"We need to encourage companies to more conscientiously broaden their search and nomination processes out of their usual social circles, for instance by developing more transparent recruitment procedures and using search firms or professional associations to source for potential candidates. Companies would also do well to identify and groom board-ready candidates from within," she said.
To estimate the level of ethnic diversity in Singapore-listed boardrooms, the Singapore Board Diversity Report relied on directors' names that were disclosed in annual reports and other available information on nationality.
It found that ethnic diversity was "limited", with 59 per cent of boards from one ethnic group. About 30.8 per cent of boards had two ethnicities represented, and only 10.2 per cent of boards had three or more ethnic groups.
It also found that companies with at least two ethnicities in their boardrooms recorded an average of 2.9 per cent ROA, compared to 0.8 per cent at companies without.
In terms of age diversity, the study looked at whether multiple generations were represented in boardrooms. A 20-year age gap was used: boards were considered single-generation if the age difference between the oldest and youngest director was less than 20 years; two-generation if the gap was between 20 and 39 years; and three-generation if the difference was more than 40 years.
It found that the majority of Singapore-listed boardrooms (52.1 per cent) consisted of directors who were less than one generation apart. Another 45.8 per cent featured two generations, and 2.1 per cent had three generations.
The study found that firms with multiple generations on their boards enjoyed an average ROA of 3.3 per cent, compared to 0.6 per cent at companies with single-generation boards.
It also found that 12.4 per cent of boards consisted of directors aged 60 or older.
Lastly, in terms of gender diversity, the study found that the proportion of women in Singapore-listed boardrooms increased marginally to 8.3 per cent, from 7.9 per cent a year earlier. However, Singapore continues to remain behind other countries and territories in the region, including China, Indonesia, Malaysia and Hong Kong.
The representation of women among independent directors increased to 5.8 per cent from 4.7 per cent last year.
The report said that companies with at least one female director in the boardroom (43.8 per cent) performed better, enjoying an average ROA of 3.3 per cent, compared to 0.3 per cent at firms with all-male boards. There were no all-female boards.
Ms Fu said in her speech: "While various forms of diversity, for example in age, gender and experience, are beneficial to the sustainability and performance of companies, I have a particular interest in gender diversity. I believe that increasing women's representation at the pinnacle of companies will help us better harness women as a source of labour, of talent, and of resource."
She went on to say that, while some countries have taken to imposing gender quotas on boards, Singapore has chosen to adopt a softer approach. "In Singapore, we are taking the path of encouragement and perhaps gentle prodding from time to time."
But, she added, "I have already suggested to MAS (Monetary Authority of Singapore) that our Code of Corporate Governance should require companies to disclose their gender diversity policy.
"I urge companies to take the initiative to disclose their diversity policies, and profile them in their corporate agenda," she added.