Board diversity is good, but inclusion is important too: study of SGX listcos

[SINGAPORE] Under three-quarters or 73 per cent of local directors believe that increasing the diversity of perspectives on the board will improve overall company performance, lower than the 85 per cent seen globally, found a new joint study on board diversity and inclusion released on Friday (May 8).

Another key finding was that, although boards have increased the diversity of their composition, only 40 per cent of directors in Singapore strongly agree that diversity leads to more insightful discussions – as compared with 67 per cent globally.

The study noted that diversity alone is not sufficient, stressing that inclusion is the true driver of stronger governance and performance, as it enables directors to speak up and contribute meaningfully.

Reflecting this, 55 per cent of directors surveyed believe that expanding the search and nomination process or channels to reach more diverse candidates would effectively advance such inclusivity within the company.

The biennial study was launched by the government-supported body Council for Board Diversity (CBD), in partnership with global leadership advisory firm Egon Zehnder.

It surveyed 170 board members from Singapore Exchange (SGX)-listed companies, drawing on both quantitative survey findings as well as candid interviews with board chairpersons and nominating committee chairs.

Another finding was that 73 per cent of the directors felt comfortable about challenging their peers, compared with 88 per cent globally.

This gap was attributed to lower psychological safety around dissent and challenging the views of fellow board members.

“We should treat inclusion as a true performance lever because once you have the best group of people on the board, then we need to be able to integrate their perspectives,” said Ang Wan May, managing partner at Egon Zehnder Singapore, during a media briefing on the launch of the study.

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She called for inclusion to be embedded as a core board practice rather than left to chance.

“Board chairs have the challenge of balancing the pace of decision-making with the inclusion of perspectives,” she added. This balancing act can enhance inclusivity, the study recommended.

Shaping the boardroom culture

The CBD-Egon Zehnder study defined diversity as the composition of the board, referring to the range of backgrounds, experiences and perspectives represented around the table.

Meanwhile, inclusion is defined as how effectively diverse perspectives are integrated into boardroom dialogue, decision-making and culture – whether different voices genuinely influence outcomes.

The importance of inclusion in practice was highlighted by survey participant Piyush Gupta, chairman of Keppel, Mandai Wildlife Group, and Singapore Management University.

He noted that the “whole intent of the board meeting is healthy debate”, which means “there is no point saying we debate offline and then rubber-stamp”.

Ang highlighted that this is where board chairs can play a key role in shaping an inclusive boardroom culture.

“The chair is an important role to help support, develop and encourage more inclusive conversations in the boardroom,” she said, adding that “effective chairing of conversations will lead towards better outcomes”.

The study found that the commitment and mindset of the board chair largely determine whether diversity and inclusion are actively prioritised.

Participating directors highlighted that the chair sets the tone for how the board operates and how safe members feel to speak up.

“Open discussion and hearing different perspectives may take more time, but it leads to better decisions and helps the board anticipate the questions that will come later – from stakeholders, investors, or the media,” said Dr Beh Swan Gin, chair at CapitaLand Ascendas Real Estate Investment Trust and nominating committee chair of SGX.

The study noted that chairs have the challenge of navigating the tension between moving discussions forward while ensuring all voices are heard.

Local boards have already made progress in diversifying their composition, noted CBD co-chair Goh Swee Chen, who is also chairman of the Nanyang Technological University board of trustees.

“It is the role of the chairman (to drive) diversity and (enable) the maturing of the journey from diversity into focusing on making sure that views are heard,” she said.