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Diverse boards for the 21st century
A BOARD for the 21st century should tap all the talent that is available, rather than hold narrow ideas about what a leader looks like.
That's a leadership lesson embraced by a group of winners at the 19th Securities Investors Association (Singapore) Investors' Choice Awards. The Singapore Corporate Governance Award (Diversity) recognises companies that strive for gender balance on their boards, among other values.
Both Singtel and bourse operator Singapore Exchange (SGX) clinched top honours here this year, while CapitaLand and Singapore Press Holdings, which publishes The Business Times, shared the runner-up position.
SGX chairman Kwa Chong Seng told BT that he believes diversity is critical for an effective board, with the SGX board's nominating and governance committee reviewing the size and make-up of the board yearly.
"All listed companies should identify strategic gaps on their boards and consider how their board composition can be strengthened to most effectively address these," he said.
"Companies, led by the chairperson, should promote a board culture that welcomes and encourages robust discussion and diversity of views."
Other criteria for the prize include having board independence and a board diversity policy.
Companies must also tap directors from different professional backgrounds - for instance, recruiting non-executive directors with experience in at least two industries beyond the company's own.
"To lead SGX effectively, our board members must possess expertise in finance, business, exchange industry knowledge, familiarity with regulatory requirements, as well as knowledge of risk management, audit and internal controls," said Mr Kwa.
"Diversity is a key criterion in our search for candidates and we cast our net wide, both in Singapore and abroad."
Singtel chairman Simon Israel, a champion of board diversity, has talked about looking beyond the corporate world to find directors beyond the stereotypical lawyer, accountant or former chief executive. He also expects global searches to turn up female candidates for consideration by the nominating committee.
"Being open to first-time directors exponentially increases possibilities," he elaborated.
"Close to half of appointments in the last two years to boards I am associated with were first-time directors who also tend to be younger."
A hot-button issue here has been the low representation of women directors, with the SGX's Mr Kwa noting: "Gender diversity is a significant issue and has rightly been a focus of much attention in Singapore."
Mr Israel, who has lobbied for more women directors since 2014 as a member of the corporate Diversity Action Committee, called the workplace environment "perhaps the greatest systemic issue for women progressing".
"If we want more women to rise to the top, we need to recognise the flexibility and support systems required to balance the various stages of career and family. Companies willing to provide this will attract the best talent," he said, adding that "there are perhaps a few key things to work on".
One is to get "buy-in" for the idea that "diversity should be valued by stakeholders for the business value it brings", while another is to push boards and management out of their comfort zones, which Mr Israel defined as "going beyond traditional views and the stereotyping of roles and profiles".
But Mr Kwa also observed that "board diversity goes beyond just gender".
He said: "In considering board members, there must be a conscious effort to assess candidates on a combination of factors. One way to encourage such a practice is to formally adopt a board diversity policy and to publicly report on progress in this area."
This could even help companies to avoid the pitfall of a board that might be stacked with women - but with all of them from similar backgrounds.
"Ultimately, diversity is not a box to be checked. Once companies recognise that board diversity can be a competitive strategy, there will be true efforts to use diversity to drive innovation and results," said Mr Kwa.
Singtel's Mr Israel added: "It's about finding the right balance between continuity, board renewal and diversity. While all elements of diversity are important, individual directors should be chosen for their skills, experience and character.
"A diverse board emerges as a by-product of that, rather than diversity being the design. At the end of the day, a board should be built around the companies' strategy and has to be fit for purpose."