Companies with more diverse boards fare better: Study

SINGAPORE — Companies with more diversity on their boardrooms are found to be more profitable, a report released today (Oct 29) by National University of Singapore (NUS) and BoardAgender showed.

The annual report, based on 676 companies listed on the Singapore Exchange (SGX), found that companies that have more females in board representation, members from at least two ethnic groups and with bigger age gaps enjoy an average 5.1 per cent return on assets, much better than the 1.1 per cent at firms that do not have such diversity.

This is the first time that the report measures ethnic and age diversity in the boardrooms.

“Our study demonstrates that boardroom diversity is associated with significantly higher profitability, and this holds true for all types of diversity we measured: whether it be gender, age or ethnicity. The message is loud and clear: companies should tap, and benefit from, the rich, diverse pool of talented professionals within Singapore society,” said Associate Professor Marleen Dieleman, co-author of the report and associate director of NUS Business School’s Centre for Governance, Institutions and Organisations.

The percentage of women directors in listed companies here has increased over the years from 6.9 per cent in 2010 to 8.3 per cent last year, but the Republic still lags behind many of its regional peers such as Indonesia and Malaysia with representation of 11.6 per cent and 8.6 per cent, respectively.

Among the SGX-listed companies surveyed, 56.2 per cent of them had all-male board members, while only 11.3 per cent had more than one female director.

“Despite heightened awareness and discussion over the last three years, we are not seeing acceleration in the number of female board members… At this rate, Singapore would reach 15 per cent female directors – roughly the level of other developed nations – by 2030,” the report said.

In terms of ethnic diversity, 59 per cent of all boards are of single ethnicity. About 52.1 per cent of them have directors whose age gap is less than 20 years, compared to some of the better-performing companies whose directors span three generations.

BoardAgender is an initiative of the Singapore Council of Women’s Organisations (SCWO) that aims to promote greater gender diversity in Singapore’s boardrooms. Ms Junie Foo, co-chair of BoardAgender, said: “This report, like last year’s, gives an unquestionable economic argument. Companies have a key part to play in making the appointment of more women on boards a reality. We recommend empowering board nominating committees to cast their net wider and pro-actively look for women candidates.”