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1. Good morning ladies and gentlemen. Thank you for the invitation to speak today.
2. Let me first congratulate the organisers for putting together the report which will be presented later and for organising this event.
3, As everyone here is probably aware, we have introduced rules for issuers to set a board diversity policy. Such a policy should address gender, skills, and experience as well as any other relevant aspects of diversity. Issuers must also describe in their annual reports their targets, the plans and progress to achieving the targets and finally, a description of how the skills, talents, experience and diversity of the directors serve the needs of the issuer.
4. What we are doing follows a public consultation we conducted last year. It was clear that many stakeholders, including investors, are increasingly viewing board diversity as a business imperative in today’s competitive landscape. I think you will see later from Professor Lawrence Loh’s presentation that diversity has a bearing on a company’s performance. Indeed, some investors have gone so far as to abstain from the election of male directors where there are no female directors on the board.
5. Of course, we are aware, this may sound a bit daunting for many companies. At the same time, stakeholders and investors are asking for more.
6. Companies are also asking, what exactly they are supposed to do. I have received many questions from directors and board committees. So, I decided it might be useful to provide my thoughts and suggestions in response to three of the most common questions.
7. First, and one where quite a lot of questions have been raised is: What diversity targets should look like. Some boards do a skills assessment or use matrices that give a full view of board skills and experiences and use this to evaluate where gaps need to be closed. Others also suggest that diversity should consider not just professional or technical expertise, or role or position of the candidate, but also his or her philosophy of life and interests. This holistic assessment then needs to be mapped to the company’s goals.
8. In other words, what is most important is to demonstrate how the diversity targets result in the skills, experience and values necessary to support the company’s long term strategic objectives, to futureproof the company’s business against disruption and meet the pressing challenges of the day, such as digital transformation, human capital and ESG. Meaningful progress in diversity should thus be assessed not through a headline title-driven appointment exercise, but through a granular assessment of how a company is able to tap the various perspectives of its board to effectively chart the company’s path in the midst of uncertainty and complexity.
9. Once the board is clear on its diversity targets, the next question is how to find board candidates with such attributes. Nominating Committees and incumbent directors would need to consciously take concrete steps to counteract the natural tendency to search within their usual networks and choose what feels familiar. A diversity of candidates can only come from a diversity of sources. Some suggestions I feel boards might want to consider would include engaging an external search firm or insisting that a diverse slate of candidates be presented for consideration. Directors can also consider sponsoring or mentoring diverse leaders, whether within their companies or through their extended networks. For companies with unambitious diversity targets, or who are unable to deliver on their ostensibly ambitious targets, we encourage you to be transparent about your unfruitful search process. The market may have suggestions on how to improve.
10. And when the right candidates have been secured, the final question is equally important: how a diverse board can get along and function effectively. A diverse board is more likely to result in diverse views. The board will have to consciously encourage healthy board dynamics, to be able to hold respectful debate on issues in a collegiate manner, while still making decisions in a timely fashion. There is a wealth of research on board dynamics and for brevity, I am simply citing one of many tools available when I speak of the 4CT tool developed by the Centre for Creative Leadership, which builds board collaboration, candour, challenge, commitment and trust. Indeed, the SID Listed Entity Director Programme for first time directors supported by SGX has an entire module devoted to board dynamics. This is important because we expect to see more first-time directors as the 9-year rule kicks in from 2022 and boards focus on their renewal and diversity goals.
11. Let me conclude by acknowledging that our rules on diversity policy disclosures are not a recipe for, nor a guarantee of success. Success requires companies to foster a corporate culture of diversity through sustained commitment. But what rules can do is to catalyse the discussion in the boardroom and provide the necessary transparency for the market to scrutinize whether the board is doing enough to be diverse enough for the intents and purposes of the company. The market can then decide how much is enough and vote accordingly.
12. Professor Lawrence Loh and his team will shortly shed more insights on board diversity and firm performance gleaned from a study of over 500 SGX-listed companies. I am sure that all of you, like me, will have important takeaways from the study. I wish you all a great session ahead. Thank you.
