Women on the board

The number of women on the corporate boards in Pakistan is still negligible; the recent news reports of 21 out of 559 (only four percent) companies listed on the Pakistan Stock Exchange (PSX) having a woman director on their boards was just s reminder of the lack of gender diversity on the boards in the country.

A key challenge that the country faces is the low literacy rate along with compounded high school dropout rates of females – With such low level of participation, chances of getting to the top are already minimized.  In Pakistan, the female enrolment rate in general nosedives from primary level to the university degree level.

Then there are social and cultural hurdles; patriarchy and gender bias in our culture continues to seep into the workforce where women’s role is restricted, and these restrictions are still embedded in a large part of the elitist of the population.

In the bigger picture, it is the issue of gender inequality. Paul Hastings’ (a leading international law firm) ongoing series, Breaking the Glass Ceiling: Women in the Boardroom, takes a closer look at the initiatives underway in countries around the world to help close the gender gap on corporate boards. The latest version (2016) talks about Pakistan being among countries with little substantial change in the value of diversity on corporate boards of directors. Largely, the study shows that despite the amendment to Corporate Governance Code for the encouragement of gender diversity on corporate boards, the largest companies of Pakistan are not practicing gender diversity as a best practice at the board level.

An IFC/ACCA study conducted before the Code’s amendment also found that the majority of companies on KSE100 index did not have a single woman on their board of directors. It found that 31 percent of the surveyed publicly listed companies had women on their boards, with 18 percent of those surveyed having one-woman director, and 13 percent having more than one.

Another survey conducted recently by the Pakistan Institute of Corporate Governance (PICG), titled Gender Diversity at Board Level, highlight the lack of qualified women as a top reason responsible for the under-representation of women on corporate boards in Pakistan, which takes the argument back to low level of enrolments and frequent dropouts along with cultural inhibitors.

The PICG report is seen to highlight that the majority of Pakistani companies with female board members tend to be family-owned enterprises, which shoes that rather than their qualifications, female board members are usually successful when they are able to bypass traditional social barriers through family connections.

Credit Suisse Research Institute highlights another characteristic of women in the boardroom, which is also observable in Pakistan’s corporate sector. It says in a research report, “female boardroom representation continues to be at its lowest at the producer end of the supply chain, and at its highest at the consumer end”.

The sectors with below average representation in the boardroom by women indicated by the study include materials, energy, industrials and technology, and those with above average participation are the service industry, financial industry, consumer staples, telecoms and utilities.

The 21 listed Pakistani companies that have women on their board and that have reportedly been awarded the W-Corporate Enlistment Award include Dawood Capital Management, First Dawood Mutual Fund, Hum TV Network, ICI Pakistan, National Foods, Pakistan Cables, PNSC, Samba Bank, Southern Electric Power, Standard Chartered Bank, Sui Southern Gas Company, Unilever Foods and United Insurance, Abbott Laboratories, Archroma Pakistan, Bestway Cement, Colgate Palmolive, IGI Insurance, JS Bank, KSB Pumps and Pakistan Tobacco – mostly in line with the research findings if not all.

Compared to Pakistan’s four percent, the number of women on boards in India has increased staggeringly; According to Credit Suisse Research Institute’s report (CS Gender 3000 report for 2016), the number of women on the boards in India has doubled over the past six years from 5.5 percent in 2010 to 11.2 percent in 2015. Another study called ‘Building Diversity in Asia Pacific Boardrooms’ also highlights India’s significant improvement in broadening women representation on boards across the companies, which has been due to a combination of government initiatives.

Bringing women on the table is beyond just women representation. There have been studies to show that returns of corporate entities and financial institutions with women directors tend to be better than those with none. Many global asset owners and institutional investors are actually looking for gender composition of company boards.

One of MSCI ESG Research’s report shows that companies in the MSCI World Index with strong female leadership generated ROE of over 10 percent per year versus 7.4 percent for those without it. It also found that found that companies missing board diversity suffered more governance related controversies than average.

The perception about the value of women on corporate boards is changing; and it is imperative that concrete efforts are made to take full advantage of gender –diverse boards while removing the stigma against women in leadership and decision making roles.

There is a need for the development and advocacy of a business case for gender diversity on boards where large companies in Pakistan should take a lead and oblige family owned businesses and small firms to considered greater representation of qualified and experienced women on boards.

Also, it is important that the government and the policy makers pay special attention to the education and training of women to make the country’s resource competent.  Firms need to inculcate gender diversity in the corporate culture and make it a significant part of practiced corporate governance.