ISLAMABAD: The Securities and Exchange Commission of Pakistan's analysis on the corporate sector revealed that women in Pakistan hold 1.8 percent of the chief financial officer (CFO) positions in companies as compared to 12.7 percent women holding CFOs positions in other countries. The SECP has issued a report on "Women on Board", Saturday.

The SECP has conducted analysis of Pakistan's financial sector with other countries of the world regarding women having positions on key positions in companies.

The SECP analysis found that women hold 12 percent of the board seats of companies in Pakistan as compared to women holding 16.9 percent of the board seats in other countries.

Data further revealed that women in Pakistan hold 1.3 percent of the chief executive officer positions in companies as compared to 4.4 percent of the women having CEO roles in other countries.

Data from Pakistan show a definite positive impact of the SECP regulations on board gender diversity in the listed companies. This impact can be seen primarily across three variables: the number of women on boards, the number of independent women directors and as chairpersons.

Women directors have increased by three percent since the regulations were introduced: from 8.8 percent in 2017 to almost 12 percent in 2019. Considering that the percentage remained almost constant between 2015 and 2017, the increase seems to have been driven by the introduction of the 2017 Regulations.

The SECP regulations also seem to have caused a proportionate increase in the number of female independent directors. In 2015 and 2017, the number of such directors was almost constant, at 17 and 16 respectively; however, it has increased to 51 in 2019.

At the same time the number of chairwomen increased from 24 to 33 (an increase of 37.5 percent). However, it is disconcerting to note the downward trend in the number of senior women occupying C-suite positions, and this has direct implications for the lack of a healthy corporate pipeline of future business leaders.

The proportion of listed companies with women directors also shows an increase from 31 percent in 2017 to 58 percent in 2019. Between 2015 and 2017, the increase was only of three percent. Listed companies with at least one woman director have increased from 84 in 2017 to 163 in 2019.

However, companies with two women directors remained constant at about 40 from 2015 to 2019; and those with three or more at 27-30. These figures show that while regulation has driven an increase in women on boards, most companies chose to only do the bare minimum, and comply with the regulations rather than appoint women over and above the number required by law.

Further, it is notable that a sizeable 42 percent of the listed companies still remain without any woman director in 2019. This is primarily due to their election cycle not having completed three years, since the introduction of the regulation. It is hoped that the next time this data is compiled; the number will be closer to 100 percent.

Across sectors, financial, textile, manufacturing, pharmaceutical and chemical, engineering and automobile, and energy seem to show the greatest increase in number of women directors. Textile and manufacturing have the highest number of woman directors, 75 and 74 respectively.

With respect to the proportion of female chairpersons, textile once again shows the greatest increase: from eight in 2017 to 13 in 2019, while the energy sector also doubled its number of women chairs. Other sectors either remained constant or changed slightly; and the same can also be said of the number of female c-suites across all sectors, the SECP data revealed.

Perhaps the most important finding that can be made from the data collected from Pakistan is that there is a clear correlation between gender diversity on boards and financial performance of listed companies. Listed companies were segregated into those with and without women on their boards and the average return on assets (ROA) and return on equity of both groups calculated.

The results show that the financial performance of companies with women is higher in both 2017 and 2019. The SECP then looked at these returns on a sector basis. The percentage by which these values are higher, varies from sector to sector, but the correlation is more.

Some of the sectors showing the greatest increase in the number of women on boards show a corresponding increase in ROA and Return on Equity (ROE). These include the financial, textile, and engineering and automobile sectors. Once again, the increase is more pronounced in some sectors than others.

It is also clear that the only two sectors where the number of woman directors remained constant, show the greatest decrease in financial performance from 2017 to 2019, i.e. healthcare and miscellaneous. The only sector not displaying the same trend is manufacturing, which could be a result of other extraneous factors including the general slowdown in the economy during this period.

Copyright Business Recorder, 2020