Singapore lags behind other nations in diversity on its corporate boards — while evidence mounts that diversity leads to better results, according to a 2014 National University of Singapore (NUS) Business School report on diversity.
Singapore is known for the diversity of its population, but you would never glean this from the boards of directors of its companies. A new report, from the NUS Business School's Centre for Governance, Institutions and Organisations working with BoardAGender, shows that Singapore’s boards continue to be overwhelmingly male-dominated and ethnically homogeneous. Based on data from 676 public firms listed on the Singapore stock exchange, the report measured diversity in three areas: gender, ethnicity, and generational. The results are starkly eloquent.
The report not only highlighted the lack of diversity of boards; by comparing results of the companies it studied, the report also confirmed that the lack of diversity dragged down corporate results. For example, boards without gender diversity had an average return on assets (ROA) of 0.3% compared to a 3.3% ROA of boards with gender diversity. Boards with age diversity also had a 3.3% ROA; boards without age diversity had on average an ROA of 0.6%. Finally, boards with ethnic diversity showed an ROA of 2.9%, compared to 0.8% for those without.
The evidence is consistent and unequivocal: diversity leads to better results. As a result, business leaders and policy makers across the world are striving to encourage and enable diversity in organizations, and specifically on boards of directors. Solutions and tactics range from mandated quotas to campaigns highlighting the benefits of diversity. In Singapore, it is the latter, less heavy-handed approach that has been chosen: “encouragement and perhaps gentle prodding from time to time,” in the words of one minister.
However, corporations in Singapore and elsewhere should prepare for greater scrutiny of the diversity on their boards. Eventually, policy makers will tire if “gentle prodding” does not lead to real results. In Singapore, for example, companies may soon be required to disclose their gender diversity policy to the Monetary Authority of Singapore (MAS), the nation’s central bank.
However, the most pressure may (and should) come from investors, especially institutional investors with clout. Given the direct links between diversity and business performance, investors will become more vocal in demanding real progress on their boards.
There is no reason to wait for such pressure. Beyond the public relations stain, companies are hurting themselves financially by resisting diversity.
Singapore Board Diversity Report 2014: The Diversity Dividend. NUS Centre for Governance, Institutions and Organisation (CGIO) & Singapore Council of Women’s Organizations (SCWO) (29th October 2014).
Why Diversity in the Boardroom Matters for Business. Curtis Burgh. NUS ThinkBusiness (7th November 2014).
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