HONG KONG – 30% Club Hong Kong and The Women’s Foundation (TWF) have welcomed the Stock Exchange of Hong Kong and Hong Kong Exchanges and Clearing’s (HKEX) release of Consultation Conclusions on its Review of the Corporate Governance Code and Related Listing Rules. After an open consultation process, the HKEX is putting in place key reforms that will improve board gender diversity in the short to medium term.
In particular, the following HKEX changes will lead to significant opportunities for more diverse boards over the next three years:
- Single gender boards will no longer be acceptable, and currently all-male boards will have a maximum of three years to appoint at least one female board member
- New hurdles for Independent Non-Executive Directors (INEDs) who are “long-serving” (over nine years) will not only require companies to disclose and justify their successive appointments, but in some cases mandate brand new INED appointments
- Companies will be strongly encouraged to set targets and timelines for gender diversity at board level and across the workforce
Given one third (32.1%) of listed companies have no women on boards, together with the pace of new listings in Hong Kong, there will be at least 1,350 board appointment opportunities for women in the next three years. This represents considerable opportunities for women leaders who are qualified to become board members.
Irene Lee, Chair of Hysan Development and Chair of the 30% Club Hong Kong, remarked, “Hong Kong offers a deep talent pool of women in a wide range of sectors. We urge boards and companies to support first time female executive and non-executive directors and look beyond the typical candidate profiles and also consider women outside the city. These new rules also present companies with the opportunity to empower their own high-calibre female executives to serve as INEDs (Independent Non-Executive Directors) on outside boards.”
Tim Payne, Chair of the 30% Club Hong Kong Steering Committee, said: “The world is complex and messy and Boards need ever more diverse perspectives. New women Directors can help boards think differently and meet the challenge.”
The Women’s Foundation has been a long-time advocate for more diverse corporate boards since launching the 30% Club Hong Kong back in 2013. While public sentiment has indicated strong support for gender diversity on boards, actual progress has been miniscule: as of July 1, 2021, only 14.3% of Hong Kong Hang Seng Index Board’s directorships were held by women. Hong Kong continues to be outpaced by other global financial centres (UK: 36.2%; Australia: 34.1%, USA: 30%) and neighbouring economies in Asia (Malaysia: 25.5%; Singapore: 18%; India: 17%).
Fiona Nott, CEO of The Women’s Foundation said: “The international comparisons prove that boards in Hong Kong are falling way behind and, at their core, remain change averse. These regulatory changes will encourage boards to do the right thing, and we believe that those same boards will end up better off and eventually embrace this outside push, as their companies will perform better with new talent. If we really want the strongest corporate governance, we must aim for 50% women on our corporate boards, in management and in the workforce, so the clear next step is for all companies to set meaningful targets of at least 30% by 2027.”
The benefits of increasing the number of women on the boards of listed companies have been well-documented. Greater gender diversity on boards improves decision-making, has a positive impact on corporate culture, and the bottom line, serves as a fundamental aspect of good governance and delivers benefits for the whole society.
Having more senior women as role models filters down into the whole economy and can help contribute to wider debates on issues such as pay equity, workplace policies and other critical barriers facing women. In times of increased volatility due to COVID-19 and geopolitical factors, it is even more important that Hong Kong embraces a strong corporate governance regime, including diversity, and rises to international best practice to maintain Hong Kong’s position and reputation as a leading global financial centre.