All PLCs are required to have at least one female director by 1 Sep 2022 (large cap >RM2bn) and 1 Jun 2023 (for the rest). Within our coverage, 96% of PLCs have met this requirement. For the broader “30% target”, 40% of our coverage have reached or surpassed this yardstick. On a less progressive note, the Chairman and CEO/MD position remains very much male dominated – for our coverage, only 5% and 3% of these positions are held by women. Our stock picks for good board gender diversity are KLCC (56% female), MAHB (46%), Dialog (44%), MrDIY (43%), FocusP (43%) and SunREIT (43%).

Plateauing participation. Women participation on boards of public listed companies (PLCs) has shown decent improvement over the past decade, rising from 7.7% to 17.7% by 2021. Nevertheless, the rate of increase has diminished over the past three years, plateauing at 16.6-17.7% between 2019 and 2021. While female representation on boards of the top-100 PLCs is higher when stacked against overall PLCs on Bursa, its pace of increase has also flattened in recent years (2019-2021: 25.0-25.5%). In addition, only 162 PLCs (18%) have achieved the 30% target for female board representation and there are still 252 PLCs (27%) that have all-male boards.

At least one female board member. “Women empowerment” was one of the key initiatives mentioned during Budget 2022 (29 Oct 2021). Recognising the role of women in decision making process and to strengthen the governance and effectiveness of boards, the government, via the Securities Commission (SC), will make it mandatory to have at least one female board member for all PLCs. This initiative will take effect from 1 Sep 2022 for large cap companies (market cap >RM2bn) and from 1 Jun 2023 for the remaining PLCs. Subsequent to Budget 2022, the SC had on 24 Nov 2021 issued its Corporate Governance Strategic Priorities 2021 - 2023 report. Under strategic initiative 1.3, the SC will pursue the establishment of a Public-Private Partnership (PPP) to support the abovementioned Budget 2022 initiative, and accelerate progress in achieving the 30% target.

Merits of gender diversity. A 2021 study by the Institute of Corporate Directors Malaysia (ICDM) and WillisTowersWatson (WTW) covering 312 PLCs on Bursa showed that boards with at least 1/3rd women representation correlates with 38% higher median ROE than boards with no women.

Analysis of HLIB’s coverage universe. We conducted a gender diversity analysis on the boards of PLCs within our coverage universe comprising 118 stocks. The data collected are based on the respective PLCs’ latest annual reports up to 29 Jul 2022. Our key findings are as follows:

• Female board representation: Within our coverage, there were a total of 1,027 directors (alternate directors were excluded), of which 261 were women, representing a participation rate of 25.4%. Compared to the data disclosed by SC, female board representation rate of our coverage is similar with the top-100 PLCs (25.5%) but above vs overall PLCs (17.7%).

Source: Hong Leong Investment Bank Research - 8 Aug 2022