Question 2 (10 marks) More and more countries require companies to maintain a minimum percentage of women on boards.

For example, Norway and Spain stipulate 40% as the minimum threshold for the percentage of women on boards. Companies subject to related law or rule have to satisfy this requirement within a grace period to avoid regulatory penalties. Do you think Singapore should adopt a similar rule to increase gender diversity so as to strengthen corporate governance? Please discuss and share your views. Answer: As global trends indicate, some governments and securities exchanges have taken action to address gender diversity in their corporate governance codes. Some examples of this include (a) revision of the UK Corporate Governance Code to consider diversity in making board appointments, and (b) recommendations by the Australian Securities Exchange (ASX) to improve transparency where director selection is concerned. While these actions may not be as drastic as Norways gender quota law, they indicate a global convergence toward increasing gender diversity in boards. Given the benefits of having female directors on boards, I believe gender diversity would strengthen corporate governance at the board level. Nonetheless, women may be unfairly prejudiced against where board director selection is concerned. Hence, I agree that Singapore should adopt a similar rule to increase gender diversity on boards. However, Singapore should adopt the rule gradually, so as to enable the local business community to adapt to changes. There are two reasons why this should be the case: 1. Women may be unfairly prejudiced against where board appointments are concerned. (a) There may be unfair prejudice against women where development opportunities are concerned. As male leadership is predominant in boards, stereotypes exist and women may be perceived as less able to handle corporate issues. Some of these stereotypes may include indecisiveness, or a lack of corporate experience among women. The relatively low number of successful female leaders in Singapore also strengthens perceptions that women may be less able to handle corporate responsibilities. (b) Women may face a double burden syndrome as an obstacle when climbing the corporate ladder. This refers to women having to cope with both work and domestic responsibilities, such as child bearing and care for the elderly. Especially in Singapore, women may not be seen as compatible with the corporate demands required of board directors. (c) Board selection may be based on informal old boys association networks and connections. Currently, selection criteria of board directors are not transparent. As boards are mostly dominated by men and may be old fashioned in their thinking, women of equal qualifications would stand a lower chance of being appointed to boards. Given the above, adopting a rule to increase percentage of women on boards would eliminate the traditional barriers that women face. Considering that 59% of boards in Singapore are all-male, such a rule would give women a chance to break into leadership

positions. Equally qualified women who were previously denied opportunities may now have a level playing field. 2. Improve corporate governance at the board level Studies in Canada and the U.S. have found that boards with more female directors were able to achieve the following: (a) use criteria to evaluate management performance, (b) follow strictly to company codes of conduct, and, (c) have better communication with management and stakeholders. In turn, these would bring benefits in terms of employee and customer satisfaction. The boards ability to provide strategic leadership and oversight of management would also improve. However, adopting a gender quota law would mean implications for Singapores business community. Some of these implications include the following: 1. Boards would need to find female directors of sufficient quality. While women may have become better qualified and educated, they may not be willing to take up directorships due to personal and family reasons. This may incur additional expense in looking for directors simply to meet a quota, which may not be feasible in Singapores context. 2. Good male board directors may be ousted if a quota is imposed. While women may be as well qualified, male directors who have sufficient experience and understand the company may be asked to leave. Female directors may also start to take the gender quota law for granted, and form their own networks in the long run. Such informal networks would defeat the purpose of having female directors on board to improve board oversight capabilities. From the above discussion regarding the introduction of a gender quota law, I recommend a gradual and step-by-step implementation. To ensure that companies take gender diversity seriously, the Singapore Exchange may provide guidelines for companies. For instance, companies by required to disclose the process by which board directors are recruited. Companies may also set up committees to tackle gender diversity issues across all levels of the company, and provide Key Performance Indicators (KPIs) for periodic review. Such actions would provide more female candidates for board selection, as companies would be forced to consider diversity in succession planning. A five-year timeline may be provided for companies to meet a gender quota. However, I personally feel that 40% as a minimum threshold is too high for companies to meet. Given that female representation on boards in Singapore is currently less than 10%, I would recommend a quota of 20%, for such a gender quota law to be feasible. This is due to the need to maintain business continuity despite a push for greater corporate governance.