The Institute of Corporate Directors or ICD has announced the key findings and conclusions of its study on board diversity in publicly listed Philippine companies (PLC) during a recent hybrid event titled “Building Better Boards through Diversity” held at the Discovery Primea in Makati last August 15, 2023
The study reviewed all active PLCs registered with the Securities and Exchange Commission from 2019 to 2021. It was conducted to determine if there are relationships between various local PLCs’ board attributes and their respective company performance in terms of return on equity (ROE).
It was highlighted in the study that board diversity fosters varied perspectives for better decision-making especially during challenges. To be competitive and responsive to the challenging economic and social trends, board diversity enables inclusion of different perspectives and ideas that can improve informed decision-making, oversight and governance.
Among the key findings of the study linked boards’ gender diversity to better ROE. Companies with women directors outperformed companies purely held by male directors.
Board directors’ seniority in age and presumably in business knowledge and experience positively influenced ROE. Based on statistical tests done, age and average ROE are significantly and directly related. This means that as average ages go up, ROE tends to go up too.
According to Helen de Guzman, outgoing chair of the ICD Board Diversity and Inclusion Committee which conducted the study, “As business trends and demands continuously evolve over time, newer board directors might have just as much expertise to offer as their longer-serving counterparts. Relatively fresh and dynamic beliefs and principles held by the newer ones can also help in improving ROE as the traditional ones long-held by the more senior.”
In terms of diversity in board directors’ expertise, the study also indicated that companies that performed significantly better than their counterparts are those that have non-executive directors and directors who are experts in Business Management (2019 and 2021), and Finance (2020).
After the presentation of the Philippine study, ICD’s counterparts in Singapore and Malaysia also presented similar research on board diversity conducted in their respective countries.
The Singapore Institute of Directors, through its Governing Council member Shai Ganu, showed the Board Diversity Index that looked at eight dimensions of board diversity: gender, age, tenure, board independence, cultural ethnicity, international experience, domain/functional expertise, and industry expertise.
The Malaysia Board Diversity Study & Index, meanwhile, presented by ICD Malaysia president and CEO Michele Kythe Lim, looked at gender, tenure, independence, culture, and international expertise. ICD Malaysia also had four key actionable steps for boards to improve diversity.
“In continuing the Philippine study, we will be looking at adding more dimensions as well as other metrics to measure company performance to better understand the correlation of diversity and inclusion on a business’ success,” said Monette Iturralde-Hamlin, the incoming chair of the ICD Board Diversity and Inclusion Committee. “At the end of the day, diversity just for diversity’s sake is not enough. Boards should also look into and prioritize inclusion,” added ICD Vice Chair and President Boots Geotina-Garcia.
To access the full study, visit the website of the Institute of Corporate Directors at icd.ph. Like the ICD Facebook page to stay up to date with its programs, courses and events.
Liked this post? Follow SwirlingOverCoffee on Facebook, YouTube, and Instagram.
