Asian companies tend to have fewer women on corporate boards than their European counterparts, but the link between diversity and profit is not clear, and mandating quotas – as is done in Europe – would not likely be effective in Asia, according to a new study by the Asian Development Bank.
“Arbitrary quotas of female representation in leadership without economic justification may produce little in terms of financial performance,” states the report, Women’s Leadership and Corporate Governance.
Europe leads the gender way
Some European companies mandate or explicitly urge companies to have female representation in boardrooms and senior management positions, based on the assertion that having more women in a position of power in corporations makes them more effective and profitable, and less corrupt.
The United Kingdom proposes a minimum of 25%; Norway mandates 40%; and Germany requires 30% female representation in boardrooms. The report finds that 90% of the top 500 companies in the United States have at least one woman on their board, as do 60% of Canada’s top 500, according to studies in 2011 and 2012.
In Asia, boardroom gender diversity is improving but it still tends to be much lower, with 7.5% female representation on average in 2012.
In terms of board representation, “Asian countries have been relatively less proactive in pressuring gender diversity compared with European countries,” the report states.
The percentage of females in senior management, however, displays an almost opposite geographic pattern, based on the report Women in Business: From Classroom to Boardroom. While most of the European firms show less than 20% female representation in corporate senior management, the ratio is above 40% for many Asian countries.
The local level
In terms of individual countries in the region, the study finds that Australia has the highest boardroom diversity and the Republic of Korea the lowest. India and Malaysia are the only countries that impose mandatory quotas for gender diversity. The implementation, however, is not highly effective, particularly in India.
The People’s Republic of China has the least public emphasis on gender diversity, but its female representation in boardrooms has grown the fastest. The People’s Republic of China also potentially has the most to lose in terms of economic losses because of the lack of gender diversity, according to the report.
The report finds that the relatively low gender diversity found on many Asian corporate boards appears to be related to a limited supply of top-level candidates due to a lack of educational opportunities, lower wages, infant survival rates and other broad societal disadvantages suffered by women in the region.
Addressing government policies that put women at a disadvantage in education, work and other aspects of society would be more effective at diversifying Asian boardrooms than mandating quotas, according to the report.
“Government policies that aim to improve female leadership through improving the gender equality in society will be well rewarded in capitalising on human talents,” the report states.