Egon Zehnder, a well-known leadership advisory and C-Suite recruitment specialist, has spent the best part of 20 years studying diversity in leadership across global corporations and recently released its Global Board Diversity Tracker. The tracker studies company boards across the world (including the UAE and Saudi Arabia) to weigh up the growth (or lack of) in ensuring that more females are included on boards or leadership positions.
According to the latest Global Diversity Tracker, globally, just 5.6 per cent of all board seats are held by women in leadership roles and the percentage of women in the boardroom stood at just 20.4 per cent. Meanwhile, Egon Zehnder found that the Middle East is further behind with only 1 per cent of board seats held by women in Saudi Arabia and 3.1 per cent in the UAE.
BusinessLiveMe speaks to Jill Ader, Chairwoman of Egon Zehnder, on diversity at leadership and board levels and spurring more female leadership recruitment as well as increasing equity returns for companies.
Over the years of your data collection and analysis on diversity in the boardroom, is there a trend towards an improving situation, or have there been variables/stagnation/decline observed that you think are roadblocks to overall progress?
“There is good news in terms of the longer-term trends that we have observed internationally. Ever since we started tracking board diversity in 2004, we have seen significant growth in the general presence of women and international directors on corporate boards. Overall, 20.4 per cent of all directors in the 44 countries we studied are women – up from 13.6 per cent six years ago. In Western Europe, board positions held by women have risen from 15.6 per cent to 29.0 per cent over the same time period.
“This is an encouraging development and, albeit slow, shows the increased importance that chairpeople, shareholders and society places on having diverse views represented on the top levels of the most important organizations. However, much more progress needs to be seen. We have classified the 44 countries we surveyed into three groups: Champions, Slow Movers, and Underachievers. Among the countries included in our Underachievers category, we have included Argentina, Chile, Hungary, and Japan where less than 55 per cent of boards of directors have at least one woman, and less than 10 per cent have two or more. But even in these countries, some companies are leading the way with new practices and differentiated results.”
How does the Middle East compare in this regard?
“Compared to Western Europe, the Middle East is far behind. Unfortunately, both the UAE and Saudi Arabia also fall into our Underachievers category when it comes to gender diversity. In fact, our latest Global Diversity Tracker study found that the UAE and Saudi Arabia stand as countries with the lowest percentage of women in the boardroom, with the UAE averaging 3.1 per cent and Saudi Arabia averaging only 1 per cent. Meanwhile, across the MENA region, only 15 per cent of boards are made up of female directors. While these figures aren’t encouraging there is hope based on initiatives and long-term strategies being implemented in the UAE and Saudi Arabia, helping to spur on evolution in terms of gender diversity in terms of the policy, parliamentary representation and influencing corporate behaviour.”
What advantages does a diverse board provide to a company?
“In a region driven by family businesses and government-owned commercial entities, organizations in the Middle East are realizing that the only way to compete in a world of ever-increasing speed of change is to have an effective, creative and agile board of directors that can flexibly change course and provide guidance to match the ambitions of the countries’ leadership, their shareholders and societies at large.
“By carrying out diversification initiatives, the current board composition can effectively address the shortage of qualified board members in the region today.
“Diversification initiatives allow companies to tap into an underleveraged pool of skill sets that will benefit the region through the representation of different parts of society, backgrounds, viewpoints, and capabilities at board level. Such initiatives have proven to drastically improve effectiveness and efficiency through a range of voices that allow for broader perspective at the board level.
“The tangible bottom-line impact of board diversity on a company’s financial performance has been studied by Egon Zehnder and others. According to MSCI, companies with at least three women on the board experienced a median increase in return on equity of 10 percentage points and earnings per share of 37 per cent within 5 years. This is a significant financial gain which is left out by companies taking a more narrow view on board composition and succession planning.
How can/should a company shift its boardroom culture to be more inclusive towards women?
“A challenge today is that most companies, specifically government-owned companies, recruit directors from an internal network, mostly from the national pools. This is a true pipeline problem and limits the opportunities for diversification. Therefore, companies need to first identify the core competencies required for an effective board and then identify the gaps that they need to fill. This will then open up the conversation on increasing board composition and diversity. Having board members that come from a different professional background will only strengthen the thinking rigour and debate, and contribution of the board.
Is there a company or country that can be used as an example in achieving the successful creation/adoption of a balanced and inclusive boardroom?
“To help transform boardrooms across the world and in the Middle East requires introspection and bold leadership – leadership that understands that diverse boardrooms reflect the broad perspectives that are shaping a world characterised by disruption to traditional business practices.
“A case in point is the United Arab Emirates and parliamentary gender diversity. Despite the slow progress of the private sector in the UAE, the country’s government has been exemplary in the journey towards creating opportunities for diverse leadership. For example, the first female leader of a national assembly in the UAE and the Arab world, Chairperson and Speaker of the Federal National Council (FNC), Dr Amal Al Qubaisi in 2015 has helped to spearhead a change in perceptions about the role women will play in the future of the country. Additionally, President His Highness Shaikh Khalifa Bin Zayed Al Nahyan issued a 2019 directive to increase the representation of women in the Federal National Council from 22.5 per cent to 50 per cent has placed the UAE among leading countries in terms of equality in parliamentary representation. We hope the knock-on effect will be that the private sector in the country takes inspiration from the diversity the UAE Government has implemented to ensure it is one of the most progressive parliaments in the Middle East.
“The same humility and introspection required to create flexible boards is critical for the private sector with one leading example being Unilever. Under the ten-year leadership of CEO Paul Polman, Unilever has grown the number of women in management positions to 48 per cent of its total, with five of 13 directors being female.
Where policy has helped improve the situation in some countries, how can governments in this region ensure there is a diverse representation at the leadership level?
“As mentioned above, the UAE has led by example so much so that under the directives of Her Highness Sheikha Manal bint Mohammed bin Rashid Al Maktoum, the ‘Women on Boards’ initiative was launched by Dubai Women Establishment (DWE) in 2012, making the UAE the first country in the Middle East, and the second in the world, to launch an initiative as such. With its dual objectives to increase the representation of women on boards of directors in local entities across the public and private sectors and to increase women’s representation on boards of directors to 20% by 2020, DWE is an example of how regional government bodies can help to influence and inspire the public and private sector.
“Additionally, for the public and private sector, a focus on diversity and inclusion has to be a core part of a company’s strategy and has to come directly from the top. Companies should start setting measurable goals, pick for potential, diversify the pipeline of talent, train/plan for board successions and professionalize the recruitment process.
“Our experience shows that meaningful change in boardroom diversity is achievable — if it becomes a core element of a company’s overall strategy. For example:
- Make Leadership Accountable: A focus on diversity and inclusion has to be a core part of a company’s strategy and has to come directly from the top.
- Raise Your Ambitions: Focus on Three. Hiring a female director simply as a token is a mistake that will not improve the effectiveness of your board. True diversity replaces groupthink with healthy debate, which leads to greater innovation and better results.
- Set Measurable Goals: Opinions on whether to impose a diversity quota on boards vary widely. Yet the evidence is clear, setting hard targets and creating accountability around diversity is one of the only actions that has truly moved the needle. Certain countries have imposed mandatory quotas.
- Pick for Potential: Boards need a new definition of board-ready. It is conventional wisdom to fill the boardroom with C-suite executives with decades and decades of senior management experience. Our own research and global client experience have found that executives with certain leadership attributes can deliver enormous positive impact, even in business situations or industries in which they have no prior experience. We call these traits, which include curiosity, engagement, insight, and determination, Executive Potential. Betting on potential expands the talent pool automatically and contributes to boardroom success.
- Diversify the Pipeline: CEOs must be intentional about developing diverse succession pipelines all the way up to the C-suite. They must create inclusive cultures where women and other groups can thrive and therefore can be retained long enough to be considered for succession to the C-suite and board positions. Companies must also make sure that as women reach the upper levels of management — a time when many women stall — they are supported and developed by mentors and peers alike
- Train the Board for Success: It is not enough to simply add fresh faces to a board. Chairs and current directors must also support the integration of new directors after their appointment, both by teaching them the norms of the board and by allowing for the norms of the board to change.
- Professionalise Your Recruiting Process: A recent survey of large U.S. boards showed that 46 per cent of organizations with board succession plans said they had no specific process for bringing in diverse candidates. What this means is that recruitment for diversity is often done in a haphazard and unintentional way. Directors must hold themselves and their recruiters accountable for reviewing diverse candidate slates. Diversity must be built into the nomination process at every stage — from briefing to interviewing to selection.
“For all of the frustrations around the pace of change, there are reasons to be hopeful. At Egon Zehnder, we focus entirely on senior executives and board members, helping place them in companies but also helping to develop them as leaders.”