Diverse boards pay dividends – often literally. There is a growing body of evidence demonstrating that heterogenous Boards with multiple perspectives generate better business outcomes than their homogenous counterparts. Yet, establishing Board diversity continues to prove a challenge in businesses worldwide.
We talked to Dr Ashraf Gamal El Din, CEO of Hawkamah, the Institute for Corporate Governance in the Middle East and a Diligent partner, to find out how the issue of Board diversity is progressing in the region, with a particular focus on women Directors.
The Middle East and Gender Equality
The Middle East region presents a dichotomy when it comes to gender equality, says Dr Ashraf: “Despite all the empirical evidence that women make a positive difference when they are on Boards and in top management and the fact that we see many women in leadership positions in government – more than 30% of UAE government ministers are women – we simply don’t see them much on listed company Boards.”
In fact, the Middle East region has one of the lowest levels of female representation on corporate Boards globally. Research by Hawkamah in 2018 found that the proportion of women on listed company Boards in GCC countries is just 2.5%. “This is an embarrassing percentage,” says Dr Ashraf. He does nevertheless see initiatives aiming to redress the balance. “We are seeing governments strongly pushing the equality agenda. They aren’t going quite as far as pushing for strict quotas yet, but they are encouraging companies to consider the issue of diversity. The other driver is civil society; we have a number of NGOs and associations, such as the 30% club and Reach, that are raising awareness of the importance of gender equality. We also have the Gender Balance Council, which is Chaired by HH Sheikha Manal Bint Mohammed Bin Rashid Al Maktooum in the UAE, which is very powerful in trying to push for gender diversity in government boards; in fact it is mandatory that every Federal government Board in UAE has at least one woman.”
The message is starting to get through: “In every conference I go to on governance in the region there is a session on gender diversity on Boards,” says Dr Ashraf, “we just need to start seeing that awareness translating into action.”
Interested in current governance, board practices and developments in the Middle East and North Africa? Read our report in partnership with Hawkamah.
Gender Equality and Barriers to Progression
While initiatives such as these are positive, Hawkamah has identified a more structural issue that is preventing women from reaching Board positions: “Women are simply not being promoted into senior positions within listed companies,” says Dr Ashraf. “Board directors tend to be people who are CFOs or COOs and it is very rare that you find a woman in this role. We’ve started to ask companies to think about how they can have policies that promote women to higher positions within listed companies, so we are growing a pool of potential directors from within.”
Dr Ashraf acknowledges that culture plays a significant role: “There are expectations of women as care-givers – as there are globally – and this is a very respected role in the culture. So what is lacking is the support mechanisms such as childcare. We are seeing this being introduced in the region, but slowly.”
A second problem that Dr Ashraf frequently notices among the women that Hawkamah coaches is a lack of self-confidence: “We see women who are too modest – they’ll say, ‘I’m not fully qualified for this, so I won’t apply because I won’t succeed’ when actually they should just give it a go. Research has shown that women believe they need to have 100% of the qualifications needed before they apply for a role, while men will apply when they only have 60%. The outcome is that men continue to dominate in Board positions.”
Board Quotas May Be the Only Answer
The idea of mandating quotas for women on Boards is controversial, but may be the only way to guarantee progress: “Honestly, we need to consider quotas,” says Dr Ashraf. “There is a thick glass ceiling and soft approaches are never going to break through it in a reasonable time frame. For me, the concept of quotas is very important. When we started advocating for quotas four years ago, a lot of women were against the concept, but now they are coming back to us saying, ‘you know what, you were right, it’s the only way.’
In the UAE, ESCA corporate reporting rules now require companies to disclose the percentage of women directors on their boards, which Dr Ashraf hopes will act as a nudge to change behaviour: “We’re saying that you don’t have to have a woman on your Board, but it is embarrassing to be always reporting a percentage of zero.”
Challenges in Board composition
When it comes to wider issues of diversity, Dr Ashraf says the Middle East region performs well on topics such as age, ethnic and religious diversity. Where Hawkamah sees the main difficulties in Board composition are the lack of women and the lack of relevant skills. Both have the potential to hold companies back from achieving their full potential and delivering shareholder value.
On the skills issue, Dr Ashraf notes: “We see a worrying number of boards where there is no financial expertise, so financial experts are co-opted as board advisors. We raise that as a red flag with companies: If you have financial advisors that are not board members, then your board doesn’t have the right skills. The other skill we see is a deficit in technology skills. Few companies have board members who are expert in IT, yet technology disruption represents one of the biggest risks to companies right now.”
“This is particularly noticeable in the FinTech industry. FinTech is really on the rise and financial institutions can see the risk that is coming from technology. It’s happening in other industries like the printing industry, the logistics industry, transportation, too. So, we are advising Boards that you have to have a financial expert and a technology expert on the Board who understand the industry who can translate his or her industry IT knowledge into a strength for the company.”
In terms of how to push for progress in recruiting women directors, Hawkamah has two main strategies, depending on the type of company they are working with: “For some companies we frame it that this isn’t about women, it’s about successful business. Having women on your Board leads to improvements to your bottom line; it’s just good business sense. For other types of companies who are further on the journey, we talk about creating policies that can help you develop your women into potential Board directors in your own business and those of your subsidiaries, and how this can build your reputation for general diversity.”
Tips for Women Who Aspire to Board Roles
Hawkamah is keen to support women to secure Board nominations and Dr Ashraf has advice for the many well-qualified women in the region on how to prepare: “We always tell the women we are coaching to be pragmatic and realistic. You have to be ready – not necessarily having every single qualification – but you have to be psychologically ready to serve on the Board. That means understanding what it means to be a Board member, making the transition from executing policies into strategic oversight and guidance. It’s not about operational skills, it’s about strategic ability.”
Dr Ashraf also encourages women to build their personal networks and associations so they are visible within their industry and making the connections that can lead to Board nominations. He advises women to gain professional directorship qualifications, so they have a solid understanding of governance, directors’ responsibilities and how the Board functions.
The final piece of advice is perhaps the most important as women aspire to break through the glass ceiling and become Board directors: Be discerning and make sure you choose the right company.
Dr Ashraf counsels: “Though you may be keen and willing to serve on a Board, it is not always advisable to accept the first position you are offered. You need to study the company and ask whether it has a good reputation and if you can add value to the business. If you feel it doesn’t have a good reputation or you can see major governance issues, step away. It is not worth risking your personal reputation; it’s better to decline the position than end up embroiled in a scandal.”
Hawkamah is continuing its drive to improve governance in the Middle East Region and is launching a new ESG Index in April, in partnership with the Dubai Financial Market (DFM). This major event will incorporate gender diversity as businesses are encouraged to compete for a place in the new index.
Thank you to Dr Ashraf for his time and expert insight.
Hawkamah was established in 2006 by the Dubai International Financial Centre in co-operation with the World Bank and OECD. As the regional institute for corporate governance in the Middle East and North Africa (MENA) region it is a knowledge hub designed to promote best practice, advise companies and drive corporate governance improvement. Hawkamah achieves this through organising awareness events and conducting in-depth research, as well as working directly with regulators and governments to help draft and review corporate governance codes. Hawkamah also delivers certified training courses to board directors to help improve their knowledge and awareness of governance issues.
Diligent and Hawkamah Partnership
For the past three years, Hawkamah has partnered with Diligent in recognition of the two organisations’ shared ambition to promote better corporate governance, as Dr Ashraf explains: “Diligent and Hawkamah have the same ultimate objective, which is to have more effective boards, we just use different tools. Diligent takes a technology approach to help boards communicate better and exchange information more securely so boards can make better decisions. At Hawkamah we achieve this through developing frameworks, governance codes and providing training on how boards can be more effective.”
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