We need more women on corporate leaderships and boards in Bangladesh
If there is one human development indicator that makes us proud as Bangladeshis, it is the progress we have made in gender equality. The 2017 World Economic Forum Global Gender Gap Index ranks Bangladesh at 47among 144 countries -- the highest in South Asia, with the next best Maldives at 106, India at 108, and Sri Lanka at 109. On three of the four parameters used to measure the gender gap -- political empowerment, economic participation and opportunity, and educational attainment -- Bangladesh has shown good progress.
These rankings also mirror the state of women’s representation on boards of listed companies in South Asia. According to data received from stock exchanges, in 2018, 18% of directors on company boards in Bangladesh were women, while the comparative figures were 13% for India and 8% for Sri Lanka. As part of IFC’s corporate governance project, we looked at earlier data as well, together with the Dhaka Stock Exchange, and found women’s representation had increased from 17% in 2016 to 18% in 2018.
However, upon furtheranalysis, we noticed that only 4% are independent directors -- up from 3% last year. We also found that of the 300 companies listed on the Dhaka Stock Exchange, 10 have women CEOs, up from five last year. In addition, the majority of women on boards were from sponsor groups or members of their families.
This shows that the nomination process to company boards is not free from conflict of interest, and that making it to boards continues to be a struggle for women if they are not connected to sponsor groups. While boardroom gender diversity has been slowly increasing, it is still low compared with the representation of women in the workforce -- which is 29.1%. Women’s influence on household spending is surely higher still, but, sadly, they remain underrepresented on the highest decision-making body of the companies which provide the products and services households use.
In recent years, there have been several studies, as well as much discussion and debate, on women’s representation on boards. Empirical studies support the business case for a gender-balanced board, maintaining this has a positive correlation with the companies’ financial performance.
They only reinforce what is plain common sense, that without substantial female representation on their boards, companies are losing out on not only an important segment of talent, but also on a critical marketplace perspective.
But the fact remains that even the biggest global companies are far from having achieved gender parity on boards -- in the S&P 500 companies, women’s presence on boards has remained at 18.7% for the past decade.
There are many reasons for this. They include:
(a) Lack of awareness of the positive impact on companies’ performance from female participation in decision-making
(b) Insufficient data on gender diversity at the board level, which translates into poor understanding of the challenge, let alone efforts to address it
(c) Absence of policies to ensure greater participation of women in senior management levels and on boards
Many countries have introduced mandatory quotas for female representation on boards or voluntary goals. India’s Companies Act 2013 requires all publicly listed companies to appoint at least one female director. This law has had huge impact. India saw a 180% increase in the number of women on boards of its listed companies between 2013 and 2016, according to a KPMG study in 2017.
Studies by PRIME Database, which tracks India’s primary capital market, show that although many Indian companies initially appointed family members of controlling shareholders just to comply with the law, such appointments are gradually becoming fewer. The study showed family members now comprise only 16% of female directors of NIFTY 500 companies in India.
However, there are also developed countries which have set neither goals nor quotas -- the US, Australia, and Denmark among them. Indeed, quotas may well not be the solution. What is more important is to have men and women working side by side, from the entry level right up to the boardroom, so that boardroom entry becomes part of a natural process.
What IFC Is doing to move the needle
Since 2011, IFC has worked towards corporate governance development in Bangladesh, to enhance the ability of firms and markets to improve performance, attract and retain investment, and ensure continuity. To be effective, a board requires a diversity of skills, experiences, and views.As part of its overall corporate governance work, IFC is building capacity, raising awareness, and expanding the discussion about gender diversity on boards in emerging markets and developing countries.
IFC’s Corporate Governance Group has identified three guidelines to help companies plot their diversity progression:
There have been targeted interventions in South Asia under IFC’s South Asia Regional Corporate Governance Project, funded by the Japanese government, to improve gender representation in the private sector. IFC has trained more than 300 women for board director positions, collaborating with market intermediaries and organizing training programs for women directors and heads of women-led small businesses.
It has tried to make the regulatory environment more gender-sensitive by reviewing corporate governance codes and related laws. It has engaged in select awareness raising initiatives to promote greater board diversity. For the last three years, for instance, IFC has partnered with the Dhaka Stock Exchange to organize a “Ring the bell for gender equality” event on International Women’s Day.
Apart from the ceremonial ringing of the bell, the event includes discussions with private and public-sector participants on the challenges and opportunities for women in moving up the corporate ranks.
The discussions have focused on the lack of regulatory support, lack of training opportunities, and lack of networking platforms for women in the corporate world. Social issues for women entrepreneurs, such as those related to managing labour in factories, were also brought up. IFC is keen to build meaningful partnerships with training institutions in Bangladesh and transfer technical resources to them for training women directors, which IFC’s global team has developed working with partners around the world.
Recent discussions with the Institute of Chartered Accountants of Bangladesh (ICAB) have been extremely positive, the number of qualified women members of ICAB crossed 100 in 2017 -- a key constituency to serve as independent directors on board. It is the hope that everyone shall continue working in this area, to build capacity for women so that they are able to serve on boards with the right skills and with full confidence.
We hope with these interventions, Bangladesh will be one step forward on the road to achieving gender parity at all levels in the workforce -- including on corporate leadership and board.
Lopa Rahman is Corporate Governance Officer, International Finance Corporation. The author’s views are personal and does not represent that of IFC.