Gender-Diverse Boards for Better Corporate Governance Practices and E&S Risk Management
LightCastle Analytics Wing
March 12, 2023
Roundtable discussion with women on boards and business leadership
Integrated Environmental, Social, and Corporate Governance (ESG) for Transformative Change in Local Corporate Governance
Environment, Social, and Corporate Governance (ESG) refers to a set of business sustainability standards that helps stakeholders/investors navigate an investment prospect through the lens of environmental sustainability, social impact, and clean corporate governance practices.
Globally, the steady growth of ESG investing accelerated between 2013 and 2014. Diversity and inclusion in boardrooms are core global ESG considerations needed to sustain sound corporate governance practices.
Globally, women make up only 19.7 % of boardrooms, 6.7 % percent of board chair positions, 5 % of CEOs, and 15.7 % of CFO positions. While around the world, gender diversity ratios across boards are steadily improving, the growth rate still lags behind. This trend is even more alarming in emerging economies for executive, non-executive, and independent director positions.
The new Integrated ESG Program was launched by the International Finance Corporation (IFC) and the Swiss State Secretariat for Economic Affairs (SECO) and aims to stimulate private sector investment in developing economies by leveraging sound environmental and social (E&S) risk management and corporate governance practices.
In South Asia, ESG consideration is an emerging concept developed to be incorporated into the corporate structure. On that front, corporate governance frameworks have sustained a process of extensive modernization over recent years. Almost all the member countries of the South Asian Association for Regional Cooperation (SAARC) have adopted a corporate governance code, except Afghanistan, Bhutan, and Nepal.
However, in emerging economies like Bangladesh, Integrated ESG is still relatively nascent. In 2018, the revised edition of the corporate governance code was issued by Bangladesh Securities and Exchange Commission (BSEC). However, there were no guidelines for diversity and inclusion. To ensure sound governance practices it is critical that Bangladeshi companies adopt a more gender-diverse agenda in board representation.
Mr. Bijon Islam, CEO & Co-founder, LightCastle Partners, shares his opening remarks at the event
“Bangladesh has achieved tremendous strides in improving gender inclusion in its labour force participation, with 35% of the workforce being comprised of women, compared to 21% in Pakistan and 31% in Sri Lanka”,as highlighted by Bijon Islam, CEO & Co-founder, LightCastle Partners.
However, this does not translate to the makeup of boards across the country. The corporate governance code instructed that at least 20% of directors on boards shall consist of independent directors.
Although the average percentage of independent directors across all sectors is 24%, the percentage of women as independent directors is notably low at 5%. It is now the clarion call of the hour to take action in promoting women’s participation as independent directors and senior management.
Against this backdrop, IFC has introduced the Women on Boards and Business Leadership (WBBL) program to maximize gender diversity across board and leadership teams and build a pipeline of independent directors to enrich their competitive advantage.
A roundtable discussion was organized on December 14th, 2022, in collaboration with the Embassy of Switzerland in Bangladesh, through the Swiss State Secretariat for Economic Affairs (SECO), and LightCastle Partners.
The discussion highlighted the intrinsic factors influencing the current status quo of gender diversity in Bangladesh and the challenges that women face throughout their professional lives.
The core objective of the discussion was to intercept productive elements that should be incorporated into IFC’s WBBL training program, to counter these challenges.
Ms. Suzanne Mueller, Deputy Head of Mission, Head of Cooperation at the Ministry of Foreign Affairs, Switzerland, shares her remarks during the event
Challenges Associated with Increasing Female Participation on Boards
Through the discussion, IFC aimed to gather insights from female leaders to identify the underlying challenges and propose pathways to improve women’s participation as independent directors and business leaders.
Through these collective perspectives, IFC sought to understand the effectiveness of formal training, and design the Women on Board and Business Leadership (WBBL) training modules for Bangladesh. This program aimed to address and eliminate the root causes hindering women’s progression to senior management.
Macro Level Cultural Biases
Inhibitory cultural biases surrounding women: Cultural stereotypes inhibit women’s access to relevant academic and non-academic qualifications essential for strategic decision-making. These prejudices surrounding women are so deeply embedded into the social fabric that the impacts are grossly evident. Most women have a non-linear career owing to the fact that they face challenges during childbirth. The lack of flexibility in transitioning into professional life after childbirth makes it increasingly difficult for women to build relevant skills. “It should not be a choice between building a career and building a family”, stated Syeda Mahrufa Bashar, Associate Professor of IBA, University of Dhaka.
Communication and networking hurdles: The lack of connection among peers and the intimidation of being the odd one out in board meetings undermine the performance of women board members. Inadequate networking opportunities present additional obstacles in women’s progression to senior positions. On this note, Zareen Mahmud Hosein, Founder & Managing Director, CholPori, commented “Women struggle to break the confidence block in voicing their ideas in a male-dominated board meeting”.
Business Environment-Affiliated Challenges
Substandard remuneration of independent directors: The role of an independent director is critical in strategic decision-making in the firm’s best interest. However, despite having impressive academic and professional credentials, the average remuneration of Bangladeshi directors is not reflective of their qualifications, experience, or the substance of their responsibilities.
Lower participation of women in high-value functions: The unnerving reality is that across all sectors, women’s presence in operational and strategic functions is significantly lower than that of men. Rubaba Dowla, Country MD, Oracle BD, noted “Gender diversity is crucial in developing a sound corporate governance framework, but the emphasis should be on inclusion across every critical organizational function”. Often prior experience as a C-Suite member is a requirement for appointing board members. However, glass ceilings in the corporate world deter women’s progression to senior management.
Ms. Rubaba Dowla, Country Managing Director, Oracle BD, shares her opinion on diversity and inclusion
Policy and Regulatory Environment Challenges
Lack of supportive gender-inclusive policy framework: Discrimination surrounding women in leadership is evident, but there are few accommodating policies in place. The corporate governance code should integrate gender-neutral mandates across boards. Policy reformation can inspire social and corporate behavioral changes at scale. Imposing a quota system on recruiting agencies to ensure the active recruitment of women can be a viable approach from the regulators’ end. Additionally, the practice of appointing only family members to the board needs to be addressed and discouraged.
Lack of adequate training facilities for women: The absence of adequate formal training for women in leadership in Bangladesh calls for interventions to develop customized training modules addressing their unique challenges and priorities. In addition, the participants unanimously highlighted the importance of appropriate modules for men to induce accountability, inform, and inspire action to break the systemic biases surrounding women in the corporate world and beyond.
Key Action Points for IFC’s WBBL Training Modules
The overarching purpose of the WBBL training program is to help Bangladeshi companies improve ESG, attract investments, adopt better corporate governance practices, and facilitate gender lens investing in Bangladesh. Encompassing the opinion and insights from leaders across industries, key recommendations were churned out to develop the training modules.
Ms. Lopa Rahman, ESG officer, IFC elaborates on the way forward extracted from the discussion
Demand-Side Interventions
Building case studies of women in leadership: Case studies of women on board and senior management across regions will provide examples and a framework for understanding the challenges and opportunities essential to sustain sound corporate practices in an emerging market.
Promoting inclusive leadership: Inclusive leadership propagates good corporate governance practices aligned with SDG goals and ESG indicators. To promote inclusive leadership, commitment, and accountability from all relevant stakeholders are imperative to acquire.
Increasing diversity: Diversity in experience, perspective, skills, and qualifications among the board participants is critical to ensure a better decision-making process. In that regard, building a diverse pool of candidates applying an appropriate qualifications-match matrix is essential.
Designing an effective incentive mechanism: From the regulatory side, the compensation and remuneration of independent directors should be designed in reflection of their academic qualifications, professional experience, and the significance of their roles and responsibilities. The corporate governance code shall provide guidelines on the non-discriminatory remuneration of independent directors.
Supply-Side Interventions
Engaging with senior board members: Mentorship and connection with senior board members are crucial for growth and development. Strategies to engage effectively with the senior members to learn their ways and build on their feedback should be taken into consideration while designing the module.
Developing ahub and spoke model: Continuous learning, peer connection, and mentorship are crucial to navigating through the high tides and sailing forward in the career trajectory. To that end, the WBBL training program aims to build an interconnected network of promising professionals across all sectors to promote collaborative culture and serve as a ground stage for sourcing talents, identifying qualifications or lack thereof to build on it further to expedite the pace for women towards leadership roles. A hub of potential independent directors will serve as a prime resource for the demand and supply side stakeholders.
The Way Forward for Bangladesh’s Gender-Inclusive Journey
Mr. Ivdad Ahmed Khan Mojlish, Managing Director & Co-founder, LightCastle Partners, shares an anecdote highlighting the contribution of women as independent directors and staff in LightCastle’s growth
There is a myriad of stories and examples in international markets that provide a framework for gender-diverse boards. In Canada, for example, women hold 40.8% of board seats. While this is higher than the global average of 19.7%, the percentage of women holding board seats is still less than half.
When compared to its South-Asian counterparts, Bangladesh currently leads with 17.7% women participation on boards of listed companies. In order to maintain this momentum, it is imperative that Bangladesh leverage the insights and knowledge of corporate governance experts going forward, to ensure that systemic interventions snowball into policy-level changes.
While Bangladesh still has a long way to go in reforming corporate governance, promoting diversity, and transforming social norms, the active dialogue surrounding this space could be the key to initiating a transformation.
At LightCastle, we take a systemic and data-driven approach to create opportunities for growth and impact. We are an international management consulting firm which creates systemic and data-driven opportunities for growth and impact in emerging markets. By collaborating with development partners and leveraging the power of the private sector, we strive to boost economies, inspire businesses, and change lives at scale.
