SINGAPORE (Nikkei Markets) -- The effort to boost diversity in Singapore boardrooms has improved the gender balance, but the culture of relying on personal networks to find potential directors remains a hurdle for women as well as those who lack the right connections.
Some 98% of listed companies identified potential independent directors through personal contacts of board members and management, says a recent survey by the government-backed Singapore Institute of Directors and Singapore Exchange Regulation. Just 17% said they also used executive search firms while a mere 8% said they used a service offered by the institute.
The reluctance to look outside the old boys' network has negative consequences, say those familiar with Singapore's corporate scene. Many boards are short of experience in relatively newer areas such as social media, sustainability and international marketing. Ethnic diversity is also absent or minimal, even in companies with a large overseas presence.
Key capability gaps in Singapore include the ability of boards to foster talent and innovation as well as to lead change, said Sunil Puri, Asia Pacific director for research, innovation, and product development with the Center for Creative Leadership, an executive education provider. Puri recently led a study of boards in six Asian countries, including Singapore.
According to the center, many boards in Singapore, like in the rest of Asia, tend to have predictable compositions, largely of chartered accountants, lawyers, former CEOs, and in some cases, retired government officials. Boards are also likely to be dominated by men who are 55 or older.
The SID survey also showed that 43% of companies had independent directors whose tenures exceeded nine years, raising concerns that they may have become too close to controlling shareholders or management, and are thus less independent than they ought to be.
Governance experts call for regular rotation of such members to avoid conflicts of interest and to allow for the entry of directors with new ideas and perspectives.
The majority of companies said they intend to put these directors up for re-election even though the Monetary Authority of Singapore has made the process harder by requiring support from minority shareholders.
Like in many other countries, much of the diversity debate in Singapore has been focused on gender. The Council for Board Diversity, set up by the Ministry of Social and Family Services, sets targets for the proportion of women on boards and champions the cause.
Figures breaking down boards by ethnicity and expertise are not available. However, the council's latest report shows that women account for 15.7% of directors in Singapore's 100 largest listed companies, an increase of half a percentage point from a year ago. This puts Singapore below Malaysia but ahead of Hong Kong, and means the council is unlikely to meet its target of having women make up 20% of boards by next year. Still, it is an improvement from 2015 when women accounted for less than 10%.
As at June end, Singapore Post, Mapletree Commercial Trust and Singapore Telecommunications had the largest number of female directors, while several big names such as UOL Group, Golden Agri-Resources and Frasers Centrepoint Trust did not have any.
Kevin Gin, who runs Alpha Capital, an investment firm, described the focus on the visual aspects of diversity as "a prejudicial approach." "The key is skillsets and experience irrespective of gender or race," he said.
Peter Lai Hock Meng, who has served as an independent director of Hong Kong, U.K. and Singapore-listed companies, said examples of overlooked director candidates include current or former trade unionists as well as community leaders in areas where the company has a large presence.
"Good directors are those who are prepared to commit the time and effort to engage stakeholders regularly," said Lai, a veteran banker and the former CEO of a listed real estate investment trust, adding that former top-level executives do not necessarily make good ones.
"The ultimate objective is to have an effective board that can function as both coach and policeman for the benefit of stakeholders," he said.
Junie Foo, co-founder and chair of BoardAgender, an arm of the Singapore Council of Women's Organisations, said that getting more women onto boards would also remain a challenge as long as directors continue to search within a narrow circle of friends.