Dr. Markus Wiesner, Regional Managing Partner, APACME & Emerging Markets at Heidrick & Struggles
Bernard Sykes, Engagement Leader at Heidrick & Struggles
Boards were traditionally designed chiefly to provide investors oversight of how their money was being used with a fairly narrow agenda. But far more is demanded of boards today; boards’ responsibilities have expanded in both breadth and depth. Boards are now expected to possess expertise and cover topics as diverse as digital transformation, cybersecurity, sustainability, and social media, to name just a few. Increasingly, more public company boards work harder to align their composition with their company’s strategy, for example, and to focus more on the value of diversity in making better decisions as well as meeting stakeholder expectations .
Recent research we’ve conducted at Heidrick & Struggles shows that companies that link diversity and inclusion (D&I) efforts to business strategy and financial performance far more often see their D&I efforts contribute to business success and have seen 62% higher revenue growth over five years than other companies.
Many boards across the GCC region are starting to take action; Heidrick & Struggles are looking forward to expanding our global annual board monitor report on new directors in countries around the world to the gulf this year, which will allow us to offer comparisons to international peers and a baseline for progress.
Building diverse boards has been a slow process
The social context poses an uphill battle for gender equality even as women make up ~50-70% of all university graduates across the GCC. While women constitute around two thirds of public sector workers, only ~10-30% are in leadership positions .
Even so, there are organizations across the gulf taking actions to improving board gender diversity amongst listed companies. For example, in the UAE, the Securities and Commodities Authority (SCA) recently announced that all listed companies should have at least one female board member. However, one early finding from our recent research indicates that new female board members still only comprise ~5-10% of newly onboarded members in 2020 .
“There needs to be a lot more recruitment efforts made to place qualified women on boards. Women, also have to play a role and realize that they need to network and connect with the board members on companies they are interested in so that when there is an opening, they're on the list. Additionally, there needs to be board training about the strategic importance of including a critical mass of women on boards and in leadership positions in general. Finally, ensuring that certain criteria and requirements are implemented from the recruitment process, to onboarding, to the time the board member leaves. That's just good modern governance” said Muna Abusulayman, Board Member on Gucci’s Global Equity Board and Advisor to Gucci CEO, in an interview with Heidrick & Struggles.
There is evidence that this new type of quota legislation has provided the push that some companies needed. A number of high profile UAE companies including Emaar Properties PJSC, DU, ADNOC Distribution, and Dana Gas have named female board members since the legislation was announced . Similarly in Saudi Arabia, Ma’aden, Tadawul, Islamic Development Bank, and Saudi Aramco all have female board members.
Potential mitigating strategies to enhance board composition
The first step for many boards is figuring out whether they have the right mix of skills and backgrounds among their directors to effectively oversee the company’s current and future direction. No matter how much a board is evolving, this duty is clear. Boards that provide a true competitive advantage plan well beyond merely filling individual vacancies on a one-off basis. They view board recruitment as an ongoing, evolving long-term proposition, assessing the specific skills and experience they will require today and over the next five to ten years to support the company and its strategy, and then recruiting to fill any gaps. Recruitment today must often go far beyond traditional sources and include broader networking, updated definitions of crucial experience, and a willingness to add highly qualified directors when they are available rather than when board tradition allows .
Some effective tactics boards have used particularly to enhance board diversity and recruit new female directors include:
- Lead don’t follow: companies that act quickly on D&I agenda will reap the business advantages of board diversity sooner rather than later through attracting high calibre female board members before they get over-boarded
- Drive board diversity from the top: the push for gender diversity must come from the top and have the support of the Chair, Lead Director, and CEO
- Look beyond the usual candidate pool: consider a diverse number of profiles, not only CEOs but also GMs, public servants, ministers, and functional leaders to proactively build a diverse female talent pipeline
- Develop a game plan: the most effective boards take a long term approach to developing a diverse board succession pipeline with a clear recruiting plan and transition coaching to support new board member development
- Stay the course: it is hard, continuous work to build a diverse board. This includes insisting on a diverse recruiting slate that includes women, building a diverse talent pipeline, and considering expanding the size of the board to accommodate long-term diversity
Moving beyond diversity
Ultimately, a winning strategy must encompass D&I not just for the sake of it but also the belief that a diverse board can enhance the quality of decision making and debate. Per Heidrick and Struggles’ “Meeting the Inclusion Imperative: How Leaders Can Link Diversity, Inclusion, and Accelerated Performance ”, to create a truly inclusive culture, companies must move beyond basic diversity goals. Across the Middle East, a first step is to ensure that minimum requirements are met, alongside proactive steps to champion firm-wide D&I initiatives. To build an inclusive board, apart from adding diverse members, companies must provide opportunities for members to collaborate and contribute to the team. Progress has been made in the last year across the gulf and there is evidence in senior appointments that companies are taking the topic of board diversity seriously.
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[1] Building a foundation for better board refreshment (Heidrick & Struggles, 2020)
[2] Meeting the Inclusion Imperative: how leaders can link diversity, inclusion, and accelerated performance (Heidrick & Struggles, 2020)
[3] UAE Gender Balance Council
[4] UAE Board Monitor 2021 (Heidrick & Struggles, 2021)
[5] UAE Asks Listed Companies to Add at Least One Woman to Board (Bloomberg, 2021)
[6] Building a foundation for better board refreshment (Heidrick & Struggles, 2020)
[7] “Meeting the demand for women directors (Heidrick & Struggles, 2018)
[8] Meeting the Inclusion Imperative: how leaders can link diversity, inclusion, and accelerated performance (Heidrick & Struggles, 2020)