Webb-site has completed a database on HK-listed boards since 1990. We begin a series of analyses on board composition, starting with the number and proportion of women on boards, and the size of boards in response to changing rules on the number and proportion of "independent" directors.

Women and the size of HK boards
13 September 2013

During the summer recess, Webb-site has completed a 23-year (and growing) database of the boards of HK-listed companies, including delisted companies and stretching back to 1-Jan-1990. So we have added a look-back function to several pages in Webb-site Who's Who, which allows you to roll back the clock to any date in that period and look at board composition and positions held by individuals.

We hope this will foster a range of independent research by our universities, but to get things started, we'll look at a few simple statistics, starting today with the number and proportion of women on HK boards and the size of boards. Click here to see the distribution of women per company. What this shows is that currently, the average number of women is 0.93 per board, with 622 boards, or 39.6%, having no women at all, and 598 (38.0%) having just one.

But were women always in such a minority? The answer is no, it used to be even smaller. Just plug in the dates and see:

Date Cos Number of women
Ave. 0 1 >1
1-Jan-1990 292 0.43 69.2% 19.9% 11.0%
1-Jan-1995 515 0.68 53.6% 29.7% 16.7%
1-Jan-2000 705 0.71 49.2% 34.9% 15.9%
1-Jan-2005 1095 0.84 45.1% 34.2% 20.7%
1-Jan-2010 1318 0.90 42.7% 34.7% 22.5%
1-Jan-2013 1538 0.92 40.6% 37.4% 22.0%
12-Sep-2013 1572 0.93 39.6% 38.0% 22.4%

The number of companies has exploded more than 5-fold from a sleepy 292 at the start of the 1990s to 1538 at the start of this year. That is in large part due to the arrival of mainland companies, both state-controlled enterprises and private-sector ones. The good news for feminists is that the average number of women on boards has more than doubled from 0.43 to 0.93. in 1990, 69% of companies had no women at all (and for those that did, many of them were the Chairman's wife); that figure has now dropped to 39.6%, and more than half of companies had a female director by 2000. Also, the proportion with 2 or more female directors has risen from 11.0% in 1990 to 22.4% today.

In another page of Webb-site Who's Who, you can see the distribution of board size at any time since 1990. Board size has increased since 1990 due to the introduction of so-called independent non-executive directors (INEDs) and subsequent changes in those requirements explained below, but still, the proportion of seats held by women has increased from 5.67% to 10.94% today:

Date Aver.
held by
1-Jan-1990 7.67 5.67% 0.43
1-Jan-1991 8.12 6.37% 0.52
1-Jan-1992 7.95 6.80% 0.54
1-Jan-1993 7.83 7.25% 0.57
1-Jan-1994 8.30 7.91% 0.66
1-Jan-1995 8.69 7.84% 0.68
1-Jan-1996 8.77 7.91% 0.69
1-Jan-1997 8.74 7.80% 0.68
1-Jan-1998 8.73 8.18% 0.71
1-Jan-1999 8.66 8.02% 0.69
1-Jan-2000 8.57 8.32% 0.71
1-Jan-2001 8.56 8.86% 0.76
1-Jan-2002 8.34 9.29% 0.77
1-Jan-2003 8.09 9.81% 0.79
1-Jan-2004 7.98 10.25% 0.82
1-Jan-2005 8.62 9.75% 0.84
1-Jan-2006 8.58 9.79% 0.84
1-Jan-2007 8.61 9.94% 0.86
1-Jan-2008 8.72 10.05% 0.88
1-Jan-2009 8.68 10.20% 0.88
1-Jan-2010 8.63 10.39% 0.90
1-Jan-2011 8.67 10.28% 0.89
1-Jan-2012 8.64 10.53% 0.91
1-Jan-2013 8.54 10.76% 0.92
12-Sep-2013 8.53 10.94% 0.93

Back in 1990, there was no requirement to have any "independent" non-executive directors on boards. That changed in 1993-4. New companies listed after 1-Aug-1993 needed 2 INEDs, and existing companies needed 1 INED by 1-Jul-1994 and 2 INEDs by 31-Dec-1994. Even then, the definition of "independent" allowed professional advisers (mainly lawyers), whose firms sold services to the company, to be called INED, so many listed companies just redesignated an existing director; that practice wasn't abolished until 30-Sep-2004. Still, the average board size did jump by 0.86 people from 7.83 in 1993 to 8.69 in 1995.

Over a 6-year period from 1998 to 2004, average board size shrank from 8.73 to 7.98. This may be due to a number of corporate failures after the dotcom crash; directors tend to resign when companies run into trouble. Then on 30-Sep-2004, the requirement to have 3 INEDs came into force. Consequentially the average board size jumped by 0.64 to 8.62 by 1-Jan-2005. That year also saw a dip in the proportion of seats held by women, from 10.25% to 9.75%, and it didn't recover until sometime in 2009.

Of course, these figures are far from representative of the gender mix in the general population and we expect the proportion of women to continue to climb from natural forces, but you need to bear in mind some key factors:

Does gender diversity improve corporate performance? The next step in this analysis would be to analyse the HK shareholder returns (as measured by the Webb-site Total Returns series) for any correlation with gender diversity. This we have not yet done; others may wish to take it on.

Ultimately companies must choose the best people, and the best mix of people, for their boards, or they will be less likely to succeed in the competitive environment that most of them (other than monopolies) face. Rather like selecting a stock portfolio, you will get a better return/risk ratio if you diversify the portfolio rather than hire 9 identical directors with the same point of view on everything - because then you might as well just have 1 director.

But this must be a choice for companies and their shareholders, and not one imposed by quotas or affirmative action, which would just be discrimination in favour of the minority, whether in gender, race, religion, nationality or any other aspect. If companies were required to appoint a minimum number or proportion of women, then they would of course comply, but it would be a sub-optimal box-ticking exercise, rather like most companies treat the requirement to have "independent" directors. Which brings us on to...

Response to the one-third INED rule: shrink the board

The most recent change in INED requirements is that at least one-third of the board must be INEDs (with the existing minimum of 3), effective 1-Jan-2013. We can see that a number of companies responded to this by trimming their board down from 10 to 9, to avoid having to appoint any new INEDs. Here is what happened:

Date Cos. with
9 seats
Cos. with
10 Seats
Share of cos. Share of cos.
1-Jan-2012 261 144 17.5% 9.7%
1-Jan-2013 351 66 22.8% 4.3%
12-Sep-2013 326 82 20.7% 5.2%

Keep in mind that most companies have a controlling shareholder who votes in all director elections, so the INEDs are only as independent as the controller wants them to be. See The three wise monkeys of HK boards for more.

© Webb-site.com, 2013

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