The World Economic Forum recently ranked Pakistan third-last in terms of economic participation and opportunity for women. Despite making up 49% of Pakistan’s overall population, the participation rate for female workers is significantly low (24%). And—to no surprise—is their even lower representation in the Pakistani boardroom. Top echelons in Pakistani corporations continue to be male-dominated. In 2017, a report surveyed 550 listed corporations on the Pakistan Stock Exchange (PSX). The results? For every nine male directors, there was only one female director.
Globally, the business case for diversity in the boardroom is slowly being established. In fact, several empirical studies have established a statistically significant correlation—not causation—between diversity and corporate outperformance. While gender-equality in the corporate boardroom across the world is gradually improving, Pakistan’s corporate sector significantly fails to keep pace.
In an attempt to address gender-equality, the Securities and Exchange Commission Pakistan (SECP) issued a Code of Corporate Governance for listed corporations in 2019. The 2019 Code is predominantly based on a ‘comply or explain’ approach, reserving certain subjects as ‘mandatory’. Under the Code, it is ‘mandatory’ for every board to have at least one female director, failing which listed corporations risk being financially penalized. While this was a welcomed step, it has done—and is doing—little to address the glaring inequalities.
Access for female professionals to the higher rungs of the corporate ladder remains considerably low. Several corporations remain in non-compliance. Peak behind the SECP’s mildly encouraging—but far from satisfactory—measures, and the picture is grim. For complying corporations, there is mounting evidence of corporate boards engaging in tokenism, perfunctorily hiring female directors to—metaphorically— ‘tick the box’. Consider there were only 11 female Chief Executive Officers out of a total 550 in 2017. Alarmingly, of those appointed, more than 91% of female directors were either related or associated to the sponsors or majority shareholders in listed corporations.
The message is clear—Pakistani corporations treat the hiring of women as a bureaucratic hurdle, for symbolic importance, and for the optical advantages. Not because gender-equality is a documented, empirically-based strategy for improving corporate performance. Not because women may bring value and skills to corporate decision-making. More often than not, it is because hiring a woman is really a one and done policy—a quota.
At best—a quota is, though questioningly, where things might begin, and at worst—a quota comes at the cost of broader equality, which requires not the facial gloss of equality in numbers but equality in dignity and opportunity for both men and women. With the current requirements, there is nothing stopping corporations from simply creating an additional seat on the board and filling it with a woman, leaving the overall gender balance of the boardroom untouched. In fact, the rush to fill quotas might be detrimental to corporate performance if firms hire less experienced but related or affiliated women—which is already the case.
The 2019 Code treats the quota akin to a self-executing, automated solution to boardroom diversity which—in turn—will improve overall corporate value. That is wrong. Hiring women on the board is where diversity may be most prominent. But diversity has to be achieved at all levels of the corporate ladder through a level playing field where women can compete equally for senior management positions.
Currently, the SECP neither recommends nor obligates Pakistani corporations to formulate, implement or publish diversity policies—which could be some starting points. In tandem with a diversity policy, the Code should require listed corporations to disclose information about the diversity of the boardroom and to set targets in annual filings. Moreover, the SECP could require corporations to periodically publish recruitment policies on the hiring of directors and employees along with explaining how diversity is ensured in recruitment. This would provide an effective check, pushing corporations to ‘walk the talk’. The experiences of Australia and New Zealand have shown how stock exchanges can also be drivers of gender diversity. Similarly, the PSX can also play a significant role in bridging the gap. How? Currently, the PSX has no diversity policy in its listing requirements. But the adoption of a ‘comply or explain’ approach encouraging listed corporations to set targets and to adopt and disclose a written diversity policy could go a long way. Alternatively, the PSX could demand mandatory disclosures as a pre-condition to listing, like its Malaysian counterpart. Equally important, however, is the involvement of the private sector in encouraging voluntary compliance, monitoring and generating awareness amongst corporations.
Ultimately, there has to be a broader recognition that women are not hired for the cosmetic balance of an equation. The imposition of quotas only propagates gender-based stereotypes, resulting in a not-so-meritocratic process. Rather than being imposed on the board’s selection process, women need to be welcomed and respected in corporate boards and management for the value they will bring to Pakistani corporate-decision making. That can only happen in a transformative environment where women, like men, have equal opportunity to foster and experience professional growth—which Pakistan’s corporate governance regime must strive to achieve.
Rafae Saigal is a lawyer and author based in Pakistan.