“How does board diversity in Singapore charities affect perception of the board and their organisational performance? What then is the current state of board diversity in Singapore?”
Conjunct Consulting asked 1,000 people about the importance of board diversity, and if it affects their giving. We also reviewed the board compositions of 204 charities with IPC status, to analyse existing board diversity levels of Singapore’s charities.
We held a Webinar in July to discuss the study. At the event, we sharing key findings & recommendations from the study which was followed by a panel discussion to discuss the implications of the study.
Board Chair, Strategic Advisor, Global Speaker, Bestselling Author
Global Practice Leader – Executive Compensation; and
Talent and Rewards Business Leader – ASEAN and South Asia
Guru-Org & Leadership Dynamics for corporate, equity-funded & nonprofits. Board Advisor, director & biz owner
Nominated Member of Parliament. Professor of Economics at Singapore University of Social Sciences
Council Member of the Charity Council CEO of Quantedge Capital and Director of Quantedge Foundation (Singapore)
Shai: The gap between perception of board diversity and giving based on board diversity is one worth noting – diversity is therefore perceived as an important social cause but is superseded by the belief in the charity’s cause when it comes to tangible giving.
Su-Yen: Information about a charity’s board (let alone board diversity) is generally not available to people when they are making the decision to donate. Hence, they are not prompted to take it into consideration. The first step should thus be to elevate the discussion about the importance of boards, and consequently their diversity when it comes to governance of the charity. This might lead to reputational effects and then ultimately translate to giving.
Walter: Why is diversity important to people, and why do they want it – do they think it is instrumental or is it a more values-based reason? If we continue down the instrumentality line of reasoning, it seems that people believe diversity leads to better performance. However, there are two issues with this – first, most of the research done is correlational, which means that more diverse boards have better performance, but the causality could be an underlying better corporate governance and second, if people care about outcomes such as efficiency and effectiveness, then the board diversity would not matter as much as long as the outcomes are achieved.
Theresa: CNPL conducted a similar study in 2013, and at the time there were only about 5% of the organisations looking out to increase board diversity. Since then, gender diversity, in particular, has progressed from less than 25% to 34%, but the levels of ethnic and expertise diversity have not changed. This arose from CNPL’s focus on gender diversity, and the initiatives and structures designed to improve that score, resulting in positive results. This forces the question, are we so dependent on initiatives and structures to change behaviours? The second thought was that diversity scratches the surface of a deeper belief in equality, which makes us think of the national culture of Singapore and whether we want to question the inequality and power distance, or just accept the status quo.
Suhaimi: We need to constantly question diversity at all levels of the organisation because it reflects on how inclusive we are as a society. If we do not strive for greater diversity and inclusivity, it means that we are not giving our people equal access to opportunities, and we are not making full use of our greatest resource – our people.
Shai: Quotas can be good to have as they do not necessarily dismiss meritocracy; it simply creates more opportunities for meritorious individuals from a particular group. Quotas simply force conversations and like every structure; it can be used for a particular time; they can be implemented for the next few years, till mindsets are changed, and diverse boards are institutionalised, after which they may be disbanded.
Walter: Quotas solve a very particular problem, i.e. boards are just not looking at candidates that belong to a minority, be it gender or ethnicity. However, it does not solve the issue of a shortage of candidates from that under-represented group. In fact, it leads to two other issues – one is that there are excess demands placed on a limited group of people from the minority and the second being tokenism, where individuals may be placed on the board but are not able to contribute in a meaningful way.
Theresa: Skills like theology have recently gained importance in banks and other private sectors as these individuals have insights into ethics, philosophy and law; so charities need to look beyond the conventional industry and functional skills when considering diversity of skill sets. Charity boards often look at sustainability and financial and corporate excellence, instead of filling the gaps of society and therefore the competencies, belief systems and diversity they would want to incorporate would depend on whether they look at charities as a means or beneficiaries as an end.
Shai: It is important to look at what diversity is needed for the board to conduct its responsibilities and what diversity is needed to represent the interest of constituents and beneficiaries. Therefore, more than physical diversity, the diversity of thoughts and experiences that different members bring to the board. Things such as gender, age, independence, tenure, domain expertise, functional expertise, industry experience and geographic exposure are all aspects and skills that should be considered.
Su-Yen: Donors by and large want to have confidence that a charity is well governed, and that it is fulfilling its mission. Thus, charities should communicate the link between board diversity and governance, have a rigorous process for constructing a board, and ensure the board reflects the community it is serving in its diversity.
Walter: At the micro charity level, the issue is the lack of properly established corporate governance policies, especially when we move out of the IPC space. We need to recognise that serving on the board for these charities is not a reward but a responsibility that comes with risks. As such, it cannot be compared to being on the board of listed companies with compensation or stock options. Therefore, we need to ensure that we do not put excessive demands on certain people just because they fit the criteria, and we want diversity on the board. The bigger structural issue is: “do we have a big enough pool of candidates from these minority groups to avoid the problem of excess demand on a certain group to the extent that they serve on several boards, placing huge demands on their time at the expense of advancing their own careers?”.
Su-Yen: I believe there are enough candidates willing and able to step-up along every possible dimension of diversity. However, that alone is insufficient – there are two key enablers to translating this pool into board diversity, which are board tenure and the nominations process. Firstly, if charities do not have a structure which requires frequent board renewal, they will not get the opportunity to look at the wider pool of candidates available to serve. Secondly, boards need to cast their nets widely and look at a broader, more diverse pool of candidates rather than only turning to their personal networks.
Theresa: There just isn’t enough prioritisation placed on renewal succession planning. Another thing to look at is implicit bias – how many of us actually know our biases towards certain diversities? These biases can then lead to gaps when it comes to social mobility for these groups.
Su-Yen: Constructing a board is part art, part science. It is important to have structures in place, but ultimately leadership matters. An organisation can have wonderful processes in place, but if the Chair and the Board do not see value in diversity, it’s going to be an uphill battle.
Shai: Passion cannot be a substitute for competence. Both are equally important.
Walter: There should be a standard for governance but not in terms of numbers or quotas but to report the diversity in a way that is easy to process for all stakeholders and donors such as ratings or scorecards.
Theresa: Renewal and succession are not being given enough attention and charities will look towards the Commissioner of Charities to set the standard or provide guidance.
Su-Yen: We need to continue raising awareness of the link between diversity and good governance on charity boards, while expanding the definition of diversity.
Walter: Having good corporate governance is really important so that boards look to have candidates that are not from the so-called traditional groups because if we just go on a principal-based approach, we do not need to link diversity to positive outcomes; as a society, we already do believe in diversity and it just ought to be there. Therefore, there needs to be processes and nominations to reflect the necessary diversity needed for the organisation’s beneficiaries.
Shai: Instead of hard standardised quotas, the charity sector could adopt a regime that tracks diversity of charities against self-declared targets both at the board and management level within in a particular time frame, which is then reported to the beneficiaries and stakeholders. A more structured nomination committee guide and/or process would also be immensely helpful, and this is something that can be taken from the private sector.
Suhaimi: The diversity scoring tool created by Conjunct Consulting is a great diagnostic tool for charities to use, to measure their level of diversity across the four aspects of diversity identified. It is clear from the studies performed that many charities are falling behind in one aspect or another, such as ethnic diversity. I would urge all charities to take the test and challenge themselves to improve.
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