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Budget 2022 Commentary: Companies should follow Government’s push for diversity on boards for stronger performance

29 Oct 2021

The Government’s priority in the Budget 2022 continues to focus on the people, specifically on driving the recovery of economy and livelihoods of the people. As Malaysia embarks on the journey to rebuild the economy, the Government’s concerted efforts and reforms will be crucial in addressing any socioeconomic disparities and creating a more sustainable, inclusive and high-value society.

On the business front, the focus is on catalysing growth and reenabling business capabilities, which means implementing policies and regulations to spur and encourage better business conduct in Corporate Malaysia. Specifically, the mandatory appointment of at least one (1) woman director on all Malaysian public listed companies (PLCs), is an important push to accelerate gender diversity on boards; this is also in line with Malaysia’s goal of achieving at least 30% women representation on all Malaysian PLC boards. As of 1 July 2021, women directors comprise 25.5% of the top 100 PLC boards and 17% of all PLC boards in Malaysia[1]. This is significant to the development of Corporate Malaysia; a recent study revealed a strong correlation between company performance and boards with at least one-third women representation specifically a stronger Return of Equity (ROE) at 38%, compared to boards with no women representation. This is a reflection of the importance of advocating for greater diversity on boards.

On this front, the Institute of Corporate Directors Malaysia (ICDM) continues to work closely with regulators and stakeholders to build and diversify the talent pipeline for Corporate Malaysia, with the goal of improving board capabilities and competency which will elevate the overall performance of Malaysia’s business landscape. As part of ICDM’s mandate and vision to support the development of directors, we look at placing high-quality directors to better support the evolving needs of boards and companies, and that includes woman directors. Currently, in ICDM’s Directors Registry, we have a total of 690 directors, 32% of whom are women with diverse skill sets and competencies such as sustainability, change management and digitalisation.

As recommended in the latest Malaysian Code on Corporate Governance (MCCG) released in April 2021 by the Securities Commission Malaysia, incorporating independent searches in the selection, nomination and appointment process is key to gaining access to a much wider network of high-quality board candidates. To ensure resilience and sustainability of the business, it is crucial for companies to have a balanced board composition, looking beyond traditional competencies such as, audit, accounting & finance, governance, regulatory, risk, and compliance to include new expertise that will help meet today’s fast-evolving business landscape. Based on our research conducted in collaboration with Bursa Malaysia and Russell Reynolds Associates, Malaysian boards do recognise the need to bring in new expertise. The skills least present but most needed on boards identified are: digital technology, innovation, sustainability, human resource, communications & public relations, and marketing & branding.

As the Government puts in the building blocks to strengthen our national resiliency, it is critical for companies – including boards – to relook their overall strategy, approach and structure to ensure longer-term business sustainability. With the disruptions brought on by the pandemic in addition to heightened expectations from investors and stakeholders, incorporating an agile and forward-looking model as well as expanded competencies will be important for our economic sectors to thrive again, and thus, create a positive spill-over effect to the people and society.


[1] Source: Securities Commission Malaysia