STAFF REPORT: The Securities and Exchange Commission of Pakistan (SECP) has directed all the listed companies to have at least one woman director within next three years on their boards.
A spokesman for the SECP said this change is being implemented through the revised Code of Corporate Governance under the new Companies Act 2017, which specifies that public interest companies shall have such representation of women directors as specified by the commission.
As a result, the proportion of women directors on listed companies, which are a subset of public interest companies, is expected to jump from 6.4 per cent to at least 14.3 per cent. It will help improve the gender balance in the boards as well as create more openings for women in the companies.
At present, out of 100 companies included in the KSE-100 index of Pakistan Stock Exchange, 69 companies don’t have a single woman director. These include 16 out of the 20 largest listed companies in terms of free-float market capitalisation.
Overall, the proportion of women directors on the boards of listed companies is only 6.4 per cent. It is far below the 17.2 per cent representation of women in the country’s parliament and their 15.8 per cent labour force participation rate. It is also much lower than the proportion of women directors in the companies in S&P 500 and FTSE 100, which now ranges from 20 to 25 per cent.
The business case for women directors in Pakistan is no different from rest of the world. It is associated with, though not established as a cause of, better decision making and lower corruption without any compromise on, if not improvement in, the financial performance. There are also legal precedents from both developed like Norway, Finland, Germany and developing countries like Malaysia, India, Kenya of direct legal intervention to address the issue of gender diversity.
The Companies Act 2017, a major project of the SECP, which was promulgated in May 2017 after years of work, has brought a range of long-term benefits for Pakistan’s corporate sector, including ease of doing business, use of information technology, expeditious resolution of corporate disputes, and greater participation of women on corporate boards.
