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Corporate pipeline

April 02, 2015


The writer is a former regulator, educator and practitioner of corporate governance.
The writer is a former regulator, educator and practitioner of corporate governance.

FIVE events in as many days to celebrate women, to empower women and to talk about the challenges and obstacles to their faltering progress. Every year, the month of March brings a ray of hope in the shape of carefully choreographed events dedicated to women.

As institutions, both local and multinational, vie for space to spend their earmarked budgets in support of women’s issues, one cannot but wonder what the endgame is for all. The usual suspects in each gathering preach to those already converted to their cause. It’s good to have an International Women’s Day, just as it is good to have a Mother’s Day, one day to celebrate their existence within a year devoted to undervaluing their economic contributions to society.

The publication of an ILO report last month ranking Pakistan last in 108 countries in terms of women in managerial positions, brought a certain sense of urgency in the proceedings of this year’s events. The 3pc representation of Pakistani women in managerial positions puts us behind Algeria, Jordan and Bangladesh. However, the shrinking corporate pipeline for women is not unique to Pakistan. Globally, despite a 40pc representation in the workforce, women occupy only 12pc of positions at the board level.

We need a business case for women in senior positions.

The reasons for this steep corporate pyramid are well documented. Women face obstacles in the context of their respective environments, which may have to do with educational choices and traditional views and stereotypes about women. They face financial constraints in accessing formalised channels of finance especially in countries where the financial system is highly collateralised. Women own fewer assets than men and are not helped by discriminatory inheritance laws, thereby constraining their entrepreneurial ventures. Finally they encounter a number of soft obstacles defined as the lack of adequate training, access to relevant networks, mentoring opportunities and the lack of role models.

While a number of more progressive institutions have started dealing with these obstacles, their efforts are limited to those easiest to deal with, the soft targets. Mentoring opportunities, counselling and role models for women are much more common today than when I started my career 24 years ago. However, it is the contextual constraints that are the most limiting, but also by their very nature, the most difficult to deal with.

Changing the mindset of a generation about the role of women will probably take a generation to take effect, but only if we start now. Propagating it as their inherent right will not win over too many detractors. It is therefore more important to make a business case for more women in leadership positions. A number of international studies have enumerated the potential benefits to companies for bringing greater diversity in their workforce:

Enhanced professionalism: Professional, competent, experienced and knowledgeable women bring a different dimension to managerial deliberations leading to enhanced strategic formulation for the benefit of the company.

More responsive to the market: Women are responsible for 70pc of household purchasing decisions. Their presence in the corporate hierarchy ensures that there is an improved understanding of customer needs and more informed decision making.

Better corporate governance: Women bring a greater ethical consciousness to the workplace and their focus on non-financial performance ensures the company remains cognisant of its social responsibilities too.

Improved company performance: Diversity of skills and enhanced accountability lead to improved financial performance. Empirical evidence collected subsequent to the 2008 economic downturn suggests that companies with more women on boards/executive management consistently outperformed their rivals in terms of return on equity, return on sales and return on invested capital.

These are strong and valid arguments, but how does one bridge the gap between awareness creation and concrete action? A number of countries around the world have instituted quotas for the percentage of women they would like to see serve at the highest levels of corporate hierarchy, while others have left it as a voluntary provision for their corporate sectors to follow.

The revised Code of Corporate Governance in Pakistan recommends gender diversity for board composition of listed companies but falls short of making a mandatory provision as was made in India a year ago. While some of the large corporations in India are scrambling to fulfil this requirement, primarily by inducting female family members of the largest sponsors, others are hoping that if they ignore the provision long enough, it will go away.

Any attempt to impose similar quotas in Pakistan will probably meet the same fate. However, the debate generated in the process will hopefully make more companies aware of the business case for inducting senior women in their hierarchy and prompt them to take action in their own long-term beneficial interest.

The writer is a former regulator, educator and practitioner of corporate governance.

Published in Dawn, April 2nd, 2015

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