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Board diversity can boost listed companies’ competitiveness — ICD

DIVERSITY in the boards of Philippine listed companies could help increase competitiveness and responsiveness against economic headwinds, a study by nonprofit organization Institute of Corporate Directors (ICD) said.

In a statement on Thursday, the ICD said its study showed that board diversity elicits varied perspectives for better decision-making, especially during challenges.

The institute’s 2022 study examined active publicly listed companies registered with the Securities and Exchange Commission from 2019 to 2021. The study sought to determine if there are relationships between board attributes and company performance in terms of return on equity (RoE).

The study’s findings were presented during a hybrid event at Discovery Primea in Makati on Aug. 15.

“As business trends and demands continuously evolve over time, newer board directors might have just as much expertise to offer as their longer-serving counterparts. Relatively fresh and dynamic beliefs and principles held by the newer ones can also help in improving return on equity RoE as the traditional ones long-held by the more senior,” ICD Board Diversity and Inclusion Committee Outgoing Chair Helen T. de Guzman said.

Another key finding of the ICD study was that companies with women directors outperformed companies purely held by male directors.

“At the end of the day, diversity just for diversity’s sake is not enough. Boards should also look into and prioritize inclusion,” ICD Vice-Chair and President Boots Geotina-Garcia said.

The ICD study showed that RoE can be influenced by the seniority in the age of board directors.

In terms of expertise, the study said companies with non-executive directors and directors who are experts in business management and finance performed better than their counterparts.   

“Based on statistical tests done, age and average RoE are significantly and directly related. This means that as average ages go up, R0E tends to go up too,” the ICD said.

Meanwhile, ICD Board Diversity and Inclusion Committee Incoming Chair Monette Iturralde-Hamlin said that more dimensions and metrics will be included in future versions of the study.

“In continuing the Philippine study, we will be looking at adding more dimensions as well as other metrics to measure company performance to better understand the correlation of diversity and inclusion on a business’ success,” Ms. Iturralde-Hamlin said. 

The ICD is a nonprofit organization consisting of corporate directors and other stakeholders engaged in corporate governance. The group offers corporate governance learning solutions for board members and senior executives. — Revin Mikhael D. Ochave

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