In his article of Jan 17, titled "Does gender diversity add value to Hong Kong boards?", David Webb says that 10 years of historical data from his Webb-site Total Returns database "do not provide any compelling evidence that board gender diversity adds value to investors".

He concludes that companies should "put gender out of their minds and instead focus on obtaining a diverse mix of expertise and experience relevant to the business and governance of the company and regardless of gender. Over time, that will inevitably lead to more women on boards anyway, because the educational and employment opportunities for women have improved over the last 30 years leading to a larger pipeline of women with the appropriate experience and expertise behind them."

As a champion of greater diversity - not just in the boardroom, but at all levels of organizations, this is an issue close to the heart of Community Business. We cannot overlook that gender is a fundamental aspect of diversity, and as such cannot simply be ignored. As shown by our Women on Boards research, published with sponsorship from Standard Chartered Bank, since 2009 Hong Kong companies have been doing a dismal job tapping into the available pool of female talent. With women holding just 9 percent of board positions on the Hang Seng Index, women's expertise, insight and perspective are simply not being voiced or heard in Hong Kong's boardrooms. We believe that enlightened companies, who make an effort to develop and retain female talent, and appoint board members who represent their customers and employees, will stand out in terms of future strategy and performance. They will become employers of choice.

Some chairpersons of Hong Kong's boards in our recent research said that appointing female board directors has led to more robust boardroom discussions, different dynamics in the boardroom, and a much deeper appreciation of the views of key stakeholder groups, including customers. This has helped their companies to "stay ahead of the curve". Seen in these terms, few would question that gender diversity enhances performance and "adds value to Hong Kong's boardrooms".

The discussion of the direct link between greater gender diversity and financial return is a tougher nut to crack. There are many factors at play that impact on the financial performance of a company. So demonstrating causality on this issue is fraught with complications. While David Webb's data may not point to any obvious pattern or link in Hong Kong, there is a growing body of evidence by reputable organizations around the world. This shows that having more women on boards impacts on financial performance, including Women Matter 2010 published by McKinsey which found top quartile companies with the highest number of women in executive committees, when compared with companies with all male executive committees, performed 41 percent better on ROE (return on equity) and 56 percent better on operating results.

One particularly important study note is from the University of British Columbia's Sauder School of Business, published in November 2012. It examined behavior traits of male and female directors in merger and acquisition activity. The study found that female directors tend to be more risk-averse, and the price paid for acquisitions was reduced by 15.4 percent for each female director on a board. This supports the notion that female directors help create shareholder value through their influence on acquisition decisions.

With new evidence emerging, the debate is likely to continue - with arguments for and against. But pinpointing the impact of gender diversity on specific financial measures may be missing the point and ignoring the broader impact. Companies who fail to address gender diversity, or simply allow it to evolve over time risk losing relevance to their key stakeholders. This will happen whether they are investors, customers or employees. Ultimately, this will impact on the long-term performance of a company.

For this reason, Community Business will continue to put the spotlight on this topic. We will conduct further research and encourage discussions on the need for greater representation of women in Hong Kong's boardrooms.

The author is the CEO of Community Business.

(HK Edition 03/04/2014 page9)