Board composition influences the ability of the board to fulfil its oversight responsibilities. An effective board should include the right group of people, with an appropriate mix of skills, knowledge, experience and independent elements that fit the company’s objectives and strategic goals.

Diversity on boards has been a topic of growing interest. It is important for Malaysian companies to critically and periodically review their board composition to work towards a truly diverse board. This can start from challenging the traditional ways of sourcing for directors (i.e. through independent sources rather than through personal networks) and focus on evaluating directors through a holistic assessment of their skills, experiences, and diversity of thought.

According to The Malaysia Board Diversity Study & Index there is a slight improvement in the number of companies with at least 30% female directors on boards - from 9% in 2016 to 19% in 2019. However, as highlighted in the Report, true board diversity goes beyond just gender. In this regard, it will be meaningful to expand the definition of diversity to cover board independence, as well as age, tenure, culture and international expertise. The observation of the top 312 Bursa-listed companies over the past three years (2017-2019) suggests a strong relationship between the following board diversity attributes and company financial performance.

There are four key actionable steps for Malaysian boards proposed including; relook at the board architecture; look beyond the inner circle for new board candidates; evaluate the board effectiveness, and; constantly acquire new skills and knowledge.

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