A Board of Directors (hereafter, Board) is one of the most important internal corporate governance instruments. The main responsibilities of the Board are to monitor management to minimize any conflict of interests between shareholders and managers, and to provide strategic direction to management for achieving organisational goals. Effectiveness of a Board significantly depends on who are on the board, and how independently and efficiently board members can play their fiduciary role. Women sitting on the board are always at the center of discussion of researchers and corporate policymakers due to their possible role to make a Board more effective. According to agency theory, gender diversity of a board with the presence of women directors increases the Board independence as women are more inclined to ask questions than male director. Women directors can bring alternative perspectives in analyzing various issues, which, in turn, enriches intellectual resources of a Board in deepening understanding the market. Moreover, gender diversity on Board increases the understanding of complexities of the business environment which may improve decision making about corporate resources. Therefore, gender diversity is expected to enhance the positive impact of Board on organisational outcomes and performance.
An empirical research shows mixed results about the linkage of gender diversity of Board and organizational performances. Though some researchers find positive influence of women directors on performance, another set of researchers do not find the influence as significant. In spite of the debate, different countries around the world have started to make it mandatory for companies to include women directors in the Board. For example, Norway (25%), Spain (40%), UK (40%), India (at least 1) make it mandatory for appointing Women Directors (WD) on Board. Furthermore, the percentage of women directors on Board increased in India from 4.9 per cent in 2013 to 13.7 per cent in 2016. However, there is no legal or regulatory requirement of appointing women directors in a Board in Bangladesh. The survey on annual reports for 2018 of 294 companies listed with Dhaka Stock Exchange shows that 499 director positions are held by women directors. The figure is 17.37 per cent of the total number of directors. Out of 294 listed companies, 80 did not appoint any woman director on their Board. The Figure 1 demonstrates that the proportion of women directors on Boards varies from industry to industry with the highest 24 per cent in IT sector and lowest 8 per cent in Cement sector. Results show that the average percentage of women directors is more than 10 per cent in most of the industries except Cement sector and Fuel & Power Sector.
Though the code of corporate governance 2018 by Bangladesh Securities and Exchange Commission (BSEC) specifies the requirement of 20 per cent independent directors, there is no mandatory requirement for appointing women as independent directors. According to the survey, there were 33 positions of independent directors held by women directors which is only 5.0 per cent of the total independent director positions which indicates poor participation of women playing the role of independent directors on boards of listed companies in Bangladesh. The Figure 2 also shows that percentage of women independent directors varied across different industries with the highest 25 per cent in Telecommunication sector. Interestingly, though there was the highest percentage of women directors on boards of companies in the IT sector, none of companies of this sector appointed any woman as independent director. In addition, companies of Cement, Jute sector, Paper & Printing sector, Service & Real Estate sector, Tannery Sector and Travel & Leisure sector did not appoint any women as independent directors. Survey results further represent that only 4.0 per cent of audit committee positions were held by Independent women directors which show the very insignificant representation of women on audit committee. Out of total 30 women independent directors, only 53 per cent of them are appointed as members of audit committee of different companies. In addition, only 4.0 per cent of the total 294 sample companies appointed women independent directors as the chairman of audit committee. The Figure 3 demonstrates the percentage of audit committee position held by women directors of different industries which suggests the variation of their representation industry to industry as well.
According to survey results, percentage of women director is not significantly correlated with profitability. The Figure 4 presents the average proportion of women directors, median Return on Assets (ROA) and median Return of Equity (ROE) of different industries which indicates that the pattern of women directors is not consistent with the pattern of ROA and ROE. According to the median ROA and ROE, the Telecommunication sector is the highest profitable sector, but the proportion of women directors of this sector is only 13 per cent, which is much less than the highest value of 24 per cent for IT sector.
Overall results show that representation of women on Board as director as well as independent director is still insignificant.
Specially, the participation of women directors on one of the most important board committees i.e. audit committee and its leadership role are very low. In addition, the insignificant linkage between percentage of women directors and profitability create a concern about quality of appointment of women directors considering economic perspective of gender diversity on Board. These results also suggest the weak participation of women in corporate governance practices in terms of number as well as quality. Therefore, two important decisions can be made from this analysis: one, there is an important scope to appoint more women directors on a Board to increase gender diversity for taking its leverage to make the Board more effective as a corporate governance instrument. Two, women should be appointed on Boards not to just increase the percentage of women, rather to ensure qualitative aspect of women's appointment for improving quality of gender diversity.