Greater diversity on charity management boards associated with better financial performance: Study

Conjunct found that women comprised a third of the boards studied. However, diversity is "strikingly" lacking when it comes to ethnic representation.
Conjunct found that women comprised a third of the boards studied. However, diversity is "strikingly" lacking when it comes to ethnic representation.PHOTO: ST FILE

SINGAPORE - A study of the management boards of charities has found that greater diversity of board members shows better financial performance for the charity.

The study by Conjunct Consulting, a charity which provides consultancy services to charities and social enterprises, collected data on the board composition and financial performance metrics of 204 Institutions of a Public Character (IPC). IPCs are charities that are allowed to collect tax-deductible donations.

It did the study, as there were none done on board diversity and organisational performance of charities here, said Conjunct's executive director Yasmine Tan.

The study focused on financial indicators, as IPCs span a range of sectors from the arts to social services to sports and it is hard to find other common indicators to measure organisational performance or impact.

Ms Tan said: "As board members are tasked with the crucial role of guiding the charity's strategy and direction, we believe it is imperative for the board to possess a diversity of backgrounds, skills and experience to guide the charity towards a sustainable future. A more diverse board can in fact help charities to broaden their networks to find other suitable board members and to fund-raise better."

The study, which was presented during a panel discussion in July on board diversity of charities, found that greater gender diversity is associated with greater financial sustainability, which is described as the charity's ability to build reserves.

It also found that greater ethnic diversity is associated with greater financial sustainability and greater financial independence, which is the ability to generate income other than that from grants and donations. This could include income from services provided and investment returns.

While it is hard to pinpoint exact reasons why greater racial diversity is co-related to greater financial sustainability, Ms Tan said many studies have found the benefits of more gender diversity, such as boosting a listed company's financial performance.

On the state of diversity here, Conjunct found that women comprised a third of the boards studied. However, diversity is "strikingly" lacking when it comes to ethnic representation.

Over 80 per cent of board members are Chinese, while Malays account for only 3 per cent, even though they comprise about 15 per cent of Singapore's population.

Mr Suhaimi Zainul-Abidin, a board member of the Council for Board Diversity and who was consulted for the study, said the leaders of charities and companies tend to ask suitable candidates they know to serve as board members and many of their networks may not have Malay members.

 

The study also interviewed 1,000 respondents to find out how board diversity impacts their giving decisions, among other things.

Only slightly above a quarter of those polled, or 27 per cent, would make donation decisions based on the board's diversity. Whether they donate are still driven largely by the charity's mission, reputation and convenience of making a donation.

Conjunct Consulting has developed a board diversity calculator tool, found at tinyurl.com/calculatebd, to help charities assess how they are faring on board diversity.

Associate Professor of Economics at the Singapore University of Social Sciences Walter Theseira, who spoke at the panel discussion at the study's launch, noted the difficulties charities may face in boosting their board diversity.

For one thing, board members are not paid, and their role is a responsibility that comes with various risks, hence the difficulties in roping people in to volunteer as board members.

He added: "The bigger structural issue is: Do we have a big enough pool of candidates from these minority groups to avoid the problem of excess demand on a certain group to the extent that they serve on several boards, placing huge demands on their time at the expense of advancing their own careers?"