(Bloomberg) -- The Hong Kong stock exchange has given listed companies until the end of this year to ensure that each board includes at least one woman, and while the majority of firms have complied, nearly 500 are still overseen by all-male cohorts. 

Among the laggards, the largest are Chinese state-owned companies or their affiliates, including lenders Bank of China Ltd. and China Merchants Bank Co., setting up a showdown with the exchange, which declined to say what the consequences will be for firms that don’t comply.  

“We would hope that HKEX takes a zero-tolerance approach” to companies that insist on maintiaining an all-male board, said Jane Moir, head of research for the Asian Corporate Governance Association. “It will be interesting to see whether HKEX gives leeway for SOEs if they can show there are plans afoot to make an appointment within a reasonable time. It really has not been a big ask.” 

Roughly 18% of directors of Hong Kong-listed companies are women, well behind the averages in global financial hubs like London and New York. Advocates for gender diversity at the board level cite several arguments, including better financial performance, less group-think, and a wider social commitment to gender equality.  

HKEX Chief Executive Officer Bonnie Chan began the campaign to root out single-gender boards when she was head of listing in 2021. The rule “will further underpin the quality of our markets and strengthen Hong Kong’s role as Asia’s premier international financial center,” she said at the time. 

Bloomberg News analyzed data published by David Webb, an activist investor who has been tracking data about companies in Hong Kong for more than 25 years. Among the 10 biggest firms governed by all-male boards, nine are Chinese state-owned enterprises or their affiliated firms. 

Directors of state-owned enterprises are typically appointed by the State-Owned Assets Supervision and Administration Commission or another SOE parent company, said Stephanie Lin, ACGA’s research manager covering China and Korea. 

“The pool of candidates available for selection is heavily skewed toward men, as there are few female executives within SOEs to begin with,” she said. “Furthermore, given that nomination committees in SOEs typically have a procedural role only, the opportunity to access an external pool of candidates through this avenue is constrained.”  

Bank of China had two female directors until their terms expired in June 2023; the board now has no women. The sole female director at China Merchants Bank resigned in March 2023. China Everbright Bank Co., China Tower, China Railway Construction Corp. and Hong Kong & China Gas Co. also filled their most recent board vacancies with men. None of the companies responded to requests for comment. 

As of now, if a listed company falls back to a single-gender board for any reason, it must announce the details and reasons and is required to rectify the situation within three months, according to an HKEX spokesperson. “We expect to apply a similar approach in the future,” the spokesperson said. “We encourage remaining single-gender board issuers to proactively take appropriate action prior to the upcoming December deadline.”

Boardroom diversity in Hong Kong has improved overall. About 19% of Hong Kong listed companies have all-male boards, down from 32% at the end of 2020.  

Xiaomi Corp. is the most recent major listed company to add a female director, appointing Kering Greater China president Cai Jinqing in January. Other big firms that have recently come into compliance include food delivery company Meituan, automaker BYD Co., energy operator CGN Power Co., coal producer Yankuang Energy Group and social platform Kuaishou Technology. 

Read More: Chinese Holdouts Look to Add Women to Their All-Male Boards 

 

--With assistance from Venus Feng, Bruce Einhorn and Amanda Wang.

©2024 Bloomberg L.P.