Dubai: The diversity of UAE boards based on 2022 appointments has increased across several metrics, according to the latest report by Heidrick & Struggles.
The report says there is evidence of a concerted effort to bridge the gender representation gap by appointing more female first-time board members—43% of women appointed had previous public board experience, compared to 67% of the men.
In 2022, women accounted for 23% of appointments, up from 17% in 2021 and 12% in 2020. This comes after the 2021 ESCA mandate, to which companies have responded with a number of gender balance initiatives. One example is a partnership between Aurora50, an organization dedicated to gender equality and ESG advancement in the workplace, and two UAC leading companies—Adnoc and Mubadala. The three organizations launched Pathway20, a board career accelerator dedicated to building a pipeline of board-ready women candidates.
New UAE directors made up the youngest cohort in the markets that the Chicago—headquartered company tracks, and the trend indicates that the 2022 cohort is even younger than the 2021 one: the average age of board appointees—48—is down from 49.7 the previous year.
Area of expertise
According to the international executive search and management consulting company, the most common career background for new board members is CEO, with 35% of 2022 appointees having experience in that role. UAE companies also showed strong interest in operating executive backgrounds such as chief operating officer, head of region, and chief investment officer.
UAE boards also frequently sought directors with experience in financial services: nearly half (45%) of 2022 appointees have a background in this sector. However, Heidrick & Struggles also sees a market-wide trend of prioritising same-sector expertise. This is clearest in the industrial sector, where 100% of directors were appointed from within the sector.
By contrast, the consumer sector appears to value, or be most open to, cross-industry experience, with 33% of consumer directors bringing outside experience to the role, Heidrick & Struggles said in the report.
International experience is increasingly sought, with 6% of 2022 appointees having that background, compared with 2% in 2021. However, the general profile of new directors in 2022 is UAE nationals with high educational attainment. Emirati nationals constitute the majority in UAE boardrooms, at 77%, and nearly half of new directors hold a Master’s degree (42%) or PhD (6%).
Takeaways for the board in 2024
To sustain its ambitions and accelerate momentum, these are the fundamental changes that the boards need to teach to show strong and clear leadership.
Gender diversity
The leadership advisory firm said that gender diversity remains one of the key focuses for the UAE government, with a new regulatory quota to bring more women into leadership positions
While it is encouraging to see an upward trend, there is still much work to be done: research shows that 59% of ADX/DFM companies have at least one woman on their board, but women hold only 8.9% of total board seats. While having a single woman on each board is a good start, boards will see more benefits of gender diversity when their female directors have the numbers to build influence and make a difference.
Diversity
Disruption from technology, particularly AI and machine learning, the influx of foreign investment, and the crescent focus on sustainability within corporate agendas are compelling boards to reevaluate the mix of expertise around the table.
The decline in the proportion of seats allocated to directors with CEO and CFO backgrounds in the UAE presents an opportunity to recruit executives with more diverse backgrounds, enabling boards to effectively address the evolving challenges and goals of their respective companies.
Appointing more retired members
Heidrick & Struggles’ analysis from the previous two years shows that UAE appointed some of the youngest director cohorts among the 30 markets it tracks. In 2022, 65% of board seats were filled with directors actively engaged in executive roles.
This year’s decline in the average age of appointees suggests a continuation of this trend, although data on the active status of appointees was limited. Appointing more retired directors could help alleviate the issue of going overboard by allowing board members to dedicate more time to their respective companies. This could also allow boards to recruit more seasoned executives from other regions and boost their international or regional business acumen.
Evaluating performance
Global best practice suggests that in-depth board reviews should be conducted at least every three years at the individual and board levels. Further, UAE regulators have issued corporate governance rules and guidelines requiring listed entities, banks, insurance companies, and UAE federal government entities to conduct annual board evaluations.
These yearly evaluations are a great way for boards to understand the gaps in skill sets and adjust their search for new directors to meet their unique situations.
