October 22, 2021

Gender Diversity in UAE Public Joint Stock Companies

Gender Diversity in UAE Public Joint Stock Companies

By Sarah Malik and Saher Khan

On 14th March 2021 a decision made by the UAE Securities and Commodities Authority (“SCA”) during its Board meeting stipulated a mandatory requirement for listed UAE Public Joint Stock Companies (“PJSC”) to have at least one female board member. This amendment came into effect on 1st April 2021 and PJSC’s are expected to comply with this requirement as soon as possible to avoid penalties for breach. In a region where large segments of the economy are principally ruled by traditionally male-dominated industries (such as in oil and gas), this decision is a welcome and positive shift in an attempt to boost gender diversity in the UAE and a step towards ensuring that boardrooms are reflective of the democratic makeup of the workforce. 

In 2012, by way of a Cabinet resolution, the UAE became the first country in the Middle East and second in the world to pass binding legislation that required government organizations to have female board members representation. Since 2016, Articles 9(3)(4) of the SCA corporate governance rules under Chairman of SCA Board Decision No. (03 R.M.) of 2020 concerning adopting the Corporate Governance Guide for Public Joint Stock Companies (“Code”) has required the board of directors of any PJSC to have a 20% female representation. This representation must also be disclosed in the annual governance report submitted by the PJSC, along with a policy in respect of gender diversity in the company. 

Unlike the rest of the Articles of the Code, Article 9(3) and (4) were based on a “comply or explain” basis, which meant it was acceptable to not have the 20% minimum required female representation on the Board of Directors, as long as the PJSC had a reasonable explanation for not achieving the stated minimum requirement in their annual governance report.

In respect of this, Chief Executive Officer of the SCA, Obaid Saif Al Zaabi as quoted by the National newspaper stated, “We previously used to accept explanations if there wasn’t compliance, but now we are moving to make female representation compulsory. So now there must be at least one female member on the board of any listed company.”

In accordance with the SCA Decision and the consequent changes to the Code by way of the issuance of Chairman of SCA Board Resolution No. (08/R.M) of 2020, PJSC’s are now required to appoint at least one female member to their Board of Directors. Unlike the position previously, there does not remain an option for not complying with this requirement. The now mandatory requirement for female representation on a Board, without allowing for a get out explanation, in respect of all listed companies is a significant development. 

It should be noted that these requirements only apply to PJSC’s that are listed on the Abu Dhabi Securities Exchange (ADX) or the Dubai Financial Market (DFM) and do not apply to any foreign companies that are listed. Listed PJSC’s based in free zones in the UAE are also required to comply with this change. 

On 13th March 2021, the Central Bank of UAE entered into a Memorandum of Understanding with a social enterprise known as Aurora50, a firm whose focus is to increase female representation on the boards of both the private and public sector companies and empower aspiring female directors.

Aurora50 has also provided data that states currently in the UAE, 28 out of 110 PJSC’s have women present on their boards, but women only make up 3.5% of all board positions.

Following this mandate, nineteen PJSC’s in the UAE have already appointed female board members. This welcome change for PJSCs is in accordance with universally accepted practices and seeks to promote gender diversity, equality, impartiality, and fairness. 

Having a diverse board is good for business and ultimately for success.  Diverse boards better represent, and mirror customer client bases and women bring in a voice that represents actual and potential customers and clients. In order to remain competitive, the board must be reflective. The experience and competencies of a diverse board and the value brought to the organisation should not be underestimated.  

This publication is not intended to offer legal advice and is solely for informational purposes.

Also published by LexisNexis Middle East in the LexisNexis Middle East HR Alert September 2021