Exchange in Focus: Egyptian FRA requires women on boards

(September 2019)  Dr. Mohamed Omran, Chairman of the Financial Regulatory Authority (FRA), has announced that amendments to the listing rules in the Egyptian Exchange have been proposed to ensure women’s representation on the governing board of companies. Dr. Omran issued decrees number (123 and 124) of 2019 that require both listed companies and non-bank financial institutions to have at least one woman on the board by the end of 2020. The decision reflects the FRA approach to further improve the ranking of Egypt in the World Bank’s Doing Business report.

The decision comes also in line with the FRA’s commitment to achieve sustainable development and women empowerment plans as well as the implementation of the National Strategy for the Empowerment of Egyptian Women by the year 2030, in which women are supposed to hold 30% of leadership positions in the country. The Chairman pointed out that there is sufficient evidence that firms with women on boards outperform those with no women. It has been statistically shown that when the percentage of women on boards reaches 20-30%, the positive results are even more noticeable.

A study conducted by the IFC, tracking more than 2000 public and private companies listed in the Egyptian Exchange between 2014 and 2016, also indicated and supported the positive impact of women representation in boards. One of the main indicators is that companies with higher representation of women achieve higher profitability and better financial strength, with 2% higher growth in return on equity, 4% higher return on assets and 5% higher return on sales.

In addition, companies that take into account the diversity in the board tend to prefer equity financing and have less reliance on debt. Private companies with both female representation on boards and a workforce of both genders (with at least 25% females) have been shown to achieve remarkable progress in profitability measures more than double the rate of profit growth and greater financial capacity. Private companies also showed 8% higher growth in return on equity and return on assets and 7% in return on sales.

The Egyptian Exchange is one of the founding Partner Exchanges of the SSE initiative. Mohammed Omran, former CEO of the Egyptian Exchange and Chairman of the FRA was the chair of the SSE Securities Regulators Advisory Group (2018).

About the SSE

The SSE initiative is a UN Partnership Programme organized by UNCTAD, the UN Global Compact, UNEP FI and the PRI. The SSE’s mission is to provide a global platform for exploring how exchanges, in collaboration with investors, companies (issuers), regulators, policymakers and relevant international organizations, can enhance performance on ESG (environmental, social and corporate governance) issues and encourage sustainable investment, including the financing of the UN Sustainable Development Goals. The SSE seeks to achieve this mission through an integrated programme of conducting evidence-based policy analysis, facilitating a network and forum for multi-stakeholder consensus-building, and providing technical assistance and advisory services.

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