Company boards should embrace a gender agenda

Corporate Australia is making progress in improving gender diversity on company boards, but it has a long way to go to match the public sector.

It’s been a better year for improving the gender diversity of Australian company boards. But the private sector still has a long way to go before it even comes close to the more flexible, inclusive environments of the public sector.

Women comprised some 30 per cent of new appointments to boards of the ASX 200 companies this year, according to the Australian Institute of Company Directors, which keeps track of new appointments in real-time.

While that’s a big improvement on the 22 per cent rate recorded in 2013, a series of diversity initiatives by the AICD had already produced a 28 per cent appointment rate for women in 2011.

Overall, the total percentage of women on the boards of the ASX 200 now stands at 18.8 per cent, which compares pretty favourably with the 19.0 per cent of women on boards of the US Fortune 500 companies, where women have long held roles at the highest corporate levels.

“The business case for having diversity in the boardroom is pretty strong,” says Steve Burrell, who is responsible for the diversity programs at the AICD.

The institute set up a series of program starting in 2010 to help achieve a greater representation of women on boards and in senior executive roles, including a chairmen’s mentoring program and scholarships for governance education, to support a pipeline of board-ready candidates from diverse backgrounds.

The majority of female appointees to ASX 200-listed companies (78 per cent) have held other unlisted board roles prior to their appointments, either with not-for-profits, private or government bodies. About 27 per cent of female appointments over the past four years came through the AICD’s mentoring program.

When executives are pondering whether to truly respond to the need to enlist candidates with different perspectives than their own, they should pick up a report from the Diversity Council of Australia that showed companies with greater executive and board diversity had returns on equity around 53 per cent higher than those with less.

The bigger companies have always done better on diversity counts, according to the Australian Council of Super Investors, which says the proportion of board seats held by women among the smaller cap ASX 101-200 is only 12 per cent.

Those are generally the smaller resources and engineering companies, which have traditionally been male-dominated and still have fewer women in senior management.

Across a broader group of public and private companies, recent figures from the Workplace Gender Equality Agency show that women made up 40 per cent of junior management and 26 per cent of senior management across 11,000 companies that submitted data to the agency.

Structural and cultural barriers are clearly making it harder for women to rise up the management ranks, the agency says.

Those barriers are well known, including a lack of workplace flexibility and opportunities for women who have left the workforce temporarily to come back at an appropriately senior level that reflects their education and experience.

“As the mostly male, middle-aged and Anglo boards of many of Australia’s largest organisations quite clearly demonstrate, merit ends up being defined in fairly self-referential ways that limit diversity and ultimately, merit,” the chief executive of the Diversity Council Lisa Annese wrote in her blog last week.

Companies are still underperforming the public sector by far, where flexible work hours and the ability to purchase more vacation time by reducing and averaging out pay over the year enable women with caring responsibilities to remain in senior roles. As anyone with school-aged children knows, it’s hard to cover 12 weeks of school holidays with the standard four weeks’ vacation that parents get, even if the parents take leave separately.

In government, women held 41.7 per cent of board appointments as at June 30, 2013 and 47.6 per cent of new appointments to government boards were women in the year to June 2013, according to official figures.

Ensuring corporate Australia better reflects the diverse nature of the population, issues of ethnic and cultural diversity also require attention. While 9.3 per cent of the Australian labour force is Asian born, only 1.9 per cent of executives in the ASX 200 have an Asian background.

And that in a country that wants to engage with Asia and where four of the top five trading partners are in the region (China, Japan, Korea, Singapore).

“That aspect of diversity needs to be worked on as well,” says the AICD’s Burrell.

“The fundamental structural and cultural issue is that directors select themselves, and people similar to themselves,” he says.