Gender diversity in senior roles: What will it take to see progress?

The issue of gender diversity on boards and in executive management has been kicking around for decades. Over the years, the debate has shifted from a focus on fairness and equity, to one of superior corporate performance with many studies including those from McKinsey, Catalyst and Credit Suisse showing that companies with a higher proportion of women on boards and in senior management perform better on many key financial measures. 

But even in the face of strong evidence that diversity is good for business, it’s an issue with which corporate Australia continues to grapple and progress has been painfully slow. 

Progress on gender diversity

Four years ago, the ASX Corporate Governance Council introduced a recommendation for ASX-listed companies to establish and publish a diversity policy and measurable objectives for achieving it.  The Council also recommended that companies disclose in their annual report the proportion of women employees in the organisation, in senior executive roles and on the board. 

The aim of this reporting was to track progress on gender diversity initiatives. Without ‘hard facts’, companies and stakeholders would have no way of knowing whether particular programs were working and if women’s participation was actually increasing.

The world’s largest fund manager, Blackrock, considers gender diversity to be such an important factor in predicting investment performance that it conducts an annual study into the diversity disclosures of the ASX 200. 

Blackrock’s first report for the 2011 financial year found that women accounted for just a little over 14 per cent of non-executive directors. What’s more, only eight per cent of key management personnel were women. 

The latest report for the 2014 year showed some improvement, but mostly at the board level, with 21 per cent of women in non-executive director roles and 10 per cent in key management personnel roles.

Commitment to gender diversity not in the corporate ‘DNA’

Despite broad agreement that we can definitely ‘do better’ to boost the number of women in senior roles, progress is only occurring at a glacial pace. Female participation at the highest ranks continues to fall far short of best practice. 

Interestingly, the most recent Blackrock report noted that the overall standard of diversity disclosures, even in the  ASX 200, was ‘perfunctory’ at best, prompting the leading fund manager to conclude that ‘gender diversity is not in the DNA of most companies’. If, as the report suggests, the quality of governance disclosures, including on diversity, reflects directly the quality of the board, its decision making and the company’s culture, then we have cause to be concerned about how genuinely committed the majority of Australian companies are to change. 

The vexed issue of quotas for boards

Quotas are increasingly being discussed because of the growing impatience with the glacial pace of voluntary change. 

Many European countries are imposing quotas to prescribe the proportion of women on boards. Norway, Belgium, Iceland, Italy, the Netherlands, Spain and France have all embraced legislative quotas. The UK government has also raised the prospect of quotas if companies do not appoint more female directors voluntarily.  

Women comprise 45 per cent of the Australian workforce and more than 50 per cent of our tertiary education graduates, yet represent only about one-fifth of the membership of boards on ASX 200 companies and one-fifth of new appointments. Women account for 40 per cent of property investors, 40 per cent of professionals in Australia and make 90 per cent of spending decisions.  

Companies that discount the importance of promoting and retaining talented women in leadership roles will therefore be challenged to remain sustainable.

The 2014 Blackrock research stated that investors now see gender diversity as a ‘window’ into the quality of board thinking and decision making. Blackrock explicitly put boards on notice that diversity is now included in the voting guidelines of the proxy advisers and may be relevant to recommendations on director elections.

As was expressed to me by a major institutional investor: ‘If they are missing this, what else is the board missing?’ That question is unlikely to go away. Which means that debate on quotas is unlikely to go away, if corporate Australia does not increase the pace of change.

Should the failure of voluntary action to deliver gender balance on boards within a practicable timeframe be a wake-up call for stronger measures? And are quotas for boards part of the answer? Let us know what you think.  

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