Our world today is embroiled in unprecedented crises; the pandemic still heavily impacts our lives, extreme weather events induced by climate change are wreaking havoc, and a plethora of humanitarian emergencies are spread across the planet. With the backdrop of this socio-political turmoil, communities now more than ever are holding those with power accountable for their actions.
This includes companies and their boards. In fact, for companies to have the social licence to successfully operate, it's imperative for them to show their progress on matters related to community impact. Couple this with the increasing regulatory and investor pressure, boards must commit to targets in key non-financial areas of business and transparently demonstrate the roadmap to hitting those targets.
One of the most crucial areas where boards must improve and perform is that of women inclusion and representation around the board table. Women’s representation in boardrooms is not only a part of the wider agenda of corporate Diversity, Equity, and Inclusion (DE&I) practices but it can be argued that it’s the first step in reforming corporate culture and ensuring that other DE&I targets are met. To understand what’s needed in coming years, it’s important to evaluate the snapshot of where we stand today. This article, by taking key insights from research by the Diligent Institute, aims to track the performance of Australian boardrooms on the matter.
The Diligent Institute recently reviewed 5,482 public companies across Australia, Japan, continental Europe, North America (US), Canada and the UK. According to this research, globally we can see that women’s representation is increasing, with women now forming 26 per cent of boardrooms.
Among these countries, Australia’s performance in terms of gender parity on boardrooms stands to be quite remarkable. Today, it is one of only three countries in the world to have surpassed 30 per cent of women in top listed-company boards without legislated quotas. The number of women on ASX 200 boards has been increasing with an average of 2 percentage points each year; by the end of November 2021, the proportion on women on boards has hit 34.2 per cent. This milestone is the result of concerted effort made by stakeholders pushing for gender inclusivity.
‘One very important aspect for this success has been formal mentoring programs, which have been a major enabler for women participating in boardrooms,’ says Susan Forrester, Chair of Jumbo Interactive. ‘Experienced mentors have been instrumental in introducing their mentees to their professional networks, chairs, directors and board recruiters. Additionally, proxy advisers and institutional investors have also put pressure on boards to improve their gender and other diversity. There are active conversations going on several times a year in terms of what the board’s plans are for improving diversity. Board members are really being held accountable.’
But as we celebrate the increase in women’s representation across Australian boardrooms, it’s important to remind ourselves how this practically impacts boardroom culture and dynamics. As we know there is intensifying social and investor pressure for companies to consider social impact and the pertinent issues of the wider society they operate in. For all directors to understand and respond to these social trends and emerging issues, it’s imperative that around the board table there is diversity which challenges conventional thinking, represents the broader society, and helps reform culture. ‘The inclusion of women positively changes the dynamic around the table and prompts transformation of behaviours’ says Forrester. ‘In my experience, women coming onto boards are not afraid to challenge the status quo, are curious and keen to understand the link between the company’s purpose and strategy.
However, transforming culture which has prevailed for years, if not decades, requires more than tokenism and rhetoric. The onus for being included cannot fall solely on women, who have historically been marginalised. Those who already hold power must recognise the disparity and leverage their position to truly support change.
We can draw from the example of Reddit co-founder Alexis Ohanian, who resigned from the board in 2020 and asked instead to be replaced by a Black individual. This came as the Black Lives Matter movement was not only gaining momentum in the US but supporters were demanding that those in power demonstrate solidarity as opposed to merely stating it. This example highlights that those at the table must be cognisant of the weight of their actions, especially if they earnestly want to support social change.
The more effort made to bring a higher number of women onto boards, the more actively women will participate. In return, this will improve potential for women to be appointed as board and committee chairs; as chairs, women will then have considerable influence in shaping boardroom culture and by extension, organisational culture.
Along with offering diversity in terms of perspective, greater women’s representation has also proven to bring with it diversity in skills set. ‘Boards today are grappling with an enormous range of
challenges and are recognising they need specific capabilities to deal with issues like digital transformation and environmental sustainability,’ pointed out Katie King, CEO of governance consultancy 7th Wave. ‘That means they’re looking to broaden their skills base with new appointments. Welcoming directors from non-traditional backgrounds, more of whom are often women, broadens boards’ views and skill sets.’ This viewpoint is also corroborated by Diligent Institute’s research. According to the Diligent report ‘A Few Good Women’, 87 per cent of female directors have non-executive expertise compared to 77 per cent of male directors.
This suggests that female directors are more likely to bring non-traditional expertise compared to men. In fact, the research found that female directors are twice as likely to have sustainability experience compared to their male counterparts. Technological expertise is another example, where Australia has the highest global average of 12 per cent of female directors having technological expertise relative to 7.7 per cent of male directors. Japan, on the other hand, has the lowest numbers of female directors with technological expertise, which brings the regional average slightly lower than the global average.
Diligent Institute’s research highlighted another key point in its findings; women are more likely to be overboarded compared to male board members. In Australia, 52 per cent of female directors sit on more than one listed company board compared to 41 per cent of male directors.
What makes this finding particularly interesting is that overboarding, while at many times seen to be a key governance issue as it overstretches board members, can also be an added benefit. ‘It’s important to distinguish between directors who sit on multiple boards and those who have too many appointments to be contribute effectively, which is where the problem arises,’ elaborates Katie King. ‘Being on more than one board at the same time is actually an advantage — it offers a broader perspective and connects directors with current issues and trends. The trouble comes when the same small group of people overlap across numerous boards. This can lead to narrower thinking as well as directors being spread too thinly across their roles.’
As discussed above, Australia has made great strides when it comes to increasing women’s representation in boardrooms. However, there is still much room for improvement. ‘Australia has demonstrated how much can be achieved without regulatory change to boost gender diversity at board level. However, cultural diversity is nowhere near as far progressed. That applies across all genders but intersectionality amplifies the issue,’ points out Katie King. ‘While the US and the UK have brought in some requirements around cultural diversity, it would be great to build on the approach that’s already been taken locally. Strong support from leaders and business associations would help boards move closer to reflecting Australia’s multicultural community.’
It's also important to reiterate that 30 per cent women representation in board rooms, which Australia has exceeded and sits at 34 per cent, is still the minimum. To reach true parity, there needs to be a much greater push for diversity of people and opinions. Diligent’s research found that in 2022, men are still 3.5 times more likely to be board leaders than women. A simple figure such as that underlines the urgency to do more and to create spaces where women not only can sit but can speak and be heard.