Approaching the tipping point

As the Australian chapter of the 30% Club celebrates its second anniversary this month, Theodora Turnbull explores the campaign’s beginnings, what it has achieved and what it has left to do.

Thirty per cent is the tipping point. In the context of boardrooms and gender diversity, it is when women are no longer just representatives of a minority but are actually heard. It is when female directors become entrenched on the board and the board properly derives the benefits from gender diversity.

The 30% Club is an international movement of company directors and senior executives, whose unifying mission is to reach the target of 30 per cent female directors on boards. The 30% Club has chapters all around the world, including in the UK, Australia, Hong Kong, the US, parts of Europe, Southern Africa and Malaysia.

In Australia, its goal is to have 30 per cent of directors of ASX200 companies as women by the end of 2018.

In the past, Australia has struggled with female representation at the top levels. In 2002, 8.2 per cent of ASX200 directors were women. By 2009, this number had only grown to 8.3 per cent. At the end of February 2017, the figure had risen to 25 per cent. Great strides have been made, but the journey of women’s advancement in Australian boardrooms continues.

The case for gender diversity Board gender diversity is an unalloyed good. It is better for an organisation’s bottom line, efficiency, productivity, employee engagement and decision-making. It mitigates against groupthink by offering different perspectives.

Catalyst’s Why Diversity Matters report (2013) found that, on average, companies with the highest percentage of female board directors had a return on equity that was 53 per cent higher than those with the least.

David Gonski AC FAICDLife who chairs ANZ Banking Group Limited, one of 66 companies on the ASX200 to have met or exceeded the 30 per cent target, has said: “sameness is the most dangerous thing around a board table. I’m happy that we have reached the 30 per cent target, as I feel we are much better for it.”

Patricia Cross FAICD, founder and chair of Australia’s 30% Club, did not need to be convinced of these things. She has known them since she first joined a board in 1996, “when the number of women on ASX 200 boards was low; hovering around five per cent,” she says. And that is why she has since been committed to changing the landscape of Australian boardrooms, by recruiting the chairs of some of Australia’s leading companies to the cause.

The 30% Club begins In 2010, Helena Morrissey CBE, former CEO of Newton Investment Management founded the 30% Club in the UK. Its modus operandi was to sign up directors and CEOs – particularly male chairs – to the goal of having a minimum of 30 per cent female directors on FTSE 100 boards. Members of the Club had to agree to explicitly set this aspirational target and to use their influence to effect cultural change both in and outside their organisations.

Morrissey has always been opposed to legislated quotas for gender diversity on boards, preferring to focus on targets to encourage cultural change as opposed to overnight, hard-line quotas. She is not alone. Oliver Parry, head of corporate governance policy at the Institute of Directors in the UK, favours the targets-approach, too. “While quotas may work in the short term, I think in the longer term, it doesn’t prove to be that effective,” he says.

Morrissey is not complacent about the goal; hence the establishment of the 30% Club. And it has worked. Since 2010, the percentage of female directors on FTSE 100 boards has risen from 12.5 per cent to 27 per cent today.

The Club has now extended the scope of its original target, setting the goal at a minimum of 30 per cent female directors on FTSE 350 boards by 2020. The figure currently sits at 23.3 per cent.

Australian expansion But Morrissey’s ambition was never limited to the UK alone. Cross first met Morrissey in 2013 and was asked to launch the campaign in Australia. Cross then spent the next two years consulting closely with and garnering the support of the majority of ASX30 company chairs and organisations like the Australian Institute of Company Directors (AICD), as well as crunching the numbers on appointment rates of women to ASX200 boards in order to establish a realistic target.

Cross explains: “I liked how the [Club] sought out chairs, who were and still are principally men, to support and foster the gender diversity cause. I also liked that it wasn’t really a club as the name suggests, but rather a long and enduring campaign with a proven track record for improving the landscape in the UK.”

In 2015, the need for the Club was dire. If appointment rates remained unaltered, it would take until 2030 for the 30 per cent objective to be realised in Australia. It was necessary that 40 per cent of new board appointments be women; a ratio of 2:3 of women:men.

And so on 5 May 2015, the Australian chapter of the Club was officially launched. It now has 82 members who sit on the boards of 90 ASX200 companies and comprises four working groups across education, chair’s liaison, investors, professional services and executive search sectors, established and piloted by leading female directors from these respective fields. The work of these groups has contributed to the positive change seen on ASX200 boards. Between May 2015 and February 2017, the percentage of female ASX 200 directors rose from 20.6 per cent to 25 per cent.

Facing headwinds But the campaign for gender diversity on boards still faces challenges. Fourteen ASX200 companies do not have a female director on their board. Some companies, which have met the 30 per cent target in the past, are falling backwards. Figures from a report released by the AICD in December showed that men made up an astonishing 93 per cent of company boards that made IPOs in the first quarter of the 2017 financial year.

For Cross, there are three key challenges that need to be addressed if the 30% Club is to reach its objective. And its members can influence all three.

“The first is the ‘merit myth’,” she says. The concept of merit is subjective and introduces bias to the recruitment process. In these cases, merit becomes a cover for recruiters where it is not only about experience, but about perceived cultural fit. Targets, accountability measures and other strategies can assist in overcoming this challenge.

Second is the executive pipeline and increasing the pool of capable female talent. New female directors tend to come from the ranks of the senior executives of large companies. “It’s crucial that we support and nurture the pipeline by giving these women opportunities and the encouragement to take on a company board,” says Cross.

The third is the challenge of communicating the business case for diversity. “I think we sometimes tend to take it as a given that the business community understands the benefits of gender diversity. But perhaps they don’t,” Cross says. The 30% Club must stress the importance of diverse leadership teams to new audiences.

Beyond 30 per cent But Cross is not stopping at 30 per cent. Once that objective is achieved, she will turn her sights both lower, and higher. She wants ASX200 boards to aim towards a target of 50 per cent women. “30 per cent is de rigeur,” she says. “We can afford to be a little more ambitious with our top companies.”

The balance will not always be perfect: over time it will fluctuate, but it should fluctuate around 50 per cent. Additionally, she wants companies in the ASX500 to embrace the 30 per cent target. There are 2,186 companies on the ASX Official List, so the 30% Club still has a long list of companies to convince of the merits of gender diversity on their boards.

Insights on diversity from those who have met 30% Leading by Example, the latest report to be published by the 30% Club, compiles the reflections of 30 of the 53 leading ASX 200 company chairs whose boards had reached or surpassed the 30 per cent target of women on boards as at 30 August 2016.

In a series of interviews, these leading chairs shared their approach and commitment to improving gender diversity on their boards, as well as the practices, values and processes they have sought to foster in their organisations.

Dr Brian Clark, Chair of Boral
On the importance of board diversity

“There is no doubt in my mind that diversity, whether it be at the board, leadership, management or employee levels, delivers more effective problem solving, decision-making, innovation and performance outcomes.”

Catherine Brenner MAICD, Chair of AMP
On the risk of homogenous boards

“Diversity is the insurance policy against groupthink. It is how we ensure we make the best decisions to take the organisation forward in an increasingly uncertain environment.”

David Kirk, Chair of Trade ME Group
On recognising bias

“The organisation needs good processes that reveal any unconscious bias and understands that the opportunity for merit to be recognised is often more difficult for women and other minorities.”

Margaret Jackson AC FAICD, former Chair of Spotless Group
On boards setting the tone

“Unless you have a diverse board, you can’t put too much pressure on the CEO for diversity. When you have a diverse board, you can say, okay, what about the executive and the executive can say, what about the organisation?”

Gordon Cairns, Chair of Woolworths
On quotas

“I’m not a believer in quotas, however I’m on the record as saying, if we don’t improve the numbers then there is no other option. But we should give ourselves to 2020 – if we haven’t achieved the appropriate number then we deserve quotas.”