Diversity at the Table

An excerpt from Elizabeth Proust AO FAICD’s address at the Ballarat Roundtable Dinner, an event hosted by the Committee for Ballarat.

Ladies and Gentlemen,

I would like to begin by acknowledging the Wathaurong people as the Traditional Owners of the land that we are on today, and pay my respect to their Elders past and present.

In all honesty, this is a conversation I would have thought unnecessary when I started my career in the late ‘70s. In the early ‘80s I was Chief of Staff to John Cain, then newly elected Premier of Victoria. Unsurprisingly all the department heads and most of the senior ranks were all male. John and his Ministers made some simple changes that were not necessarily welcomed at the time: all interview panels for roles, especially senior roles, had to comprise at least one woman, and all short lists had to contain at least one woman. I became very busy for a period on interview panels… but by the ‘90s, the issue was no longer a major one in Victoria, and for many other public services. I raise this simply to make the point that, on the issue of greater gender diversity, the public sector, has led the way.

Indeed, Victoria’s public service continues to lead the way in this regard, reaching the target of 50/50 parity on government boards in February of last year – well ahead of even the best performing of the other states.

And the Victorian Government has put their money behind initiatives to increase gender diversity on boards, for example through the Women’s Board Leadership Program that provides governance education support for women serving on government and not-for-profit boards.

Yet, despite the decades of progress in the public sector, the private sector has failed to keep up.

Homogenous boards and management teams don’t make better decisions – they just think they do.

Diverse boards and leadership teams lead to better outcomes for shareholders and stakeholders alike; they lead to greater innovation and better bottom lines.

Now diversity around the board table can take many forms, and we certainly should be looking beyond gender alone, but the research is clear that the greatest benefits in this area come from visible diversity – that is to say gender and race.

The Credit Suisse Gender 3000 Report has over multiple years reconfirmed the clear link that exists between gender diversity and improved business performance. In the most recent report, the findings were that where women account for the majority in the top management, the businesses show superior sales growth, high cash flow returns on investments and lower leverage.

Despite this, Australia’s boardrooms and C-suites are woefully lacking in diversity.

Importantly, the number of women on a board makes a difference. Research shows that one woman alone does not do enough to achieve the full benefits of diversity and rather that three women, or 30% for most boards, is where the magic happens.

To quote one research report by academics from the University of Ontario, “While a lone woman can and often does make substantial contributions… increasing the number of women to three or more enhances the likelihood that women’s voices and ideas are heard and that boardroom dynamics change substantially. No longer does any one woman represent the “woman’s point of view,” because the women express different views and often disagree with each other.”

30% is where the voices of women become heard rather than just represented and therefore, where there is true capacity for boards to realise the benefits of diversity.

That is why the AICD has a target of 30% female representation for all boards, and a specific goal for the ASX 200 to reach that milestone by the end of this year.

As part of that ASX 200 goal we release quarterly progress reports towards that target.

You might ask why the focus on the ASX 200. First there is publicly available data that allows us to track progress easily. This just simply isn’t the case in other sectors.

And secondly there is no doubt that the ASX 200 sets the benchmark for corporate Australia and it sets the discourse politically and for the community.

Earlier this month on International Women’s Day we released the latest quarterly results, which showed that there were still five companies on the ASX 200 with no women on their board, 4 of which are based in NSW.

The percentage of female directors across the ASX 200 rose to 26.7%, which is a significant increase from the 26% we ended last year at.

And while those numbers represent a significant increase from where we were in 2009 when women accounted for less than nine per cent of ASX 200 board roles, it is clear that there is still so much room for improvement; such tremendous benefit to be had.

For example, we continue to see a ‘fat middle’ of companies with only one woman on their board, with 63 ASX 200 companies still with only one woman at the table, which as I mentioned earlier, isn’t enough to truly gain the benefits diversity has to offer.

Indeed, the Australian Shareholders’ Association’s CEO Judith Fox said following the most recent AGM season, that for them, gender has become a proxy for board performance – to quote, “If the board is missing the importance of diversity, what else are they missing?”

I can understand the support for that view – after all, targets have been set in the public sector and met. If the private sector cannot do it under their own steam despite the mountain of evidence, maybe a stick is needed.

However, as someone who has spent substantial parts of my career working in government and the public sector, I know all too well the unintended consequences that can accompany well-intended legislation.

For example, the Credit Suisse report I mentioned earlier also found some evidence that in an effort to meet gender targets in US and European boardrooms, the pool of women available for senior management roles has reduced.

Academic research from Norway, which is often held up as the poster child for quotas, too found that the policy had resulted in little increase in interest in grooming future female executives nor a substantial increase of women in senior management ranks.

That’s why I'd rather that we get to a point of genuine diversity, and that includes people of different cultural backgrounds as well as gender, on our boards without government intervention.

What the AICD wants to do is drive a conversation about how we can achieve cultural change. The risk with quotas is that you introduce it and people, including the media, think ‘well that problem is solved, we don’t need to worry about gender diversity anymore’ – and that could prevent us from achieving the real cultural change we want to see not just at the board level, but in management ranks as well.

I think the better question than simply “is it time for quotas” is “will quotas actually fix the underlying cultural problems that are inhibiting greater gender diversity?” … I think the answer is probably not.

Before I finish I would also like to make the point here that the lack of diversity is not just a problem for stakeholder or shareholder returns and results. Nor is it solely one of equality. As governance leaders, we also need to consider that if their people look to the top of their organisations – to the boards and senior management – and only see white men, then all the people who don’t look like that may rightfully think their company doesn’t understand or care about them. Their customers may well think the same.

So what do we need to do? The AICD of course will continue to advocate for greater diversity on our boards, because as far as we see it, diversity is vital to the future of good governance in this country.

We will also continue to provide governance and learning opportunities to women on boards and board-ready women, whether it be through the Chairs Mentoring Program, in partnership with the Victorian Government or Federal Government scholarship programs, as well as through the not-for-profit scholarships the AICD itself offers each year.

More broadly I would call on all boards making an appointment this year to have at least a 50/50 candidate list.

A recent report released by the 30% Club found just how heavily boards rely on their own networks to source candidates, with over 67% of respondents gravitating towards candidates already known to board members to supposedly enable better collaboration and alleviate concerns around cultural fit. Given the small percentage of female directors currently in circulation, this sort of approach poses a catch-22 to increasing gender diversity on our boards.

To the same end, if you decide to use a search firm and they aren’t listing 50% quality female candidates – they’re just not trying hard enough. Make them find the quality female candidates that are out there and make sure you’re not giving them a brief that is in effect, if not by intent, is so narrow in seeking to replace the man that has left your board that it can almost only filled by another man.

While board directors often say they value ‘out of the box’ thinking, they need to actually do more looking outside of the box to recruit women, especially in regional areas where the pool may be smaller. Going outside your own network and thinking more broadly about who might be interested and valuable is a must if we are to increase the pool of female directors across the country.

Ultimately we all need to do more, and that includes men doing more publically and vocally. Women are often over mentored and under sponsored, and women sponsoring fellow women alone will not do enough to achieve change. I hear a lot from males about the need for gender diversity and of their support for it. But in Sydney last year when the 30% Club put on a breakfast event aimed specifically at men, with an all-male panel, titled “Calling all Men” … only 13% of attendees were male.

Men – as well as women – need to consciously identify women, the same way we all often unconsciously identify someone as a future leader, and sponsor them to succeed.

Only then can the boards and senior leadership of our organisations represent and reflect the talent we have in our society.

Thank you.