Active Diversity

If the most recent Federal election has taught us anything, it is that the make up of our Corporate Boardrooms falls far short of the level of gender diversity that our community now demands and the argument that these women do not exist has been proven wrong by the intelligent and charismatic group of teal independents.

There is, in fact no shortage of qualified women with the necessary personal qualities and qualifications demanded of them by current legislations covering directors’ duties. If they are not readily identifiable, then it is incumbent on these Boards to actively search them out and recruit them. What this means is that we need to take the extra step to develop opportunities for these directors to be identified and mentored to create the future crop of female directors, enabling our Boards to be more diverse and representative.

This is not a numbers game, however, number is a first step. What this means is that there must be substantive diversity, where people from diverse backgrounds and genders have equal Boardroom control.

Quotas

The Norwegian government established a 40% female quota in 2003, followed by Spain in 2007. Since then, Belgium, Finland, France, Iceland, Israel, Italy, India, and Kenya have all introduced quotas for female representation. Norway passed the gender quota legislation in December 2003 and enforced the law in January 2006, with a two-year transition period. In 2008, all public company Boards in Norway had complied with 40% gender quota.

In Australia, there are no mandatory quotas in the ASX Listing Rules or Guidelines. However, since 2012, non-public sector employers with 100 or more employees are required to report to the government in relation to various gender equality indicators. In March 2015, Victorian premier Daniel Andrews announced that he would implement 50% quotas to ensure half of all representatives on government Boards are female.

Substantive Diversity

Additionally, it is not just an issue of quotas when you speak in percentages. One woman can be seen as tokenism representing the views of all women with no power, whilst two would be seen as pitting to women against each, whilst a minimum of three women is sufficient to ensure that they can agree or disagree with each other without being viewed negatively within the Board as a whole.

Given that the average ASX company Board is made up of 7 – 9 people, a quota of approximately 40% would mean that there were at least 3 women in the Boardroom ensuring more substantive diversity.

Better Corporate Governance

In situations where there is a substantive diversity of female directors, evidence suggests that those Boards score more highly on the nine key organisational criteria being:

1. Capability
2. Leadership
3. External orientation
4. Accountability
5. Motivation
6. Coordination and control
7. Innovation
8. Direction
9. Work Environment

Governance is further improved where:

• Female directors are better able to test decisions and advocate conflicting viewpoints;
• Diverse Boards have improved strategic decision-making power and risk management;
• Female directors improve intra-board communication; and
• Female directors are often more aware of social dynamics and human issues.

Arguments Against Diversity Ring Hollow

The arguments against greater diversity at Board level being the lack of qualified women, tokenism, and government non-interfere with business do not hold true and are the last arguments left by predominantly white male directors, who dominate current boards and have a vested interest in ensuring that no further change is implemented.

It is these boards that have being put on notice by the election!

Conclusion

In the absence of quotas, the onus is on changing the attitude of these existing predominantly white male directors. They should be actively listening right now to the winds of change. If they fail to hear the lesson dealt out at the Federal election, then they will be blown away by the shareholder and stock advisors that put Board diversity on the table as a key risk for shareholders to clear the boardroom and appoint from the outside.