A wide-ranging study into the impacts of board diversity unveiled by University of Queensland researchers today has found that companies with female directors enjoy myriad benefits, but more can be done to bring more women into executive and CEO roles.
The study by Associate Professor Terrance Fizsimmons and Professor Victor Callan from the UQ Business School, which also determined that legislated diversity quotas did not actually empower women, saw the academics interview 45 chairs of ASX-listed companies who mostly hold “very positive perceptions” about the overall influence of female board members.
The results come in tandem with the release of new analysis of ASX 300 data by the Australian Institute of Company Directors (AICD), which revealed the proportion of women on boards of the nation’s top public companies has continued to climb to 34.7 per cent and 33.6 per cent for ASX 200 and ASX 300 companies respectively.
This is up remarkably from the percentage of women on ASX 200 boards in 2009, which was just 8.3 per cent at the time, however it is still a distance off the AICD’s preferred makeup of boards being a 40:40:20 model, whereby all boards have at least 40 per cent women directors, 40 per cent male directors and 20 per cent of wriggle room.
Nonetheless, the progress was made without imposing any sort of legislative requirement that large Australian companies appoint women to boards - something that should only be considered if the rate of progress stalls according to Associate Professor Fitzsimmons.
“The bigger issue in this country is that only five per cent of women are company CEOs,” Fitzsimmons said.
“It means getting more women into operational roles, addressing the division of domestic labour and gender role stereotypes and introducing universal free childcare.”
Speaking to Business News Australia, Fitzsimmons, who is also the managing director of the Australian Gender Equality Council (AGEC), said if we want more women on boards changes have to me made holistically - from early education all the way through to promoting more women into executive roles.
“If we want to see we’re not having this conversation in another 30 years we have to be addressing why girls are choosing non-STEM (science, technology, engineering and mathematics), non-trade and non-male dominated career paths,” Fitzsimmons told Business News Australia.
“A lot of it is around gender role stereotypes - we talk a lot about the workplace but a lot of these attitudes are taught back in primary school.
"We need an intervention at a primary school level - not just at schools, but with parenting and perhaps even a national campaign around gender stereotypes.”
Why legislated quotas fail women
To understand why Fitzsimmons and Callan embarked on this study, it pays to revisit the reasoning behind the push to make boards diverse.
Beyond the fact that involving women in boards is fair and equitable, it has been well-documented that a diverse board delivers better results for companies. If you’re not convinced about the feminist perspective, the business case certainly comes out in favour of a board with a mix of men and women.
In fact, research from the Bankwest Curtain Economics Centre (BCEC) released in 2020 found a direct causal link between gender balanced executive teams and profitability.
Further, as part of the study, Fitzsimmons and Callan interviewed 45 chairs of large ASX firms, with most holding positive perceptions about the overall influence of female board members.
There were five reported positive effects women had on their boards’ dynamics: enhancing debate, challenging views, providing clarity and decisiveness, raising levels of professionalism, and enhancing behavioural norms.
“Those five mechanisms mean boards have a better decision-making process, consider more points of view, are more balanced in their analysis and will likely lead to financial benefits for the business,” Associate Professor Fitzsimmons said.
But reaching an equitable position is difficult. As mentioned previously, just 13 years ago the share of women on ASX 200 boards was just 8.6 per cent.
In the years since, great strides have been made, and women certainly make up a larger share of directors leading the nation’s top companies. This was all achieved without legislator intervention - a good thing according to Fitzsimmons.
“Quotas are one of those tools that people see as being a solution, and certainly I would agree in a lot of instances - graduate intake for example - there’s no reason why you shouldn’t be aiming for 50:50 as a quota,” the associate professor said.
“But when it comes to board roles, and this is the experience of researchers looking at what happened in Norway, is that you get some negative consequences of quotas; people second guess why there there and wonder ‘did I get this role because I deserve it or because I’m a number?
“The second consequence is for the people on the board themselves - the other board members - in their minds they’re asking ‘is this person credible or are they here to make up the numbers?’. That’s a real danger when it comes to quotas.”
As such, legislated quotas - while good at getting women onto seats - appear to do more harm than good.
“It actually undermines decision making on a board - if you can’t have all the board members who are there for particular reasons contributing, you’re going to get worse decisions,” Fitzsimmons said.
“What happened in Australia is the opposite of that.”
The UQ research also aligns with the position of AICD managing director, governance & policy leadership Louise Petschler, who told Business News Australia that the Institute was not, in principle, in favour of legislative quotas.
“They’re a very blunt instrument,” Petschler said.
“But that’s in the context where we have seen the significant shift in Australia,” she added, referencing new data analysis from the Institute on the makeup of Australian boards since 2009.
“But if we were to see the rate of change fall away, then of course you’d have to consider and think about the environment that you’re in.”
According to Fitzsimmons, the AICD has been instrumental in pushing board diversity, particularly with its Chairs Mentoring Program whereby the organisation matches ASX 200 chairs and directors with high-performing, board-ready women to develop their skills and prepare them for a board position.
“In my mind, the pivotal moment was when the AICD decided to set up its Chairs Mentoring Program,” Fitzsimmons said.
“So you’ve got people like Don Agus, the former chair of BHP, putting up his hand to say ‘yeah I’ll do this, I will mentor a woman as a potential board member’.
“And of course, at the top end of town, when people like that put their hand up the rest fall in line.”
Petschler agreed that the Chairs Mentor Program, which commenced in 2010, was a “flagship initiative” of AICD.
“What we’ve been able to create through the Program is an environment where we can provide targeted support for the mentoring partnership,” Petschler said.
“We’ve been able to draw on that passion and goodwill from very experienced men who are chairs or senior directors in the ASX 200 and 300 and really create that entry into the network.
“I think what that shows is if you can harness the passion for change, and if you have an organisation like AICD that has the capacity to create that network, then you can lead to really positive results.”
Fitzsimmons also noted that beyond initiatives like the Chairs Mentorship Program, pressure from investor groups and the general public to appoint more diverse boards also has an impact.
“Corporate Social Responsibility is a theme that has become more prevalent in the last decade, and I think in Australia the roles of industry super funds play a large part,” he said.
“I think the Australian Council of Superannuation Investors, which is the peak body for those industry funds, has played a massive role here.
“They wrote to the ASX 200 chairs and basically said ‘If you don’t have a woman on your board we’re going to vote against your revenue report and the chair. Super funds control 10 per cent of shareholdings - you can’t ignore that. While some might view that as heavy handed - those super funds represent the Australian community and that money comes with an expectation that it will be used responsibly, not just to increase the balance in their super account.”
While great strides have been made in increasing female board representation, AICD research found that there are still 53 ASX 300 boards with either just one women or no women at all, as well as 63 ASX 200 boards and 118 ASX 300 boards that have not reached the benchmark 30 per cent as at 31 May 2022.
In fact, in the latest quarter, AICD found that an all-male board entered the ASX 200 following the most recent rebalance of the index, that being the board of AVZ Minerals. There had been no all-male boards at Australia’s top 200 companies since August 2021.
Overall, Petschler said she was pleased with the latest results.
“The latest quarterly report on gender board diversity in Australia’s biggest listed companies is a positive result,” Petschler said.
“We’re continuing to see that positive trajectory to bring greater gender diversity into the board tables of large companies in Australia.
“We’ve also found that there’s pretty much gender parity in terms of the new directors entering the ASX 300 and that’s als positive in the sense that we’re bringing new skills, new faces, new perspectives - rather than having an overly concentrated pool of highly experienced directors that dominate those boards.”
Diversity beyond gender
Without understating the major step change that has been the greater involvement of women in Australia’s peak boardrooms, the unfortunate reality is that the makeup of leadership teams remains predominately male and white.
This is fairly unrepresentative of Australia’s population base. According to the latest Census data, the top five most commonly reported ancestries included English at 33 per cent, Australian at 29.9 per cent, Irish at 9.5 per cent, Scottish at 8.6 per cent and Chinese at 5.5 per cent.
The proportion of Australian residents that are born overseas or have a parent that was born overseas has also moved above 50 per cent.
In addition, Millennials (those aged between 25 and 39) are now the dominant generation in Australia, comprising 21.5 per cent - neck and neck with Baby Boomers (aged 55 to 74 years).
So while gender diversity is improving, Fitzsimmons agrees that more could be done to make boards more representative of a multicultural Australia. However, this proves difficult considering most boards have an average of just seven people sitting on them.
“If you look at the ASX 200, they are mainly Anglo Saxon males and females. There’s a scattering of others in there but it’s way below what the Australian population looks like,” Fitzsimmons said.
“But inclusion in the workplace is key - if we want to have more diverse appointees we have to have those diverse individuals in senior roles.
“It’s not about quotas for boards, it’s about making sure that we’re progressing diverse individuals in our corporations to that executive level so that they are getting experience to go on boards.”
Petschler agreed with the observation that Australian boards were overwhelmingly white, and said there was no question that there were “very low levels of cultural diversity on publicly listed boards”.
“I think that the issue with women being 50 per cent of the population and almost none of the board seats is a very easy one to see,” she said.
“We don’t suggest that a listed company needs to be a demographic mirror of Australia, but obviously diversity of experience and perspective will strengthen board decision making.
“That’s definitely an area that we intend to focus on. There’s a very strong opportunity for Australian boards to build their Asian capability so their understanding of the markets that are closest to us is improved. That may be an area where a bit more of a concerted focus and campaign might support the kind of growth that we need.”
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