The Diversity Dividend

Despite the evidence of improved financial performance female participation on boards has stalled.

It is difficult to know exactly why Australia’s biggest companies have slowed their efforts to get more women on boards, but with the benefits of diversity clearly proven in terms of financial performance, experts say it is time to increase momentum rather than take the foot off the accelerator.

Companies in the ASX 200 have made remarkable strides toward meeting the Australian Institute of Company Directors’ target for all boards to have 30 per cent female representation by the end of this year.

Since 2009, the number of boards with 30 per cent female representation has risen from just 16 to 70.

“We know that is one of the highest figures for representation of women on boards anywhere in the world,” says Elizabeth Proust, Chairman of the AICD.

Disappointingly however, the rate of female appointments in Australia has fallen. In 2016, 44 per cent of appointments to ASX 200 boards were female; last year, that number fell to 35 per cent.

Proust speculates that the slowdown is due to a perception that once a company has one female director, requirements for the inclusion of women have been fulfilled and the pressure to become more diverse will go away.

“They are not generally moving towards the 30 per cent target, they are stalled at one [woman],” she says.

At the end of 2017, there were around 63 ASX 200 companies with only one woman and nine with no women at all on their boards. TPG Telecom, Flight Centre Travel Group and Reliance Worldwide Corp are three of the most notable examples with no women, but Reliance and Flight Centre were working on filling those gaps as the year ended.

Two years ago, there were 30 such boards without women.

While each male-only board will have its own reasons, they tend to be in companies that are still dominated by their founders, with small boards of four or five people, or they may have had a single female director who has left and has not yet been replaced (as is the case with Flight Centre).

Proust says this is even more evident in smaller companies.

“It is where there is a group of almost entirely men, who have started a company. They have taken it from start-up to success to listing, and have not had any women involved at the start. They often say ‘We did all the hard work, we put our money up, why should we invite women in now?’”

There are a number of answers to that question, including that decision-making will be improved if the board reflects the population they are serving.

Research from a Nordea Bank study of more than 11,000 companies around the world found that those either led by a woman or with a gender-diverse board more than doubled the performance of the MSCI index (a global equity benchmark) and their annualised return, based on equal weighting, was 25 per cent since 2009, compared with just 11 per cent for the broader market.

The chair of BlueScope, John Bevan, says a diversity of background and attitudes is a benefit for any board.

“You often get deeper debate if you have people coming to the subject with different experiences and, generally speaking, the experience sets of most of the women on the boards I am on are quite different from those of the men,” says Bevan.

“They have generally come up through their career from different areas and have worked in companies with different sets of issues. They ask different questions because their experience and backgrounds are different.”

One woman is not enough and the push to have more is not just about creating a buffer against becoming a male-only board if a female director leaves. It also has the effect of “mainstreaming” the women.

When there are three or more women, they are no longer singled out to provide the “woman’s view”, but become integrated as part of the group.

Non-executive director Penny Bingham-Hall says she has experienced being the only woman on a board, as well as one of a group of women.

“There is no doubt that when you get a critical mass of women on a board the conversation changes,” she says.

“[Women] probably tend to put more weight behind some of the people, stakeholder and community issues, which we know can make or break the reputation of companies.”

Bingham-Hall says there are fewer female directors with a CEO or CFO background, and their path may have included expertise in marketing, technology, legal or finance.

She is on the boards of BlueScope Steel and property group Dexus Funds Management, each of which have three women. Fortescue Metals Group, of which she is also a non-executive director, became only the second ASX listed board to be dominated by women in 2016, with five of the nine directors female. This was a big leap. Less than three years earlier, it had an all-male board. The company will also have a female CEO, with Elizabeth Gaines to take the reins in February

“Some of the male-dominated industries — such as mining, manufacturing and engineering — have actually been quite proactive about creating female talent pools and realising that having women on the board really helps management address those issues,” says Bingham-Hall, whose executive experience includes head of strategy at Leighton Holdings.

“Any of those companies that still have no women on the board and no women in their executive team, there is a problem with their culture.

“If you can have at least a couple of women on the executive team and two or three women on a board in the steel or mining or construction industry, I don’t see why any industry can’t get close to that target of at least 30 per cent of women. It doesn’t make sense.”

While the 30 per cent target of women on ASX 200 boards is now within reach, the pressure to advance the participation of women is not going to let up, either inside or outside the ASX 200.

The chair of Dexus Funds Management, Richard Sheppard, a former CEO of Macquarie Bank, says it is many years since he sat on an all-male board and he would encourage smaller companies to appoint women.

“In all the boards that I am working with, we have reached those [30 per cent] targets and it is working well … and they all have policies to exceed to 30 per cent,” says Sheppard, who is also on the boards of Snowy Hydro and the Star Entertainment Group.

“One of the important things is to develop female participation in management and in the workforce, which is in my experience what a lot of the boards are working quite hard on because that will [produce] the future female directors.”

If companies prove too resistant, they should look at measures that have been imposed overseas, says Proust.

“At some stage, the government in Canberra, of whatever persuasion, may get tired of the fact that these companies just don’t seem to get it and might impose quotas, which has happened in Norway and a few other places,” she says. “If [a quota] is legislated, it will happen, but I always prefer the carrot to the stick”

Neither the Turnbull Government nor the Opposition are in favour of legislating for a quota at this point. However, the Opposition has flagged a willingness to proceed down that path if the business community can’t deal with the issue itself.

The Australian’s editorial staff were not involved with the production of this content.

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