GETTING SERIOUS ABOUT GENDER DIVERSITY IN THE BOARDROOM

GENDER DIVERSITY

When considering board composition, there is clear empirical evidence that building a board with leaders who possess a diverse range of skills, experiences, and business perspectives is an essential element of good corporate governance.

Not surprisingly, research into the subject also

indicates that board diversity delivers business

results. Australia’s Reibey Institute has

conducted research into the correlation between

gender diversity at the board level and

corporate business performance among the ASX

500, which includes the 500 largest listed

companies in Australia. According to the report,

ASX 500 companies with at least one female

director delivered a three-year ROE of 6.7%

versus a negative 0.1% return for companies

with an all-male board. These statistics echo

earlier findings of U.S.-based Catalyst in studies

of female directors and their impact upon the

performance of Fortune 500 companies.

Despite this evidence, among the ASX 200, only

21% of board seats are held by women. And

more disturbing is the fact that approximately

30 of the ASX 200 companies still do not have a

single female director.

And so a campaign to boost the proportion of

women on the boards of Australia’s largest

companies to 30% by 2018 is looking

increasingly unattainable, with the latest

appointments data suggesting it could take at

least a decade unless something is done to

materially alter the current pace of change.

Only 31% of new appointments to the top 200

listed companies so far this year were women.

And while the pace of change in the private

sector is slow, recent figures released by the

federal government measuring the proportion of

women serving across more than 360

government boards point to the fact that during

2015 female representation slid for a second

consecutive year to 39.1 per cent — beneath

the government’s minimum 40 per cent target.

Momentum Builds for Change

The revelation comes as momentum builds

around a push to increase the number of

women in leadership roles, including new laws

that would make equal gender representation

on government boards and committees (already

the subject of government policy) mandatory.

The Australian Government Boards (Gender

Balanced Representation) Bill 2015, sponsored

by Senator Nick Xenophon, is proposing that all

government boards comprise at least 40 per

cent of both sexes. So, despite the public

opposition among some quarters to quotas,

Australia is likely to adopt a legislated quota to

achieve and maintain gender diversity on

government boards.

Getting Serious About Gender Diversity in the Boardroom October 2015

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Concurrently, other significant stakeholders are

exerting pressure for change too. For example,

the Australian Council of Superannuation

Investors will consider recommending against

the re-election of directors of companies that

don’t encourage more women on their boards.

The council, which represents 29 Australian

industry and public service super funds that

manage $450 billion in assets, has a target of

30 per cent women on the boards of the top

200 ASX-listed companies by 2017.

Along those lines, in October 2015, Diane Smith

-Gander, Chairman of Chief Executive Women,

called for an equal split of men and women on

both government and corporate boards. Bain &

Co have just completed a study for Chief

Executive Women confirming that a sufficiently

large pool of qualified and talented women

exists to make up 50% of Australian boards. At

Johnson we absolutely concur with this finding.

Achieving Gender Diversity

So the question becomes: What are the best

practices for achieving gender diversity in the

boardroom, and what role should an executive

search partner play in helping a company to

achieve that goal?

The first—and perhaps most important—step for

companies is to change the relationship they

have with an executive search firm. Rather than

engaging in transactional relationships,

companies should seek an advisory relationship

with a search partner that is prepared to help

develop and support a structured and

systematic succession process. This kind of

relationship will ensure that a company can

make sustained progress toward important

leadership goals, such as gender diversity.

Clearly, a company must also evaluate a search

partner’s commitment to gender diversity.

Evidence of this commitment might be found by

looking at the search firm’s own staff diversity,

by inquiring about its gender diversity policy,

and by learning about the firm’s diversity

placement metrics.

For companies on the road to gender diversity

in the boardroom, an appropriate search partner

should be willing to develop a candidate short

list with at least 50% female candidates, or

even an entirely female list if so requested by

the client. In Australia this practice is allowed

under the Sex Discrimination Act 1984 if it is a

temporary measure used to achieve gender

parity.

Building Appropriate Search Parameters

Additionally, to achieve boardroom gender

diversity, companies will need to be open to

lateral and innovative candidate pools in

markets and business sectors where female

leadership is most scarce. This may involve

looking to other business sectors to find female

leaders with the appropriate skills and expertise

for a particular board position, rather than being

too prescriptive about the type of industry

experience required.

Gender diversity in the boardroom won’t be

achieved overnight, but neither should excuses

be made that push the goal too far down the

road. In partnership with a trusted executive

search adviser and with a sustained process in

place to address this corporate governance

priority, committed companies should be able to

achieve gender diversity—and other diversity

goals that deliver tangible results—in the near

future.

GENDER DIVERSITY

Getting Serious About Gender Diversity in the Boardroom October 2015

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Johnson is a next generation consulting firm working in Board Search, Executive Search and Leadership Succession. We connect the world’s top organisations with the premier leadership they need to transform their organisations, outperform the competition, and achieve their business goals.