Mar 14th 2010
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Loading ...A place at the table: Women on boards
After decades of discussion, there is still a marked lack of women on company boards. Some are saying it’s time for the law to step in. By a Business21C writer.
‘If women don’t bring something exceptional to the board, they will get eaten alive by the CEO,’ an unnamed board director told Anne Hatton when she conducted in-depth interviews with 80 directors and chairs of Australian boards last year. The survey, conducted by Hatton’s executive consulting and search firm, Hattonneale, identified that current economic pressures meant boards were recruiting their ‘mates’ and steering clear of new blood.
But the situation is more serious than this suggests. Research compiled by a leading broker of women into board roles in November 2009 shows female participation on ASX 200 company boards up only from 8.3 percent in 2008 to 8.7 percent in 2009. The Women on BoardsTM research also shows that the percentage of companies without a female director marginally increased in 2009 to 53 percent. In number terms, of the 1,474 total directorship positions in ASX companies, only 128 were filled by women.
‘A national outrage’
‘Let’s be clear – this isn’t just a problem, it’s a national outrage,’ says Elizabeth Broderick, Australia’s Federal Sex Discrimination Commissioner.
‘Without significant intervention – by government, by business – the number of women progressing in the workplace may shrink even further.’
Australia ranks first in the world in terms of women’s education. ‘Women start with the same level of intelligence and commitment [as men]. Sixty percent of people coming out of Australian universities will be female. It does not make any sense at all to not be looking at women as a potential source of highly skilled talent.’
But the tide is finally turning: the ASX Corporate Governance Council has recommended sweeping changes to Principle 2 of the Corporate Governance Guidelines, expected to be implemented in July 2010. These will require a ‘naming and shaming’ regime intended to motivate publicly listed companies into promoting women.
Accountability
From July 2010, share-market-listed companies will need to publish in their annual reports the number of women on boards, in senior management and within the organisation. They will also be required to introduce gender diversity policies and targets, and the successes or failures of these will be made public. Board nomination committees will have to publish the ‘skills and diversity’ criteria sought for each new board appointment.
‘It’s a major breakthrough,’ says Broderick. ‘Never before have companies been required to publish not only the number of women in senior management and the numbers of women on boards, but to set targets and transparently report against those targets in their annual reports. If we say what gets counted counts, this level of transparency is the first step towards changing the picture of leadership in Australia to ensure it is inclusive of women and men.’
The new disclosure requirements mean companies will have to have diversity plans. ‘They will have to set some measurable objectives or what I call targets. They will also have to talk about the diversity required on the board. We will see board positions advertised more – and there will be more transparent selection. It will be easier for experienced women to say: Here I am,’ says Broderick.
But the ASX Corporate Governance Council, which consists of 21 business, investment and shareholder groups, said companies failing to meet their targets would not be penalised – though it did say that the regime could become a listing rule down the track and would then be more strictly enforced.
This absence of target enforcement parallels a 2009 report released by the Corporations and Markets Advisory Committee (CAMAC). That report rejected the idea of any type of quota system or target setting. Softer solutions being bandied around range from naming and shaming companies with no women on their boards to introducing financial incentives that reward companies’ senior management for their diversity.
‘We haven’t ended up with quotas and I never imagined that we would, immediately. But where we’ve ended up is a midway position, which is a significant advancement from where we were three months ago,’ says Broderick. ‘If you don’t comply with your listing rules, then you can be suspended from the stock exchange. If this doesn’t fix the issue, the government may impose a quota and say all boards must reach this level of gender equality.’
But many will not be satisfied. A recent survey by Women on Boards found that more than 50 percent of respondents – all female directors on a range of companies, from ASX 200 firms to not-for-profits – said that legislated quotas were needed if the system was to change.
The big question floating around now is will Tanya Plibersek, Minister for the Status of Women, introduce legislation whereby publicly listed companies have to set voluntary targets on the numbers of women on boards?
And, fearful of any law, are boards trying to look self-motivated on the issue before the minister forces them to act?
Norway has been a catalyst. In 2003, a Conservative government there passed legislation requiring 40 percent of positions on the boards of publicly listed companies and all wholly state-owned and inter-municipal companies to be filled by the under-represented gender. Any company that did not comply would be dissolved. Within five years, the numbers of female board members jumped from seven to 39 percent. Broderick remembers the response: ‘They said things like, “You are putting constraints on business. It will become less competitive.” They said: “Where are these women coming from? Where will we find the women to fill these positions?” If the Norwegians can find 1,000 women out of a population of 4.5 million, I am sure we can find a couple of hundred women out of a population of 22 million. The fact is the women are there.’
Where have all the women gone?
Australia lags almost all of the OECD and other countries, including South Africa, in the percentage of women on public boards.
Broderick lists mining, engineering, resources and construction companies as most likely to struggle under the new ASX rule. ‘Those areas have been very, very difficult for women, particularly at board level. At senior management level, you’d have to say that financial services aren’t doing terribly well.’
So why aren’t Australian women properly represented on boards? The merit argument pops up a lot. The usual pathway to a boardroom has been through a CEO role. And with women still struggling to secure senior management roles, there is a belief that women lack the experience.
Broderick says it boils down to a reluctance to share power. ‘I’d like to think it’s not so much about an absolute intent to exclude women – I think we’ve moved past that stage of “It’s just that I am the chairman of the board and I don’t really know any good women”,’ she says. ‘Part of getting on a board is who you know, and the fact that the board can feel comfortable with you because they know you, or they know someone who knows you – all those kind of network issues. Women don’t do very well there because often, they are not part of the club.’
Talk to anyone in the board recruitment game and they’ll agree that it is largely about networking, particularly as board jobs are rarely advertised. As Hatton’s research shows, in a tough economic climate, directors stuck to their own networks in a process shadowed by a formal ‘search process’ so it looked like the company was doing the right thing.
US research applicable here shows that women who do get onto boards use alternative pathways: as entrepreneurs, academics, government board holders or through experience in the not-for-profit sector and the investment sector.
Nor is the diversity debate confined to women – there are also calls to include more people from non-English-speaking backgrounds and more people of varying ages on boards.
Whatever the answer, change is nigh.
As Katie Lahey from the Business Council of Australia puts it: ‘Nice policies have not worked.’
What the female directors are saying
‘There are so many talented women around but they just aren’t well known. To get onto boards, you have to do more networking. The problem is that women don’t have the time to network because they have so many different roles. The men who have been successful often have a wife at home looking after the kids, as well as a personal assistant.’
Targets?
‘I believe that quotas are the last resort – particularly now that this whole issue has been given a lot more attention. The first step is for boards to include diversity in their charters. The Noni B board charter specifies that the composition of the board should reflect diversity in terms of skills, experience, age and gender. Once you have done this, you should start looking at ways to achieve it, then look at reporting against it. I would encourage all board members to put a review of the board charter on the agenda. If this doesn’t work, we should go to quotas. At least something is on the move.’
Lynn Wood, Chairman Noni B, director of GPT Fund Management and the Committee for the Economic Development of Australia (CEDA). Wood has previously held positions on the boards of HSBC Bank Australia, Macquarie Goodman Group and the NSW Lotteries Corporation.
For quotas
‘I’m now firmly of the mind that unless there are quotas or targets, we won’t get the chance – maybe that’s from 30 years of watching this and seeing nothing happen.
‘I honestly think we won’t see real gender diversity until we see more of a critical mass of women, and we have to get there fast and I think quotas are a way of doing this.’
Lynn Ralph, Director Sydney Swans, speaking at a meeting of the Women in Finsia (Financial Services Institute of Australasia). Ralph is a Director of Babcock & Brown Direct Investment Fund, the Sydney Swans and The Sydney Institute.
Against quotas
‘On balance, I always come out against quotas, although I respect the opinions of the growing number of women who support this view. Indeed, we are overdue for a serious debate on the issue.
‘We all want to be promoted on merit, not tick a box for a quota. While it might satisfy some to pay lip service to quotas, it will not change the hearts and minds. It will not influence a sustainable organisational cultural change, which celebrates the values, beliefs, attitudes and behaviours that genuinely support diversity. I fear that quotas to increase the number of women might well result in unintended consequences for us.’
Helen Lynch AM, Chair, Westpac Superannuation Fund. Lynch is a director of Coles Myer Ltd, CRI Australia Holdings Limited, Southcorp Limited, the Sydney Symphony Orchestra and Deputy Chair of OPSM Protector Limited.
What the industry is saying
‘I have highlighted the prospect of quotas in the past to spark discussion on this issue. Voluntary targets are also now on the agenda. More radical solutions, such as requiring those who tender for government contracts to demonstrate diversity, could be the next barbecue-stoppers.
‘Perhaps the time has come to just get on with it. Link pay for senior managers to diversity outcomes and I expect you will then start to see the broader changes in workplace flexibility and recruitment processes needed to produce real and sustained results. Nice policies have not worked. We need a radical rethink for women to reach their true potential in our economy.’
Katie Lahey, Chief Executive Business Council of Australia. Lahey served five years as the Chief Executive of the State Chamber of Commerce (NSW) before joining the BCA.
Time for legislation?
A 2009 survey of Australian female directors revealed more than 50 percent of respondents supported legislated gender quotes for ASX boards. Women on Boards conducted the survey with 598 women in their networks, including 29 respondents who were on public listed boards. Here is what some of the female directors said, anonymously.
‘Quotas are regrettable but probably the only way to make progress – Australia is too conservative and blokey to make progress otherwise.’
‘I spend part of my year in Scandinavia. What I have noticed is that where women are more involved in public and company decision making, there are better outcomes and a more equal society.’
‘As there is real resistance to increasing the number of women in senior executive positions and at board level, the only way to get any traction is to engineer this through policy/reward or legislation and then prove the effectiveness.’
What the chairs are saying
‘I am not in favour of the idea of quotas for women on boards, but I think more transparency on the issue is welcome.’
Heather Ridout, Chief Executive, Australian Industry Group.
What Women on Boards is saying
‘ASX 200 companies should set targets to achieve a minimum of 25 percent female directors by 2012. If they cannot do this, then we will actively start lobbying for quotas.’
Claire Braund, Executive Director, Women on Boards lobby group, and co-founder of The Regional Institute.
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