Boardroom diversity gains momentum

While more still needs to be done, John H C Colvin is heartened by the solid progress made in boosting gender diversity on Australia’s boards.

It’s difficult to rebut the argument that diversity of ideas and skills is crucial to the success of any board. More than one academic study backs the common sense view that an organisation which welcomes input from people of different backgrounds is most likely to make independent and well-informed business decisions.

Gender diversity is one area that has recently captured media headlines, but a truly diverse board will reflect not just the attributes and personal qualities required to be a successful director. It will also reflect the cultural, economic and other societal differences that are apparent in any operating environment.

Diversity on a board can enrich debate, foster creativity, broaden perspectives and limit the danger of “group think” that is inherent when a group of individuals from too similar backgrounds dominates a board. A diverse board can also improve corporate performance and shareholder returns. Indeed, a 2001 study of Fortune 500 companies found those with a better record of appointing women as executives or directors were more profitable than others. Subsequent research has found the same thing time and time again – not just in the US, but also in Spain, France, the UK, Denmark and numerous other countries.

While the business case for board diversity is obvious, the real challenge is to find ways to achieve it that will deliver tangible and long-lasting results. I am proud to say that Company Directors has been a leader in helping increase the number of women on boards.

We have developed practical measures that have helped drive a more than doubling in the number of female directors on the boards of S&P/ASX 200 companies in the past four years – from 8.3 per cent to 17.6 per cent.

The proof of our success lies not just in these numbers. It’s also reflected in the take up of a number of our programs, including the scholarships we offer for women to undertake our Company Directors Course or Mastering the Boardroom course. The scholarship program was launched in 2010 and has so far helped two groups of 70 women complete our courses. We are hopeful that the program will be extended to allow even more women to benefit from the education that we can provide.

The success of our initiatives to improve the gender imbalance on boards is evidence that hard quotas for female representation on boards are unnecessary.

In fact, quotas run the real risk of being counterproductive. They also decrease the focus on the actual structural changes that are required to reach the end goal of greater diversity.

Our scholarship program is just one of several steps we have taken to remedy structural impediments since we announced our Board Diversity Initiative in 2009.

Back then, we wrote to all chairmen of ASX 200 companies seeking their support in achieving greater representation for women on boards and in senior executive ranks. We called on companies and boards to establish a diversity policy in which clear goals, and measurable milestones towards achieving these goals, are articulated, consistent with the particular requirements of their organisations, nature of the business and its stage of development. Since then, we have taken a leadership role in the development of the ASX Corporate Governance Principles and Recommendations on Diversity and have established a dedicated board diversity website that publishes the only real time diversity statistics on ASX 200 female board appointments.

In addition, our Chairman’s Mentoring Program is now in its third year and involves ASX 200 chairmen and senior directors mentoring highly talented female directors. It is notable that over a quarter of the female director appointments in the four years to January 1 were past or current mentee participants in this program. I was also thrilled that I did not receive a single rejection when I first approached chairmen and senior directors to ask them to participate in this program.

These are some examples of the work we have done. There are many more. There is no doubt that improvement is occurring and that our efforts, and those of other organisations, are helping to achieve that. More needs to be done, but the progress made so far is very heartening. The number of ASX 200 boards without any female directors more than halved from 87 boards in June 2010 to 42 boards by early this year.

In addition, the percentage of females comprising new director appointments to ASX 200 boards has risen from five per cent in the calendar year 2009 to an average   22 per cent for the year ending 2013. And, the latest figures show that females have accounted for 39 per cent of new appointments to ASX 200 boards so far in 2014.

Today’s rapidly changing world requires the board to be more nimble than ever to cope with the challenges thrown up, including the enormous technological changes that are transforming business and issues such as the growing economic importance of nations like China. Achieving and maintaining true diversity on their board will help organisations retain the edge that is necessary to not just survive, but also to thrive in these circumstances.