It is terrific to see that women are gaining seats on company boards. In Australia, women now occupy 32.1 per cent of board positions among ASX 200 companies. While small compared to the proportion of seats held by men, it shows significant progress in the five years since the Australian Institute of Company Directors set a voluntary target of 30 per cent . At the time, women made up only 21 per cent.
In the US too, there has been strong progress. Today, women have a seat on all S&P 500 company boards, and they constitute 45 per cent of all new directors joining boards at companies of all sizes.
Women are now gaining seats on company boards. Why is that not enough?
However, being in the room is no longer enough: only by gaining access to leadership positions can women properly influence board agenda and ensure that their perspectives are considered.
Currently, women account for less than 20 per cent of board committee chairs globally according to Deloitte. Another study found that women are less likely than men to serve as board chairs or lead independent directors, even after controlling for the relatively shorter tenures of female directors compared to their male counterparts.
Why are some companies slow to change?
Boards slow to change are quick to point to logistical hurdles as an excuse for their inaction. They tell us competition for talent is fierce and top female candidates are difficult to recruit.
The reality is that some companies are simply too limited in their outlook. Instead of relying on the status quo to fill open seats, they can engage outside recruiting firms with a track record of identifying top female talent. They need to think more expansively about what skills they need on the board. A new board member need not be a current or former chief executive. Indeed, a CFO, CMO, chief human resources office, or business unit head can bring valuable experience to the boardroom.
What can companies do to improve gender diversity in the boardroom?
Companies whose boards are truly diverse will engender additional corporate and societal benefits, including happier employees and better engagement with environmental, social and governance (ESG) considerations.
Companies should look to governance best practices and conduct annual board evaluations to review committee assignments and make sure they are rotating committee chair roles as a way to ensure that more members of the board, including women, can take on leadership roles. Ongoing board training can also help board members, regardless of their background, learn and refresh skills necessary for effective board leadership.
How can the investment industry play a part?
Boards need diverse perspectives to avoid groupthink, ensure understanding of the diverse markets in which they operate, capitalize on the fast-moving trends reshaping the global economy and retain and attract employee talent. Large institutional investors have a duty to press for greater board leadership opportunities for women – and not just for the sake of gender equality.
But it isn’t just the large institution that holds a responsibility – managers must also take action to increase leadership opportunities for women and that starts with engagement.
Typically, smaller and mid-size companies are more vulnerable to diversity challenges. Among ASX 201-300 companies, only 22 per cent of directors are female. Yet having gender diversity significantly strengthens operational effectiveness. Those in the group that do have at least 30 per cent women on their boards are more likely to have seen a market capitalisation increase in the last 12 months, KPMG reported in its recent report Building Gender Diversity on ASX 300 Boards.
By initiating a dialogue with their leadership we can create real change either in female appointments or with a commitment to diversity. If leadership is not responsive, take concrete action and use the power of the proxy to vote against leadership without diversity.
It’s encouraging that so many more Australian companies have joined the 30 per cent, however it’s critical that we keep the pressure on companies to continuously improve gender diversity. Thirty per cent should be seen as the minimum, and diversity must reach all the way to the top.
Every AGM season offers another opportunity for shareholders to deliver the message that diverse boards with diverse leaders deliver better results for their companies. Let’s keep pushing for boardroom equality.
Amy O'Brien, global head of responsible investing, Nuveen