AICD Takes Action On Board Diversity

  • Date:24 Nov 2009
  • Type:Media & Communications: Media Release

The Australian Institute of Company Directors (AICD) advocates diversity on boards and believes companies should adopt an open approach that aims to select the best possible directors from a diverse range of candidates.

Directors should be chosen from a broadly-based candidate pool, possessing appropriate individual skills, varied experience and sound judgement but also reflecting diversity of gender, age, experience, relationships and background. Diversity is a competitive advantage bringing real value, adding to the collective skills and experience of the board and allowing board refreshment with changing company needs.

However, boards need to be more proactive in taking advantage of the value of diversity. In particular, AICD believes that the current proportion of women on major company boards in Australia – 8.3 per cent of ASX 200 company directors according to the latest EOWA data – is not good enough and needs to be increased.

AICD also believes it should take a leadership role in addressing this issue and is today announcing a range of new measures to help focus on the value of a diverse board and, in particular, to increase the pool of women available for board positions. The aim of the initiative is to achieve a greater representation of women on boards and in senior executive positions. It will have an impact both in the short-term and in the longer term by addressing the so-called “pipeline problem”, the current obstacles to women gaining positions in senior management ranks that could prepare them for future directorship roles.

These measures include:
• New recommendations for boards to adopt, and report on, diversity policies and goals for the board and senior management;
• Recommendations for greater transparency in board selection processes and reporting;
• A new AICD mentoring program bringing together senior listed company chairmen and emerging women directors;
• A new AICD scholarship program and other educational initiatives;
• Enhanced AICD database and information services for current and aspiring women directors;
• Additional briefings, seminars and other events tailored to the needs of aspiring women directors;
• A new AICD publication providing guidance for boards and search professionals on board appointments that highlights the advantages of diversity and widening the candidate pool.

“AICD is uniquely placed as a facilitator of diversity, using its networks and contacts to offer training and support to women director aspirants, to raise awareness of how boards and mentors can make a difference and to use its database to steer boards toward the talent pool of women directors. It can also play a role in rewarding and recognising success,” said AICD Chairman, Richard Lee FAICD.

Diversity goals
AICD believes that companies should set measurable milestones towards achieving these diversity goals. These milestones will vary from company to company and will reflect the particular needs of each board.

It is recommending that listed company boards identify diversity goals over a given timeframe and report on progress (for example, in annual reports) in regard to both board appointments and executive management. This reporting would be on a “disclose or explain” basis.

AICD is also recommending that companies publish annual statistics on the diversity profile of their boards and executive management. These statistics should include a breakdown of the type and seniority of management roles undertaken by women and where they fit into the corporate executive structure, to focus attention on this issue.

There is a wide range of diversity goals which boards could consider, which may potentially include:
• A review of company policies designed to achieve diversity, including recruitment practices and talent management to address inherent bias, implementation of family-friendly policies and flexible work options and intervention programs to foster the career development of women employees;
• Strategies to address the loss of talented employees, especially women, from middle management, particularly as a result of competing demands between work and family obligations;
• Strategies for the re-introduction of employees who take time out of the workplace to meet family obligations in a way that minimises, as far as possible, career disruption;
• Boards setting explicit KPIs for CEOs to foster the development of women in management;
• Embedding diversity goals in succession planning for the board and senior management;
• The publication of the desired diversity profile and the plan adopted by the board to achieve that profile; and
• Measurable objectives for the number of women on the board and in senior management, reflecting the individual circumstances of their companies.

In developing these goals, boards should determine the diversity profile that meets the particular requirements of the company. That profile is likely to differ depending on the nature of the business and the parts of the world in which it operates. The profile will also need to reflect the skill and experience set that the board has determined is necessary to effectively oversee its business. Effective recruitment strategies will need to be identified to attract people who reflect the desired profile.

“AICD emphasises that boards are best placed to decide on the appropriate diversity goals for their companies, the appropriate timeframe for implementing those goals and whether they choose to disclose this or explain to stakeholders why they have not,” AICD Chief Executive Officer, John Colvin FAICD said.

“These goals and timeframes would be determined by individual companies according to their own circumstances and would not be imposed by government, the ASX, AICD or any other external body on a rigid, ‘one size fits all’, basis."

“This is certainly not a quota, which is wrong in principle, has difficulties in practice, is tokenistic and is counterproductive to the end goal. AICD remains opposed to quotas as a way of increasing board diversity.”

Board reporting
AICD will also recommend comprehensive board reporting to shareholders on the board selection and nomination process, including information on the candidates for election. This could include:
• The board’s diversity policy;
• A statement by the board of the skills and experience it is seeking for any new appointment;
• The steps taken to ensure that a range of candidates was considered;
• Whether professional intermediaries were used to identify or assess candidates;
• Factors taken into account in the selection process;
• A statement why a particular person was nominated by the board;
• Succession planning; and
• Making the chairman of the nomination committee available at shareholder meetings for questioning about the appointment process.

New AICD Mentoring Program
AICD will establish a mentoring program involving mentors from the ranks of senior listed company chairmen to work for one year with senior executive women, and appropriately qualified and skilled women from professional and other backgrounds, to prepare them for director responsibilities.

Chairmen who have already committed themselves to this project include:
• Don Argus AO FAICD, Chairman of BHP Billiton Ltd;
• Graham Bradley AM FAICD, Chairman of Stockland Corporation Ltd and President of the Business Council of Australia;
• Elizabeth Bryan FAICD, Chairman of Caltex Australia Ltd and UniSuper Ltd;
• David Gonski AC FAICD(Life), Chairman of Coca-Cola Amatil and ASX Ltd;
• Richard Lee FAICD, Chairman of AICD and Salmat Ltd;
• Peter Mason AM FAICD, Chairman of AMP Ltd;
• Kevin McCann AM FAICD, Chairman of Origin Energy Ltd;
• John Schubert FAICD, Chairman of Commonwealth Bank of Australia Ltd; and
• James Strong AO FAICD, Chairman of Insurance Australia Group Ltd and Woolworths Ltd.

It is expected that these will be the first of many to become involved as the project is developed.

AICD will explore opportunities for collaboration with other bodies with an interest in this issue.

AICD director education and development
AICD will each year offer scholarships for talented women directors and emerging directors to attend the Company Directors Course and other AICD courses.

AICD is running courses in 2010 on ‘developing your director career’, some of which will be customised for women.

Improving AICD’s database
AICD’s database is being enhanced to identify and manage the profile of women directors and emerging directors. The database will allow boards and search firms to identify potential women candidates for board appointments.
Directorship Opportunities, AICD’s new online service to assist in finding board positions, includes the ability for women members to search, review and apply for advertised board positions and to receive email alerts when new opportunities are advertised.

Better website information
AICD will develop an online information directory for our website, giving details of services that are relevant to board diversity and women in particular. Relevant information would include board search firms, contacts, professional associations, and government registers of interest.

New AICD Guidelines for board selection and appointment
AICD will publish guidance for boards and search professionals for a structured selection process for board appointments that highlights the advantages of diversity. It will include suggestions for selection criteria and managing the executive search process to broaden the candidate pool. It will also include suggestions on where to look for appropriately-qualified women directors.

Diversity ‘champions’
AICD will identify and resource leading directors to champion the issue of board diversity in a public campaign and contribute as mentors for emerging women directors.
AICD ‘champions’ will be invited from the ranks of Australia’s major companies, especially company chairmen. The initiatives announced today have already been endorsed by AICD’s Chairman’s Forum, which is chaired by BHP Billiton chairman Don Argus AO FAICD and consists of chairmen of ASX 50 companies.

They have also been strongly supported by the AICD Board and Division Councils after wide ranging consultation within the organisation.

A special AICD committee, including representatives to be invited from the Office of the Sex Discrimination Commissioner and EOWA, will be established to work with our diversity champions in framing initiatives and planning events.

Action to uncover existing talent
AICD will pursue a range of initiatives to encourage boards to increase the diversity of board selection and to identify and open up new reservoirs of talent from which boards can recruit.

These include:
• Hosting discussions between directors and search professionals to broaden the field of potential candidates for board appointments, with a focus on the participation of women.
• Addressing legal, regulatory and other disincentives to board appointments. Accounting, law and consulting firms offer a supply of appropriately qualified senior women but their opportunities for board appointments are limited by concerns about exposure to director liability and conflict issues.
• Encouraging boards to take immediate action on board appointments by looking at experienced women directors on government boards, private company and SME boards, and the larger, business-oriented, not-for-profit boards where women form a higher proportion of board appointments.
• AICD will advocate the application of a wide definition of appropriate experience and skills by boards considering new appointments.

A focus on corporate organisational culture
There is also an urgent need to address the “pipeline problem”: the current obstacles to a larger stream of qualified and skilled women with potential to take up directorships coming through the senior executive ranks of our companies.

AICD will advocate an explicit board policy to enhance the career development and retention of women in management in their companies, sending a strong message about organisational culture and values to employees and other stakeholders.

AICD’s policy recommendations will include family-friendly staffing practices and flexible working arrangements.

AICD will also identify resources that boards can use to address the needs of women in their organisational culture.

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Media Contacts:
Steve Burrell, General Manager Communications and Public Affairs
(02) 8248 6627 or 0407 708 485
Juliet Chandler, Communications Advisor
(02) 8248 6624 or 0412 580 402

Australian Institute of Company Directors (AICD) provides education, information and advocacy for company directors Australia wide, with offices in each state to cater for 25,000 members. AICD members work in diverse corporations such as small-to-medium enterprises, the ASX Top 200 corporations, public sector organisations, not-for-profit companies, large private companies and smaller private family concerns.