Mixing it up

  • Date:01 Sep 2015
  • Type:Company Director Magazine

Do boards need quotas or targets to improve gender diversity? Three industry figures share their views.

Narelle Hooper
Director,
The Ethics Centre

Targets or quotas? Both are specific, time bound, measurable objectives. Both are designed to get us to focus on achieving certain outcomes. One we routinely use to run our businesses. The other scares us. We frequently hear people say: “I’m for targets but I’m against quotas.” Yet there’s a follow up question you need to ask. What kind of targets and are there consequences if you miss them?

Are they “nice to haves” or “must haves”? Government-mandated gender quotas to address a market failure, like those introduced in Germany in March, imply compulsion and consequences. That’s a must have. Are voluntary, or “aspirational” targets a “nice to have” or a “must have”?

Do the targets have credibility in the organisation because they’re connected to your business strategy? Are they disclosed, tracked with rigour and tied to people’s KPIs so that they are held accountable? That makes them a must have. “When something is on your scorecard, you’d be rather silly not to take it seriously” is how Westpac CEO Brian Hartzer put it. If not they’ll lack credibility.

Yet it’s a bit of a strawman or woman, this debate. It distracts us from the performance logic that sits behind gender diversity.  There is now substantial body of research that underpins four main ways that diversity boosts organisational success. It creates better financial performance and decision-making, gets you closer to your customer; increases your capacity to innovate and leverages all available talent.

Credit Suisse’s 2014 study of 3,000 companies in 20 countries points to higher ROE, stock performance and dividend payout ratios for companies with more women at the top.

In 2015, we do not need to rely on a business case for leadership that reflects our broader society. But who wouldn’t want to start getting their head around such compelling data?

A first step is understanding the targets versus quotas argument. A second requires a deeper reflection on the notion of merit and how it is shaped by our unconscious mental models and assumptions. In the interests of shareholders you need to start bridging the diversity knowing-doing gap.

Louise Petschler
General manager, advocacy,
Australian Institute of Company Directors

There is an undeniable case for including more women on Australian boards. This is not just “the right thing to do” – it is critical to ensuring that our governance structures draw on the broadest range of talent available, bring a diversity of views and experience to the table and better reflect our contemporary and forward-looking nation.

The AICD is passionate in this belief. It recently launched an initiative to increase the number of women on ASX200 boards to 30 per cent and has pledged support to the Australian chapter of the 30% Club. 

We are confident that the clear benefits of increased diversity, continued investor and stakeholder focus and the engagement of boards and directors will see significant improvements in the gender diversity of boards by 2018.

It is understandable that frustration with the pace of change leads many to support mandated targets or quotas.  The AICD believes the goal of diversity can and will be achieved without requiring legislation that mandates numbers or percentages.  Experience suggests that such rules do not necessarily generate comprehensive change. In Norway, for example, while quotas increased the number of women directors on the boards of listed and public companies, they did not boost the number of female chairs, chief executive officers or women in the executive pipeline. 

Quotas can focus attention on reaching the required figure without providing any incentive to exceed it, and not encourage genuine engagement with the structural factors and biases that drive our inadequate statistics. The AICD believes that mandating unduly prescriptive standards of corporate governance risks creating a “one size fits all” approach that constrains boards in the proper exercise of their significant obligations.

Organisations must be encouraged to develop strategies to increase the diversity 
of their boards and organisations. This requires consideration of organisational culture, including diversity beyond gender. Such cultural change will ensure that improved diversity is the result of a sustainable and genuine approach rather than a compliance focus.  

Jacquie Petrusma
Minister for Women, Tasmania

The Tasmanian government believes equal participation by all members of society is critical to reducing disadvantage and enhancing economic growth. Management and leadership are still commonly seen as masculine roles. Consciously or unconsciously, men are considered to be more suitable for appointment than women, even when women can demonstrate relevant qualifications, experience and skills. 

Bias against women works against the promotion and progress of women to positions of leadership. And it is not just men who think men are more suited to appointment than women – women can also share the belief that management and leadership are masculine roles. Consequently, men are disproportionately chosen ahead of women for leadership roles. Changing this bias means changing cemented patterns of thought – for both men and women. Research has shown that companies with a higher proportion of women in management are the companies that have the best performance and competitive edge as they are able to draw from a broader pool of talent as women bring different perspectives, new ideas and different ways of thinking.

Gender equity on boards has also been shown to improve the financial bottom line, business integrity and the corporate image. By having more women in leadership roles, we begin to change attitudes across the board with a flow on to all aspects of society.

The Tasmanian government is leading by example by committing to achieving 50 per cent representation of women on boards and committees by July 2020. For 16 years now, the percentage of women on Tasmanian government boards and committees has stayed between 33 to 35 per cent.

The Women on Boards Strategy 2015 to 2020, our five-year plan for improving gender equity, will make this target possible through promoting leadership and training opportunities. The government is also partnering with the AICD in implementing this strategy and will contribute up to $50,000 a year for three years towards the cost of scholarships for women to undertake training through the AICD.