“[T]he numbers of women experiencing family violence, and the low numbers of women getting through to leadership roles in business.” These are the two reasons Kate Jenkins gave for taking the role as Australia’s next Sex Discrimination Commissioner prior to her appointment last month. In light of this, we look at female representation on Australia’s boards and what is being done to address the continued gender imbalance.
While individuals, industry bodies and regulators are engaged in a process that has facilitated a number of reforms and initiatives, when more CEOs and chairs of ASX200 companies are called Peter than there are women, the question remains; “is enough being done?”
For decades now women have been entering the workforce at similar rates as men and yet the rate at which women are reaching senior corporate positions remains low. Women comprise 21.9% of directors on ASX200 boards or put another way almost 80% of ASX200 boards are men. While this is a clear improvement from 2009 when only 8% of directors were women, there are still a total of 24 boards in the ASX200 which have no women at all.
In 2015 women comprised 34% of new appointments to ASX200 boards improving from 8% in 2008.
Current Australian regulation
In 2010, the ASX Governance Council Principles and Recommendations were updated to require all ASX listed companies to make a number of disclosures with respect to gender diversity policies including requirements to:
- adopt and publicly disclose a diversity policy;
- establish measurable objectives for achieving gender diversity and assess annually both the objectives and progress toward achieving them;
- disclose in each annual report the proportion of women employees in the whole organisation, in senior executive positions, and on the board; and
- disclose the mix of skills and diversity the board is looking to achieve among members.
Compliance with the recommendations is not mandatory, rather the ASX Governance Principles work on an ‘if not why not’ basis requiring companies that choose not to comply provide an explanation in each annual report as to why.
Should a board quota be adopted?
Since the recommendations were introduced there has been significant discussion in Australia as to whether Australia should adopt a more rigid set of regulations such as compulsory board quotas to achieve gender diversity.
In June last year, Independent Senator Nick Xenophon tabled The Australian Government Boards (Gender Balanced Representation) Bill 2015 (Cth) which if passed would have required Commonwealth officials making appointments to Government boards to ensure that each board is made up of at least 40% men and 40% women. No penalty would arise for non-compliance with accountability enforced through public disclosure.
The Xenophon bill will not become legislation following its rejection in November 2015 by the Senate review committee. The Committee expressed the view that legislative quota was not necessary, citing other initiatives such as the Boardlinks and the Board Diversity Scholarship which the Government supports in improving the representation of women on Government boards.
Board quotas and sex discrimination
In Australia, board quotas might constitute unlawful discrimination unless they are designed to achieve gender diversity. In 1995, the Sex Discrimination Act 1984 (Cth) was amended to include a “special measures” exception to the prohibitions on discrimination, which sanctions positive discrimination where the purpose is to achieve substantive equality.
In order for a quota to meet the exception as a special measure, the person proposing the quota must be acting reasonably in assessing the need for the quota (including the feasibility of overcoming/mitigating the purported disadvantage) and the quota must only be in place for so long as it is required to achieve its objective of substantive equality.
If it had been implemented, the Xenophon bill would have been a “special measure” and therefore not a form of discrimination prohibited by the Sex Discrimination Act.
Response from corporate Australia
Corporate Australia appears to be reluctant to impose strict quotas to achieve gender diversity. While acknowledging that progress to achieving gender diversity has been “far from” satisfactory, Mr Elmer Funke Kupper, former Chief Executive of the ASX posits that a “tick the box” exercise of a quota “is unlikely to change the fundamental issues that prevent the advancement of women into leadership positions.” Mr Kupper suggests that the focus should be on “line management” rather than boards.
“While there are voices in business calling for quotas, in general the business community is not in favour of setting quotas for board representation in companies.”Mr Elmer Funke Kupper, former Chief Executive of the ASX,
Despite the ongoing debate as to what measures are appropriate to achieve gender diversity on boards and how such measures might be implemented, there is undoubtedly increasing momentum to improve gender equality and diversity on boards and in the senior ranks of companies.
The Australian Institute of Company Directors (AICD) has appealed to Australian companies to set a target of 30% women directors by 2018, coined the “30% Club”. According to John Brogden, Chief Executive of the AICD, research shows that 30% of a 10-member board, is the “tipping point”, at which "the voices of the minority group begin to be heard rather than being simply represented and where, therefore, the increased capacity for diversity to deliver value begins to be optimised.”
The Norwegian experience
In 2005 Norway became the first jurisdiction in the world to implement a strict gender diversity quota for public companies. The Norwegian quota requires that each gender be represented by at least 40% of a public company’s directors.
The Norwegian quota has serious teeth. The ultimate consequence for non-compliance is the forced dissolution of the company. However, to date, no company has been dissolved for failing to meet the gender quota.
The legislation provided public companies until 1 January 2008 to meet the quota requirements. Since the legislation was adopted, the percentage of female directors on public limited company boards jumped from approximately 12% (in 2005) to approximately 41% (in 2015). However, the quota appears to have had a very limited “contagion” effect with no female CEOs among the country’s 60 largest companies in 2015.
The global perspective
Since 2005, a number of countries have followed Norway’s lead and adopted board quotas with differing thresholds and commencement dates. A summary of the quotas that have been adopted in key countries is set out in the table below. The list is relatively short and the adoption of board quotas appears to be slowing following a wave of new quotas being adopted in 2011.
Click here to view the table.
Where to from here?
It is clear there is no one measure which will achieve gender diversity in Australia’s business sector. As we can observe from the number of female CEOs in ASX50 (there are currently three) looking to company boards alone cannot fix the problem. Even if a quota were adopted, for it to work effectively there needs to be sufficient female talent at the senior management level and achieving this would require a multi-faceted approach.