Governance News 27 July 2022

The Australian Institute of Company Directors (AICD) has released its latest quarterly update tracking the progress of ASX 300 boards against the (voluntary)30% female representation target. The headline message is that though the number of women on boards continues to increase, and the aggregate 30% milestone for ASX 201-300 boards has now been reached, the need for continued focus to ensure women's participation on all boards remains. Some Key Takeaways The aggregate 30% milestone has been achieved The report found that as at 31 May 2022: ▪ Women held over 30% of all ASX 300 board seats (in aggregate), with the proportion of female directors highest in larger companies. According to the report women accounted for: – 33.6% of ASX 300 board seats – 34.7% of ASX 200 board seats – 36.4% of ASX 100 board seats – 37.8% of ASX 50 board seats – 38.5% of ASX 20 board seats Not every board has met it… ▪ Drilling down to individual company level,the report found that: – 118 ASX 300 boards are yet to meet the 30% female board representation target. Seven of these boards include no women and 46 include only one woman. – 63 ASX 200 boards have yet to meet the 30% target, with one including zero women and 16 including only one woman. According to the AICD, this is the first time since August 2021 that the ASX 200 has included an all-male board. – 21 ASX 100 boards have yet to meet the 30% target – Just four ASX 50 boards and two ASX 20 boards have yet to meet the 30% target. Women remain underrepresented in Chair roles ▪ The report found that the number of women holding board Chair roles remains low: 19 ASX 200 Chairs are women, increasing to 30 across the ASX 300. The overall increase in the number of women on boards is being driven by an uptick in female NED appointments ▪ The report found that 49% of all non-executive directors (NEDs) appointed over the past 12 months were first time ASX 300 directors, with women accounting for 50% of this new NED cohort. 53% of women non-executive directors (NEDs) appointed in the past year are first time ASX 300 directors. ▪ In contrast, the proportion of women appointed to ASX 300 executive director roles over the past twelve months remains very low at 7.5%. The report attributes this to 'the stark gender imbalance in existing executive ranks of ASX 300 companies'. The AICD has reiterated its support for boards adopting a 40:40:20 target for board gender diversity as 'good practice' and has urged companies to 'use every appointment as an opportunity to ensure diversity across all levels of leadership'. [Sources: AICD media release 22/07/2022; Gender Diversity Progress Report March 2022 to May 2022] UQ researchers say women are not 'empowered'by legislated diversity quotas The University of Queensland (UQ) has released a statement briefly outlining the findings of a study by UQ researchers into Chairs' perceptions of the impact that including women on boards has on board dynamics.  Governance News | Weekly wrap up of key financial services, governance, regulatory, risk and ESG developments. Disclaimer: This update does not constitute legal advice and is not to be relied upon for any purposes MinterEllison | 5 ME_183543315_1 The study found, based on interviews with 45 (mostly male) ASX listed company Chairs, that most Chairs had 'very positive' perceptions of the 'overall influence of female board members'. More particularly,the inclusion of women was found to have five positive benefits: 1) enhanced debate; 2) challenging views; 3) providing clarity and decisiveness; 4) raising levels of professionalism,and 5) enhancing behavioural norms. In sum, Chairs appreciate that diverse points of view lead to better decision making which in turn will likely translate into stronger financial returns. Companies will only 'reap the benefits of diversity if gender is not the top criteria'? The researchers also consider the findings support the view that 'legislated "diversity" quotas are not the answer to having more empowered women on Australian boards'. The authors of the study caution against Australia following other jurisdictions in mandating minimum gender quotas for listed company boards as a means of accelerating progress pointing to the fact that this approach has not proven as effective as hoped in other jurisdictions or as effective as Australia's voluntary approach. Report co-author Associate Professor Terrance Fitzsimmons comments: 'Gender-balanced decision-making at the executive and board level undoubtedly produces better financial outcomes, but companies will only reap the benefits of diversity if gender is not the top criteria…In countries like Norway, where the government mandates that 40% of board members must be women, the projected positive outcomes haven't eventuated,and there are mixed views about the economic benefits. Quotas may actually undermine a woman's sense of self-efficacy,and if board members believe the appointment wasn't made on merit, her impact can be neutralised.' The authors of the study point to what they see as the success of Australia's voluntary approach which has seen the proportion of women on ASX 200 boards increase from 8.3% in 2009 to 34.7% in 2022 in support of their view that legislated/mandated gender quotas are unnecessary to achieve progress. Dr Fitzsimmons' view is that (mandatory) quotas should only be considered if the rate of progress 'stalls'. Dr Fitzsimmons argues that increasing the number of women CEOs and women in the executive ranks of listed entities is a more urgent issue to address. 'Organisations need to start looking through their executive ranks and working out how they can bring more women into executive and CEO roles…It means getting more women into operational roles, addressing the division of domestic labour and gender role stereotypes and introducing universal free childcare'. [Sources: UQ media release 25/07/2022; Full text study: Fitzsimmons TW, Callan VJ. Managing gender diversity and board dynamics: The role of male chairpersons of large listed firms. Australian Journal of Management. 2022;47(3):454-473. doi:10.1177/03128962211066536] ISS finds the racial/ethnic diversity of US boards has accelerated over the past two years Analysis by Institutional Shareholder Services (ISS) has found that there has been a strong increase in the representation of racially/ethnically diverse directors on the boards of US companies in the two years since the murder of George Floyd – though this is not to say that boards are generally reflective of the diversity of their customer base