Investors continue the push on gender diversity
Both AMP Capital and Blackrock recently issued report cards on how the boards of ASX companies are faring in terms of progress on gender diversity.
Both reports cover the positive signs of progress at board level but do not make any claims for complacency. Because while both report on positive signs at board level in terms of female representation, the commensurate lack of progress at management level and ongoing pay inequity sets off alarm bells for investors as to how seriously corporate leaders are about tackling gender diversity as sound business sense and good talent management.
In its report, Achieving Gender Diversity in Australia: the Ugly, the Bad and the Good, Blackrock assesses the ASX200 list and reports that since 2011, the percentage of female non-executive directors on these boards has increased from 14.4 per cent to 22.3 per cent, while the number of boards with no women has decreased from 871 to 35 in the same period. Hearteningly, only four ASX100 boards and two ASX 50 boards have no female directors, and every company in the ASX 20 has at least one female director. Blackrock’s report even goes on to state that the aim of filling 30 per cent of board positions by women is achievable — at least for larger companies during 2017.
AMP Capital, meanwhile, in Corporate Governance Report: ESG insights & proxy voting notes that 17.9 per cent of board seats in the companies in which it invests were filled by women, up from 7.7 per cent in 2010. And the number of companies with two or more women directors has now increased by one-third to 38 per cent of companies measured by AMP — a significant increase from the 28 per cent it reported in 2014.
But even at board level, work remains to be done. While AMP’s report notes the significant improvement from five years ago where 60 per cent of companies in AMP Capital’s portfolio had no female representation on their boards, it also states that almost one-third of Australian companies it invests in still have no women directors. And currently only 10 per cent of the 252 Australian companies held by AMP Capital meet the 30 per cent target.
And Blackrock notes that 18 per cent of women on boards hold multiple board positions, compared to only 11 per cent of men, which suggests that the number of individual women holding board positions isn’t actually increasing as fast as the statistics suggest. Blackrock’s concern is twofold — the same women are taking on more board positions, and the reason for this is that women are still seriously under-represented at the key management personnel (KMP) (and executive director) level in ASX 200 companies.
Given that executive ranks are the pipeline for future director appointments, the lack of attention by ASX200 companies to improving gender diversity in executive ranks means both that companies are not managing talent well and also there will not be an adequate pool of female senior executives to replace women retiring from boards as part of normal succession planning.
What do executive ranks look like in terms of gender diversity? The Blackrock report states that the proportion of women KMPs in ASX 200 companies has increased from 8 per cent to 13 per cent between 2011 and 2014. Yet in the same period, the proportion of female directors reached over 22 per cent and is on track to reach 30 per cent in the next few years. The AMP Capital report canvasses the data released by the Workplace Gender Equality Agency on companies with more than 100 employees and reports that ‘while women comprise 39.8 per cent of ‘other managers’, their representation falls to 26.1 per cent of KMP and just 17.3 per cent of CEOs. One-third (33.5 per cent) of employers have no female KMPs, and 31.3 per cent of employers have no ‘other executives/general managers’ who are women. At the top three layers of the management hierarchy, women comprise just 26.2 per cent.’
The Blackrock report does not pull any punches. ‘The low representation of women at KMP level is also a reflection of poor talent management given that for a long period of time the majority of graduates from Australian universities have been women. If companies are to ‘win’ the war on talent the issue of talent management must be given priority.’
Pay equity is another problematic issue, with women continuing to be paid less than men when performing the same roles. Both reports hone in on the point that pay inequity can act as a barrier to the advancement of women into senior executive roles and that sound remuneration policies promote the attraction, retention and reward of key talent.
Blackrock references WGEA 2014 data, showing that the largest gender pay gap is at KMP level — 28.9 per cent (based on full-time total remuneration) — closely followed by other executives/general managers at 27.5 per cent.
Gender diversity is just one of the sustainability drivers considered by institutional investors, who canvass a range of environmental, social and governance issued that could affect the value of the investment. Gender diversity is a proxy for how well boards are effectively questioning and challenging ideas, management and the business model. Their interest is not in gender diversity as a ‘social’ issue but as a business issue.
And if companies don’t meet the challenge? AMP Capital bluntly states: ‘…if the rate of improvement slows before considerable ground is won the introduction of prescriptive quotas may well be necessary.’