Women are finding board seats, but not C-suite roles

A number of organisations, including investors, have been tracking whether improvements in gender diversity are taking place in boardrooms in Australia. Investors consider gender diversity to be a driver of long-term shareholder returns and this is factored into their shareholder engagement with boards on governance. BlackRock, AMP Capital and ACSI have all reported this year in this area. But the research, backed up by WGEA data, shows that while the percentage of female non-executive directors on ASX200 boards has increased over the last few years, any increase in the proportion of women in key management personnel (KMP) roles in the ASX200 has been negligible.

Blackrock’s research, released in May (Achieving Gender Diversity in Australia: The ugly, the bad and the good) has shown that since 2011, the percentage of female non-executive directors on ASX200 boards has increased from 14 per cent to 22 per cent. AMP Capital’s full-year report, issued in March, (Corporate Governance Report: ESG insights & proxy voting) showed a similar trend, with 17.9 per cent of board seats of its investee companies filled by women in 2014, up from 7.7 per cent in 2010.

However, ACSI’s report, released in October (Board Composition and Non-Executive Director Pay in ASX200 Companies) while supporting the steady, albeit very slow, increase in the numbers of female non-executive directors on boards in our largest listed companies, showed less than 20 per cent of ASX200 board seats are now held by females. Female representation stands at just under 23 per cent of directorships in the ASX100, but progress is lagging in the ASX101-200 — women hold just under 14 per cent of board positions in this group. ACSI’s research showed that 37 per cent of new director appointments in the ASX100 were women in the past 12 months, but the trend was less evident in the smaller companies of the ASX101-200, with women accounting for only 23 per cent of appointments.

There are numerous examples of programs designed to raise awareness of gender diversity at board level, and attempts to address it. These include the 30% Club (a UK initiative with a branch opening in Australia this year), as well as the Male Champions of Change Group, and initiatives such as those from AMP Capital, Blackrock, ACSI, Women on Boards and the Australian Institute of Company Directors (AICD). The majority of these aim to increase the number of women on boards, usually with a target of 30 per cent by 2017 or 2018. Despite slow progress, most are of the view that this target can be met.

However, while the trend to date in term of women being appointed to board seats in the ASX200 has been positive, there are signs that this may become static. Until the end of 2014, Blackrock showed that the number of ASX200 boards with no women decreased from 871 to 35. However, only five companies of the ASX200 companies with no women on the board appointed a female non-executive director this year.

There is no doubt that improvements have been made, but the point made in all of the reports from investors is that progress is painfully slow. Significantly, in terms of the effect on the boardrooms of corporate Australia, the majority of non-executive directors appointed to ASX200 boards are drawn from the senior management level of Australian companies. Two-thirds of director appointments  came from these ranks in 2014.

Yet data released by the Workplace Gender Equality Agency (WGEA) in February 2015 revealed that women make up a mere 13 per cent of the KMPs in ASX200 companies. Blackrock’s research supports this — its report shows that while the proportion of female non-executive directors increased from 14 per cent to 22 per cent between 2011 and 2014, the proportion of women in KMP roles in the ASX200 increased from a low eight per cent in 2011 to only 13 per cent in the same period. ACSI reported that in the ASX100 there were only seven female executives in 2014, compared to six in 2013.

With women comprising more than 50 per cent of university graduates, it is clear they are not progressing to C-suite roles. And while women may be gradually getting a seat at the boardroom table, this trend will not last if non-executive directors continue to be drawn largely from the senior management levels of Australian companies, given the insignificant shift in numbers of women progressing to KMP roles in the ASX200.

Moreover, data released in February 2015 by the WGEA showed that women in management ranks are paid less than their male peers. The largest gender pay gap was at KMP level where the gap was 28.9% (based on full-time total remuneration). Blackrock’s report notes that ‘Pay inequity can act as a barrier to the advancement of women into senior executive roles’.

AMP Capital reported that the WGEA has encouraged the investment industry to use its influence with boards and CEOs to lift the gender equality and diversity performance of listed companies. The pipeline may be in difficulty, and companies may be of the view that gender diversity at board level is the key concern of investors, but the research shows investors are clearly turning their attention to the senior management ranks, with a view to assessing if companies — and their governing bodies — are managing the pool of talent available to them well.

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