Board diversity: Who’s missing at your table?

(Sponsored article) Australia has progressed remarkably in recent years having achieved the milestone of no all-male boards among the ASX 200. A notable achievement considering there are no mandated quotas. But is it enough?

Head of Board Engagement at Nasdaq Governance Solutions, Byron Loflin had the opportunity to unpack this with Chair of the 30% Club Australia and Macquarie Group Non-executive director, Nicola Wakefield-Evans and GM Inclusion & Social Policy at the AFL, Tanya Hosch during Governance Institute of Australia’s National Conference 2021.

Key topics and takeaways from their discussion include:

Representation

Much of the focus for boards has been on gender diversity. However, given Australia’s population is 50.2% female, boards are still far from gender parity which suggests there is more work to do.

Boards also have work to do on equitable ethnic representation and understanding the benefits inherent in those diverse perspectives and experiences. Strategy should be driven, at least in part, by the insights of end customers and company stakeholders (in significant proportion, these are women).

Expectations

‘Diversity’ is broad and includes gender, ethnicity, experience, age, skills, background, and thought. Regulators’, investors’, and society’s expectations of listed companies are growing, and those pressing for diversity understand that it may lead to better outcomes, returns, and performance.

ASX Corporate Governance Principles set expectations for gender diversity reporting and call for 30% female representation on ASX 300 boards. In addition, Blackrock and State Streethave pushed for more transparent diversity disclosure, recognising the positive impacts of diverse groups on decision making, risk oversight and innovation.

From diversity to diversity, equity, and inclusion

In recent years we have moved away from the ‘era of management’ and into the ‘era of corporate governance’ where diversity, equity, and inclusion, purpose, and ESG are integral to a company.

However, ‘diversity’ alone may be insufficient. Broadening the scope to ‘diversity, equity and inclusion’ may help. It is not enough to have directors who simply look different; these diverse voices and views must be heard and championed. “How do we view the value of diversity?” and “How do we harness that value?” are questions every board should try to answer.

It boils down to culture. Board chairs demonstrating courageous leadership contribute to an open culture where diverse views can be embraced. It’s important for directors to make an effort to connect with fellow directors and encourage their contributions. Moreover, directors must understand their own purpose and value, asking, “Am I bringing all of myself to the table, and if not, why not?”

Succession planning and refreshment

Succession planning and refreshment are critical to evolving the modern, diverse boardroom.

Consider taking these steps as part of the board succession and refreshment process:

• Engage in consistent periodic reviews of the board’s capabilities, identify gaps, and ensure alignment with the end customer and the company’s purpose.
• Broaden the search for potential talent, including diverse director candidates with experiences that complement the board’s existing skillsets.
• Have honest, open conversations about term limits and timeframes for stepping down from the director role.

While there is still more work that can be done, companies are certainly on the way to achieving board diversity.

Further Information

Nasdaq Governance Solutionsis a Gold Sponsor of Governance Institute of Australia’s National Conference 2021.

Nasdaq Governance Solutions supports more than 4000 organisations worldwide with innovative corporate governance solutions. Ranging from board portal technology to board engagement services to expert insights, these solutions are designed to help boards, leadership teams, corporate secretaries, and general counsel optimise their collaboration activities and drive governance excellence.

How effective is your board? Schedule a free 20-minute governance consultation here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

© 2021 Nasdaq, Inc. The Nasdaq logo and the Nasdaq ‘ribbon’ logo are the registered and unregistered trademarks, or service marks, of Nasdaq, Inc. in the U.S. and other countries. All rights reserved. This communication and the content found by following any link herein are being provided to you by Nasdaq Governance Solutions, a business of Nasdaq, Inc. and certain of its subsidiaries (collectively, “Nasdaq”), for informational purposes only. Nothing herein shall constitute a recommendation, solicitation, invitation, inducement, promotion, or offer for the purchase or sale of any investment product, nor shall this material be construed in any way as investment, legal, or tax advice, or as a recommendation, reference, or endorsement by Nasdaq. Nasdaq makes no representation or warranty with respect to this communication or such content and expressly disclaims any implied warranty under law. At the time of publication, the information herein was believed to be accurate, however, such information is subject to change without notice. This information is not directed or intended for distribution to, or use by, any citizen or resident of, or otherwise located in, any jurisdiction where such distribution or use would be contrary to any law or regulation or which would subject Nasdaq to any registration or licensing requirements or any other liability within such jurisdiction. By reviewing this material, you acknowledge that neither Nasdaq nor any of its third-party providers shall under any circumstance be liable for any lost profits or lost opportunity, direct, indirect, special, consequential, incidental, or punitive damages whatsoever, even if Nasdaq or its third-party providers have been advised of the possibility of such damages.