Shifting boardrooms: New report puts board diversity under the spotlight

A major new report has found that Australia’s boardrooms are being transformed with greater gender balance for some organisations at board level, growing levels of qualifications among newer board directors, and an increasing awareness that a more diverse board is good for business.

But as the report confirms, there is also plenty of room for improvement.

The Board Diversity Index, released today by Watermark Search International and the Governance Institute of Australia, examines six years of data and puts five key areas of corporate diversity under a magnifying glass.

With 296 ASX companies surveyed, the report puts five key areas of board diversity under the spotlight:

• Gender diversity
• Cultural diversity
• Skills diversity
• Age diversity, and
• Tenure.

The report found that there have been some improvements in gender balance on boards with 561 of the 2004 board seats on the ASX300 now filled by women (28 more than last year). This has been accompanied by a rise in the number of boards that have 50 per cent or more women on their board (20 companies, up from 16 last year). And the number of boards being chaired by women has grown for the third year in a row.

However, many companies joining the ASX in 2020 were found to have less gender balance on their boards: “For the 30 companies new to the ASX300 in 2020 the overall picture, in terms of gender balance, definitely lowers the average of the companies already part of the ASX300. The new players brought with them 156 board seats and only 24 of those were filled by women,” the report states.

Governance Institute CEO Megan Motto said she is delighted to partner with Watermark Search for the Board Diversity Index, saying the report provides important insights into diversity in the corporate arena, highlighting positive developments but also showing where there is still room for improvement.

“This report provides the latest insights on how diversity is really playing out in the boardroom – and how having a diverse board can be a key factor in promoting business resilience and success, particularly as it is evident that there is increasing resistance to investing in companies with homogeneous boards,” Megan said.

Watermark Search International Managing Partner, David Evans said: “With six years of data, this report is the most comprehensive in analysing diversity in all its forms. We typically see organisations embrace diversity in later stages of their evolution, and those organisations are proving to be able to adapt to challenges, consider more alternatives and ultimately make better decisions.”

While some areas of board diversity are transforming for the better, other areas are seeing minimal positive change, or even taking a step backwards, the report found.

Cultural diversity is an area with room for significant improvement with the latest figures showing that in ASX300 companies, the number of board directors from non-Anglo-Celtic cultural backgrounds decreased from 5.4 per cent to 5 per cent, and the percentage of board directors from anywhere outside Australia has decreased from 30.4 per cent to 29.3 per cent.

The report states: “The representation of directors with an Asian cultural background has reduced this year and their place seems to have been taken by directors from the USA, Canada and New Zealand. The numbers are not that large, but it is a disappointing shift from a board diversity perspective.”

Skills diversity is also examined, with the report finding that newer board directors are better qualified academically and have more governance training than those already in the boardroom.

The report also found that women joining the ASX are overall better qualified and better prepared from both a governance and academic perspective. For example, an analysis on the qualifications of ASX300 board members and directors found that four per cent of men had PhDs, while seven per cent of women had PhDs. It found 17 per cent of men had an MBA, while 22 per cent of women had an MBA. And governance qualifications are held by 60 per cent of women and 41 per cent of men.

Age diversity is also examined in the Survey with the report finding among respondents that the average age of all directors is 60.6 years, and 61.5 for males and 57.9 for women with little variation across the ASX300.

The average age of company directors is likely to increase due to an overall healthier population, a receding retirement age, and a growing female cohort ‘settling’ into their relatively new (relative to the men that is) board portfolios.

Click here for the full Board Diversity Index report.