26 September 2023

Are quotas needed to reinvigorate gender diversity on boards?

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Financy* takes a deeper look at achieving gender equality on Australian boards.

Corporate Australia is losing steam when it comes to improving gender equality on listed company boards and it begs the question: are targets really working?

Whilst headline data shows that the proportion of women directors on ASX 200 and 300 boards reached an all-time high at the end of February 2022.

The rate at which progress is happening is quite frankly, SLOW!

According to the Australian Institute of Company Director’s (AICD) latest gender diversity report there were 34.5 per cent women on ASX 200 boards and 33 per cent women on ASX 300 boards.

However, there are still 66 ASX 200 boards and 127 ASX 300 boards that haven’t reached 30 per cent.

This time last year ten companies in the ASX 200 reached the 30 per cent threshold in the first three months of 2021, taking the overall number to 123.

By comparison, it has taken 12 months for that figure to rise to 134, indicating a slowing down of boards achieving the minimum 30 per cent representation threshold.

To add perspective to that, the rate of annual progress has slowed to just under 9 per cent in 2022 compared to 23 per cent in 2021 for ASX 200 boards.

For ASX 300 boards, the rate of annual progress has slowed to around 7 per cent in 2022 from 35 per cent in 2021.

In my opinion it’s time we started to look deeper at why this is happening even if that means talking about the controversial – that’s mandatory quotas rather than voluntary targets – which are losing favour.

Just last month, European Union states gave initial approval to push firms to appoint women to at least 40 per cent of non-executive director roles or 33 per cent of all board jobs by 2027.

The proposed legislation would apply to companies that are listed or have at least 250 employees, with estimates suggesting it could affect some 2,300 firms in the bloc of 450 million people.

It does not however propose strict sanctions for failing to meet the goals, beyond obliging the companies to introduce clear policies aimed at alleviating the gap.

It’s a move that we could see happen in Australia one day but I suspect only if the results offshore show evidence of the benefits to gender equality and corporate performance.

Arguably, we would also need to see government’s adopt similar standards before pressing such a change upon the private sector.

In commenting on the latest AX 200 and ASX 300 board statistics, AICD Managing Director and CEO, Angus Armour said, “It’s welcome to see the overall figure of women representation rise on the ASX 200 to 34.5 per cent, the highest level of gender diversity to date.

“But there is still work to do, with 66 boards with less than 30 per cent.

We are encouraging them to make gender diversity a priority in board renewal.”

The AICD’s most recent Director Sentiment Index indicates that boards are well aware of this challenge, with 51 per cent of directors indicating that they are seeking a greater balance of gender on their board.

30 per cent Club Australia Chair, Nicola Wakefield Evans was also encouraged by the new data, saying, “Women account for around 42 per cent of ASX 200 board appointments so far this year, which is encouraging, and we hope to see it climb to 50 per cent.

“Approaching diversity through a gender lens is an effective means of boards accessing a broader talent pool and a greater range of skills and capabilities.”

*Financy creates and publishes a variety of content on women’s money matters.

This article first appeared at financy.com.au.

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