Michael Bailey Deputy editor

Michael has been a business journalist for 12 years. He has extensive experience editing magazines covering funds management, commercial property and the travel industry. In 2011 he won a Citi Excellence in Financial Journalism award for a BRW cover story on economic indicators.

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Boards’ boys club on notice with reports putting diversity under the microscope

Published 02 October 2013 00:01, Updated 26 November 2013 18:35

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Boards’ boys club on notice with reports putting diversity under the microscope

Westpac CEO Gail Kelly: one of five female executive directors in the 2012 “Top 100” listed companies report. Graphic: Stephen Clark

The top end of town seems to be getting the message and putting the old boys’ club on notice, if not quite breaking it up as yet.

A comprehensive look at the diversity of Australia’s boardrooms and c-suites was provided by two major reports out last week. One was the 2012 Board Composition Study, prepared by corporate governance consultancy Ownership Matters on behalf of the Australian Council Of Superannuation Investors (ACSI), an advocacy group dominated by large industry and public sector super funds. It revealed that in 2012, women finally broke the “100 in the 100” barrier – there are now 105 women, occupying 144 roles, on the boards of Australia’s 100 largest listed companies.

However, the progress to 100 has been far from steady (see graph), and the overall proportion of women on top 100 boards has only accelerated towards 20 per cent in the past year or two – thanks to the work of the Australian Institute Of Company Directors (AICD), the Australian Securities Exchange’s Corporate Governance Council, and institutional investor lobbyists such as ACSI, says Ownership Matters principal, Martin Lawrence.

“You find that if an all-male board is performing really well there is less pressure to change, but these days , as soon as they come back to the pack, . .  . there are plenty of voices saying, ‘Come on now, you couldn’t do any worse with some female directors, could you?’ ”

Lack of diversity

The reason why the impetus for change usually comes from outside the companies themselves was demonstrated by last week’s other major report, from the 18,000-member Women On Boards network, which measured the culture of gender diversity within Australia’s top 200 listed companies.

Women On Boards scoured the top 200’s annual reports and websites looking for:

Telstra chair Catherine Livingstone is among the highest-paid non-executive directors.Photo: Louise Kennerley

  • meaningful diversity policies
  • measurable targets for appointing women to leadership positions
  • the existence of a diversity council, ideally chaired by the chief executive officer
  • transparent gender data
  • flexible work practices
  • programs moving women into the leadership pipeline
  • honesty around the company’s existing gender pay gap

The network then sent each company secretary a provisional rating: “green” for companies with truly embedded diversity principles; “red” for those encouraging little gender diversity; and three levels of “amber” in between.

The company secretaries could then provide additional information before a final rating was assigned. Only 16 companies in the top 200 were rated green, with 31 rated red and a further 59 in the bottom tranche of amber.

“So there are 90 companies that could benefit from lifting their game around diversity initiatives,” says Ruth Medd, the chair of Women On Boards and author of its “Traffic Light Index”.

A box-ticking, feel-good statement in the annual report about diversity is not good enough, Medd says.

“A measurable objective of ‘increase the number of women in leadership roles over time’ gives little comfort the company is on the diversity dividend path,” she says.

“I wonder if such companies would countenance a profit target of ‘increased EBIT’ as its financial objective for a given year?”

Brambles, Suncorp-Metway and Metcash are exemplars of best practice reporting, Medd says, publishing detailed metrics around diversity, including the gender pay gap and progress towards closing it. within different employment categories across their organisations.

ASX 200 of two halves

There were 11 companies with three women on their board as at June 30, 2012, the ACSI/Ownership Matters study found. This was up from seven in 2011 and only three in 2010.

Nine of these companies were in the Top 100 (AMP,QBE Insurance, Macquarie, Commonwealth Bank, Qantas, Bendigo & Adelaide Bank, Downer EDI, Telstra and Westpac), and two were in the ASX 101-200 (Billabong and Ten Network), reflecting a far better diversity record in the top half of the ASX200.

The highest-paid portfolio of non-executive directorships belonged to a man, Kevin McCann (Macquarie Bank, Origin Energy), but two women are not far behind – Catherine Livingstone ($1.26 million) and Nora Scheinkestel ($1.1 million).

However, the increase in the number of women serving on Top 100 company boards in recent years is yet to result in many more females in leadership roles.

In the Top 100, there were again five companies with a female chair: Caltex’s Elizabeth Bryan, Telstra’s Catherine Livingstone, QBE’s Belinda Hutchinson, Tabcorp’s Paula Dwyer, and a new entrant, Barbara Jeremiah at Boart Longyear.CSL chair Elizabeth Alexander retired from the board after the 2011 AGM.

Across the 132 executive directors in the Top 100, the number of women was also almost unchanged from 2011. Of the five female executive directors in the 2012 sample, four were in the 2011 sample – Westpac CEO Gail Kelly, Kay Page at Harvey Norman, Sydney Airport’s Kerrie Mather and Origin Energy executive director Karen Moses. The new addition was Graincorp’s Alison Watkins, who was included in the ASX 101-200 sample in 2011.

There were again two female executive directors in the ASX 101 – 200 in 2012, both of them new appointments – Billabong’s Launa Inman and Coalspur’s Gill Winckler. The other female executive director in 2011, Pacific Brands’ Sue Morphet, resigned in September 2012.

The 18.1 per cent proportion of female directors on ASX 100 board seats drops off a cliff for the next 100 companies – it’s just 9.9 per cent. This is largely thanks to the mining boom populating that part of the index with a lot of graduated junior explorers and mining services companies with little access to female director networks, and little competitive pressure to seek them out, says Ownership Matters’ Martin Lawrence.

“To be fair to a lot of those ASX 101-200 boards, they have other things on their minds, just trying to become steady-state companies as commodity prices tumble,” he says.

“They appoint who they know, because they can’t justify to shareholders the expense of a director search firm. There simply aren’t a lot of female mining executives out there.”

Westpac CEO Gail Kelly: one of five female executive directors in the 2012 “Top 100” listed companies report.Photo: Nic Walker

Hope on the Aurizon

Male-dominated industries such as mining, construction and transportation tend to do worst in terms of gender diversity, but one exception in the “Traffic Light Index” was Queensland rail freight company Aurizon, which graduated to a green rating this year.

Ruth Medd commended the company for its “transition to operations” women’s development program: a series of rotations and secondments sponsored by chief executive Lance Hockridge and his senior executive team.

“We see [gender diversity] in the same way we see safety as an important issue for us,” says John Atkin, a non-executive director of Aurizon. “There’s still a war for talent and you want the best people, so you want to set up the best working environment and attract and promote and develop the best people and half the workforce is female, so you’ve got to set yourself up for that.”

Atkin says the company strives to ensure it recruits women, both in managerial roles and trainee programs. “Managers are responsible for achieving the targets in their division and we make that very clear to them,” he says.

“Lance Hockridge is now chairing our diversity council … and we run it all through the senior management body of the company. Lance has made it clear to everyone he’s deadly serious about this.”

Aurizon runs a program where women are assigned to work alongside the chief executive on a four-month rotation.

Atkin says the gender program is driven by business reasons, and argues that Aurizon had more of a “box-ticking” compliance attitude back when it was government-owned.

With Caitlin Fitzsimmons

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