Gender diversity lacking in senior management
Gender diversity in business? We're not quite there yet according to ASX Corporate Governance Council, which finds we're tracking slowly on boards and in senior management.
PT2M5S 620 349Companies get real. Gender diversity is more than just paying the issue lip service.
Having a gender policy on your website isn't enough. Companies should be setting clear strategies, and related targets, to increase women on boards and at senior leadership levels.
They should be linking those targets to KPIs, just like they do with other business objectives.
Companies should be linking targets for more women on boards and senior management to KPIs, just like they do with other business objectives.
A report by KPMG for the ASX Corporate Governance Council released on Tuesday confirms this. It tracks the success of almost 600 entities across Australia for the 2015 calender year.
The report – which divides entities into three main categories: S&P/ASX 200 (197 entities); ASX 201–500 by market capitalisation (200 entities); and ASX 501+ by market capitalisation (200 entities) – is a depressing read. It shows that companies, while slowly improving, are far from reaching gender parity.
Going backwards
Illustration: Andrew Dyson.
For the top 200 companies, just 22 per cent of board members were female. And just one – the board of Medibank – had a majority of female non-executive directors.
Among the top 100 companies, the percentage of women in CEO and COO/deputy CEO roles did not change.
Female representation at CFO level reduced. In both 2011 and 2016 just 5 per cent of CEOs and 10 per cent of COOs were women, while the proportion of CFOs fell from 8 per cent in 2011 to 6 per cent in 2016.
The main areas where female representation increased? You guessed it; in HR (65 per cent), general counsel (39 per cent) and marketing (33 per cent). The one surprising, and pleasing, finding was an improvement in women in senior IT roles, up from 19 per cent in 2011 to 29 per cent in 2016.
Given candidates for CEO roles will typically require experience as a CFO or leader, the pathway to more balanced gender representation could now be further delayed.
Women fighting for equal pay will find it harder.
The report says it will increase discrepancy in pay equity given the remuneration packages at CEO, CFO and key operational roles are typically higher than remuneration packages for functional roles such as HR.
Companies have a diversity policy, so what?
The council, a self-regulatory body made up of 21 companies alongside shareholder and industry groups, tracks the success of reporting standards introduced in January 2011.
These standards require companies to reveal whether they have a diversity policy, set objectives and disclose the number of women at senior levels on an "if not, why not?" basis.
Its latest report shows most Aussie companies now have a gender diversity policy.
For the ASX 200 it was 99 per cent (compared to 98 per cent in 2013), for the ASX 201-500 it was 88 per cent (compared to 85 per cent in 2013) and for the ASX 501+ it was just under 75 per cent (compared to 66 per cent in 2013).
But the report suggests that companies may be reporting "progress" for the sake of it.
There are vague definitions of "senior executive" such as "individuals who collectively participate in determining and implementing major operational and strategic decisions".
The report suggests a clearer definition going forward would allow progress to be more accurately measured.
Case for numerical targets
But diversity policies alone are not enough. As the report notes, "very few companies set or disclosed transparent quantitative objectives such as "30% of director seats to be held by women by 2018''.
The majority of objectives focused on implementing diversity programs or initiatives such as "undertaking a pay equity review", "implementing programs in unconscious bias" or "undertaking an all employee satisfaction survey".
These are all necessary steps to ensure greater diversity, but as the report spells out, "by the fourth full year of reporting, we expected many entities, particularly those in the S&P/ ASX 200, to be in a position to set and disclose quantitative objectives".
It continues: "There continued to be a number of entities reporting more 'aspirational' objectives such as 'achieving a culture of inclusion', making it difficult for these entities to measure progress against their objectives both now and in future years".
The report also finds that bigger companies generally do better than smaller ones in terms of gender balance.
The ASX 501+ category showed a 3 percentage point decrease (from 9 per cent to 6 per cent) in the proportion of women on boards. Of the entities that disclosed the proportion of women at board level 77 percent did not have any women on their board.
If we can't ensure that women – who make up about half of Australia's population – also make up 50 per cent of board and senior management positions, we have no hope of achieving diversity in other areas such as age, ethnicity, religious beliefs and cultural background (the report confirms most companies still don't have measurable objectives in this regard).
If targets don't work, move to quotas
To assist in "developing a diverse pipeline of talent that can be considered for future succession of CEO, CFO and key operational roles", the report calls for quantitative targets.
KPMG partner Ben Travers says companies could look at the Male Champions of Change's "Targets with Teeth" program, which ties executive incentive payments to numerical diversity targets.
If targets are not linked to KPIs those who make the decisions about who gets promoted will just keep paying lip service to diversity.
The report also points to regular claims that companies that hire more women make more profits.
Across all groups, it found that 51 per cent said implementing a diversity policy assisted with employee retention, and 48 per cent said it helped them attract high-calibre employees.
For companies that do not set, and reach, voluntary targets, a solution may be for the government to mandate targets.
Give companies a timeframe within which to hit their targets, and if they don't, hit them with quotas.
In 2016 we should be far beyond "aspiring" to gender equality.
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