Corporate Australia needs to re-examine its workplace culture and diversity to better support long-term value, according to the Australian Council of Superannuation Investors (ACSI).
ACSI has developed two policy proposals designed to ensure company boards are focused on culture and diversity.
ACSI CEO Louise Davidson said, “It is widely accepted that poor culture is a key contributor to major behavioural and governance failings, which harm investors, consumers and markets.
“Australia’s response to cultural failings has traditionally been reactive, happening only after significant consumer and investor harm has occurred. Our proposals would focus companies on the risks and opportunities associated with their corporate culture.”
The key changes that ACSI is calling for are:
All listed entities should be required to regularly assess their culture and disclose the action taken.
Investors recognise that poor corporate culture is a material risk to the value of their shareholdings. We support the recent recommendations from the ASX Corporate Governance Council’s that entities articulate and disclose their values and have and disclose codes of conduct and whistleblowing and anti-bribery and corruption policies.
In addition, we think that all listed company boards should be required to regularly conduct culture assessments to identify and address issues. The recommendations of the Royal Commission are relevant across the market, not just in the financial services sector.
Davidson said, “Issues related to culture are not limited to the financial services sector and apply to all listed companies. Corporate Australia has an opportunity to learn from the failings highlighted by the Royal Commission.”
Gender diversity targets
Listed companies should be required to set a time frame within which they will achieve gender balance on their boards. If companies are unwilling to set a reasonable time frame or those targets do not improve diversity by 2025, regulatory intervention should occur.
Gender balance typically refers to a minimum of 40 per cent of either gender, with 20 per cent unallocated to allow flexibility for appropriate renewal. Diverse boards make for better governed companies and maintain more effective oversight of ESG risks and opportunities. This is intrinsically linked to the creation of long-term shareholder value.
Davidson said, “This is the logical next step in supporting diversity on boards. If companies are not willing to set and achieve a target for gender balance within a reasonable time frame, then there is a role for further regulation.”
Today’s announcement is part of a comprehensive policy agenda that ACSI is releasing in the lead up to our Annual Conference on Wednesday 8 May. It includes proposals designed to improve corporate accountability, culture and diversity, and investment stewardship.