Why do we engage on diversity?
A properly structured board should include appropriately skilled and experienced directors, drawing on a range of criteria, including gender, ethnicity and age, in addition to core skills and
Companies are likely to be most successful when they harness collective intelligence, and approach problems with cognitive diversity. Diversity of thought assists boards to set and
challenge company strategy, and to better understand the markets in which they
Diversity and inclusion provides a good opportunity to identify issues, challenge the status quo and prevent ‘group think’.
Companies that demonstrate their commitment to diversity attract the best talent throughout the organisation and do better over the long-term. Likewise, the clients, customers and other
stakeholders of any business are diverse. To properly understand their interests and how they impact the organisation, the organisation’s governing body should be reflective of its stakeholders.
Gender diversity has been a major challenge for Australian boards.
Over the last 10 years, our members and other long-term active owners have been engaging with companies to increase the number of women on boards.
Diversity has a material benefit to governance outcomes and strengthens decision making. That is why we strongly supports efforts to improve gender diversity on boards and management teams.
How do we engage on Board diversity?
Our members have endorsed a gender diversity target, and expect that at least 30 per cent of the board positions in ASX listed companies be occupied by women.
We work with companies to understand their plans to meet this target. Our preference is for companies to reform their board’s composition, in line with this target, on a voluntary and planned basis.
Does ACSI recommend proxy voting to improve gender diversity?
We believe that zero women boards are not fit for purpose. Equally, where a board has only one woman, there is a risk of falling back to being a zero women board, or that diverse views are not properly heard.
Where a company has zero women directors, we may make recommendations to vote against any newly appointed male directors. In 2019, we broadened our approach to include the ASX300. Recognising that board renewal takes time, we allow a year for engagement and renewal for new entrants to the ASX300 before we apply our policy.
We combine our approach to voting recommendations with our engagement to provide companies with an opportunity to show a pathway to increase women on boards.
How are Australian companies responding?
Over the last decade, gender diversity on Australian company boards has significantly improved. In 2019 women directors on ASX200 boards finally reached 30 per cent, up from 8.3 per cent in 2009. This milestone represents the culmination of years of work by
investors and others to increase the number of women appointed to listed company boards. ACSI and our members adopted a 30 per cent target in 2015. To reach this milestone shows our policy is working.
More specifically, our engagement has been successful in meaningfully targeting boards where gender diversity was lacking. Our successful engagement outcomes in 2019 included:
- Six of the seven ‘zero women boards’ we targeted appointing their first woman director.
- In the first half of 2019, 12 women directors were appointed to diversity target companies.
66 of the 80 companies we engaged with in 2019, seeking discussions on how they plan to achieve the 30 per cent board gender diversity target, responded by organising meetings or appointing women directors
Percentage of female directorships on ASX 200 boards
How can board gender diversity improve?
While reaching 30 per cent women directors across the ASX is a good outcome, it does not mean the job is done, as more than half the companies in the ASX200 are yet to reach this target. Given that boards are still comprised of 70 per cent men and 30 per cent women, gender representation on company boards is a long way from fully harnessing the potential of diversity.
Targets provide a way for companies to assess their approach to diversity, but they also provide incentives for change. Companies should have gender balance on their board. This means a minimum of 40 per cent women , 40 per cent men and 20 per cent unallocated to allow flexibility for board renewal.
Listed companies should set a time frame within which they will achieve gender balance (40:40:20) on their boards.
ACSI is encouraging boards through engagement to speed up board renewal and improve gender balance. We are calling on boards to improve diversity by 2025. If this does not occur, regulatory intervention is needed.
Gender diversity voting policy
Applying the ACSI Governance Guidelines, we will recommend our members vote against the boards of ASX200 companies with poor gender diversity, on a case-by-case basis.
Our recommendations will focus on the individual directors most accountable for board succession and composition.
For ASX200 boards with one or zero women directors, we will recommend a vote against at least one of the following
(in descending order):
- the Chair of the board
- the Chair of the Nominations Committee
- a member of the Nominations Committee or
- the longest-serving director seeking
As always, our voting recommendations will be combined with direct company engagement.