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 different mindsets. Diversity of thought assists boards to set and challenge company strategy, and to better understand the markets in which they operate.
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.
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.
Engaging 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.
Proxy voting on 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.
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.