Board composition and diversity

Why is it important?

A primary responsibility of the board is to review, ratify and oversee the implementation
of the company’s strategy and represent the interests of shareholders.

Suitably diverse boards better govern companies and maintain more effective oversight of ESG risks and opportunities. Diversity of thought assists boards to set and challenge company strategy and to better understand the markets in which they operate. Review and renewal are integral to ensuring the board draws upon perspectives that allow it carry out its duties effectively.

Our view

The selection, appointment and performance review of non-executive directors must
be aligned and relevant to company strategy. The effectiveness and composition of the board and individual directors should be regularly evaluated to assess the board’s ability to provide strategic direction and objectives for the company. As part of this process, gaps in skills and experience should be identified to support the board’s ability to promote company performance over the long term.

Independent directors are integral to the board’s supervisory and advisory functions as they are ordinarily free from relationships that could interfere with the board’s ability to make decisions in the best interests of the company. Nonetheless, independence is determined predominantly by an individual’s character and integrity.

In proposing directors, the board should consider a range of diversity factors that can bring different perspectives to bear on matters linked with the company’s strategy, products, markets and commercial objectives. Diversity considerations should include core skills, education and experience, gender, ethnicity, age and tenure, along with any other factors relevant to the
company. 

Our members expect at least 30 per cent of the board positions in ASX-listed companies to be held by women. We believe that companies should also set targets to achieve gender balance in their boards, within a reasonable specified time period (for example, by 2025). 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.

Links

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