Boardroom diversity at mid-market organisations is still at modest levels and represents an opportunity for business growth, according to a study of ASX300 companies carried out by KPMG and the 30% Club, released today.
The report finds that, as at April 2020, companies in the ASX201-300 bracket had 22 percent female representation on boards, compared with nearly 32 percent in the ASX100 and nearly 31 percent in the ASX200
While a quarter of businesses in the ASX201-300 category had achieved the 30 percent level of female board membership, over a half had either zero (23 percent) or one (35 percent) female director.
Nicola Wakefield, Chair of the 30% Club Australia, said: “Firstly, it is encouraging that the ASX200 has now reached the 30 percent target which was set some years ago. But at the tier just below, there is still a long way to go. The 30 percent level is recognised as the ‘tipping point’ at which the dynamics of the board conversation change. Senior Non-Executive Directors engaged in the course of this analysis all agreed with what research has consistently shown – that there is a correlation between greater boardroom diversity and better business performance. We were looking to identify the key learnings that mid-market businesses can take from the experiences of companies which have already gone through the process of improving, and benefiting from, increased diversity.”
The report notes that those companies in the ASX201-300 bracket which had significant female representation on their boards grew more than others going into the COVID-19 crisis.
Sarah Cain, KPMG Enterprise Partner, said: “KPMG’s strong belief is that the greater range of views and experiences across the boardroom table which diversity provides will be crucial in leading businesses out of the shutdown. Of course there are many priorities at the moment but this is not a ‘nice to have’ – companies need to see increased diversity as a business imperative and an opportunity for growth.”
By sector, the report shows that in the ASX201-300 category, consumer staples, utilities, financial sector and healthcare have 40 percent or more female representation. This contrasts with materials and energy, both well under 20 percent. Well-established ASX300 companies were more likely to have reached the 30 percent benchmark than newer entrants into the top 300, although only by 38 percent to 34 percent.
The study includes interviews with a number of senior NEDS across ASX200 and ASX300 companies to gauge their views on key lessons for the mid-tier sector in their approach to achieving greater diversity. These revealed seven key lessons for businesses to consider:
- Achieving board diversity is a function of leadership – NEDS said that the personal commitment of the board chair was crucial in driving a diversity agenda.
- Diversity improves outcomes for the company in the long-term – companies in the top 200 see diversity as a business imperative, which research has proved brings long-term financial and non-financial benefits by recruiting from the broadest talent pool, challenging groupthink and improving governance and risk management.
- Modern, growth-oriented businesses strive for greater diversity – for top companies it is now embedded in their culture but for businesses striving to get into the top 200, it is important to explicitly spell out greater diversity as a source of competitive advantage.
- Progressive companies look beyond line experience as prerequisite for NEDS – skills, rather than direct sector line experience is key. NEDS say that many ASX300 companies tend to have a restrictive view on what they need, but diversity of skills and capabilities is more important.
- Focus on building diversity in executive roles and senior management as well – boards need to use their influence to increase diversity throughout the company and create an environment and framework conducive to female career progression into top management roles. Mentoring and role modelling is also important.
- Existing and aspiring female NEDS are attracted to businesses with diversity – companies with proven board diversity find it easier to attract female NEDS, who wish to play a valued role and not risk being seen as a token appointment. Businesses need to be careful on how they are perceived externally.
- Companies should set stretch targets for board and senior executive diversity – NEDS say the setting of specific targets and goals is the most effective method of increasing women and other minority board members.
Sarah Cain said: “There are some learnings from the experiences of others of direct relevance to mid-tier companies. Line experience is one – often businesses feel they need someone with direct executive experience in their sector before they will consider appointing them to their boards. This frequently acts as a barrier to females in traditionally male-dominated sectors. While sector knowledge can be useful, NEDS we have spoken to in the course of this research say the key is the range of unique skills and capabilities a candidate will bring to complement existing board capabilities.”
“Companies in the ASX201-300 category also need to be sensitive of the signals they send to the female NED and senior executive talent pool. Women NEDS want their voices to be heard and valued on a board and do not want their appointment to risk being seen as tokenistic or ticking a box. Female directors are more likely to join a board with more than one woman already on it – so those businesses which the study showed have none or one female should think about the impression they are giving to the market.”