Ever since Derek Higgs[i] proposed that non-executive directors be sought from a broader range of potential candidates, including those which would capture likely female appointees, diversifying board composition has become a world-wide trend.
At one end of the spectrum, voluntary codes of governance have been revised to include “diversity” guidelines for increasing the number of women on boards, and in senior executive ranks.[ii] At the other extreme, in 2003 Norway legislated for corporate boards to increase the number of directors in the “under-represented gender”[iii] on the board or else face de-listing by the Norwegian Stock Exchange.[iv]
While statistics show that the number of women represented
on Australian corporate boards has increased significantly between 2009 and
2013, the figures come off a very low base. For example, in Australia, the
number of female directors on the ASX100 boards increased from 8.7 per cent in
2010[v]
to 15.7 per cent in June 2013.[vi]
But as of June 2013, 48 boards on the ASX200 do not have any female directors.
A greater number of women are represented on boards in other
sectors namely mutual and community banks[vii],
governing councils of universities[viii],
and government entities[ix].
Medibank Private, which is one of the largest and most influential of
government boards in which a federal Minister has final approval of the
directors, has reversed the trend: five of the seven members of the board are
female, including the chairman, Elizabeth Alexander. (The two men on the board
are non-executive director, Paul Vamos, and the Managing Director, George
Savvides).[x]
As governments, professional associations and boards
continue to redress the gender imbalance on (mainly corporate) boards, two
themes recur: 1) that “gender” and “women” are used as a synonyms for
“diversity” (as opposed being only one example of the many dimensions of
diversity), and; 2) the consequences of diversity of board composition is little
understood.[xi]
One of the hurdles to overcome is the habit of “diversity” continuing
to be defined as the number of men, versus the number of women, who compose a
board of directors. While this misconception continues to be perpetuated, the
opportunity to broaden the interest, and subsequently the discussion and
academic research, on the impact of diversity on boardroom decision-making
remains stymied.
Diversity means having many different characteristics
represented (on a board) such as gender, age, cultural background, professional
expertise, sexuality and religious affiliations. Diversity does not mean having
one or two female directors on a board composed otherwise of men who all share
the same characteristics – typically age, gender and professional background.
By limiting the definition of “diversity” as it relates to
board composition to women, the opportunity for further discussion and research
is likewise restricted. One area of research in which I am engaged currently is
considering what it means to “lead for diversity”, meaning what additional
skills does a chairman, experienced only in leading a board composed of men
similar to him, need in order to accommodate a greater range of people on the
board?[xii]
When there is only one person who represents the minority in
a group, the spotlight of attention shines brightly. The other group members,
shrouded in comfortable familiarity, are suspicious of this person, who looks
different, speaks differently, and most confronting of all, thinks differently.
Group dynamics theory attests to the practice of groups striving to conform in
order to survive; a member who is different to the majority usually has limited
choices: conform, or act independently and authentically and risk being
rejected by the group.
Minorities in groups, even if this means one woman in a
group of male directors, is often called a “token”, and the practice of
admitting a person different from the group norm is called “tokenism”. Senior
female executives and directors want to avoid being the “token woman” at all
costs. Yet in this period of reforming the way boards recruit new directors and
plan for succession, “tokenism” is a pertinent issue.
Women directors on ASX200 boards are most likely to find
themselves as the lone woman, and occasionally as one of only two female directors.
One woman finds the spotlight
of attention very bright; but this is shared more easily with two women. Once
three women are appointed a “critical mass” occurs and the group sees the women
as “members” rather than “our female director”.[xiii]
The problem of tokenism on boards is greater when other
dimensions of diversity, such as cultural representation, are sought on a
board. In Australia, the Federal Government’s Asian Century White Paper has
called for all ASX200 boards to have 33% of directors with “deep Asian
experience” by 2025.[xiv]
The definition of “Asian experience” is fraught with
misinterpretation,[xv]
and so far, only three per cent of directors
of the ASX100 boards were born in an Asian country, namely China, Hong Kong and
Singapore.[xvi]
There is also a spattering of directors with experience of working in Asia,
such as a former ambassador to China. If number of boards surveyed is increased
to the ASX200, the number of boards with directors with “deep Asian experience”
increases to six per cent.
With this push to increase the number of women and the
number of people with “Asian experience”, on corporate boards, it is timely to
consider what it means to place a person who represents a minority group into a
well-established group.Whether that person is a woman, a younger person, an indigenous director or a director born in an Asian country – further examination is needed of the impact of introducing a person of “difference” into a group whose membership that has a long tradition of “refreshing” its membership from a similar group of people. Questions to consider include adapting leadership styles for the chairman, training the whole board to better understand different perspectives, and revising induction programs for new directors.
These are areas of deep interest and relevance to my
doctoral research and to my work as a board advisor. For further information,
please contact me: ann-mareeATboardroomcg.com
[i]
Higgs, D, (2003) Review of the role and
effectiveness of non-executive directors
[ii]
One example is the Corporate Governance Principles
and Recommendations with 2010 Amendments produced by the ASX Corporate
Governance Council.
http://www.asxgroup.com.au/media/PDFs/cg_principles_recommendations_with_2010_amendments.pdf
[iii]
It is critical to note that Norway didn’t legislate for “the boards of all listed companies to be at least
40 percent female” as is widely quoted in global media. Instead, it introduced
laws to ensure that corporate boards be composed of 40% of the under-represented gender. The distinction is critical for the debate on gender
balance in the boardroom as it takes away the focus on feminism and “women’s
issues” and instead forces the argument to be about equality in leadership in
business and in the boardroom.
[iv]
Storvick, Aagoth and Teigen, Mari, “Women on Board: The Norwegian Experience”,
Friedrich Ebert Stiftung, http://library.fes.de/pdf-files/id/ipa/07309.pdf
[v]
http://www.womenonboards.org.au/pubs/bdi/2012/index.htm
[vi]
http://www.companydirectors.com.au/Director-Resource-Centre/Governance-and-Director-Issues/Board-Diversity/Statistics
[vii]
http://www.womenonboards.org.au/pubs/bdi/2012/creditunions.htm
[viii]
Of the governing councils of the
Group of Eight (Go8) universities in Australia, 33% of members are female. http://www.go8.edu.au/
[ix]
As at 30 June 2012, women held 38.4%
of Government board appointments (up from 35.3% in 2011). Over the 2011-2012
financial year, 41% of the 1633 new board appointments were awarded to women. http://www.fahcsia.gov.au/our-responsibilities/women/publications-articles/gender-balance-on-australian-government-boards-report-2011-2012
[x]
http://www.medibank.com.au/About-Us/Corporate-Information/Our-Board-and-Governance/Board-member-profiles.aspx
[xi]
Adams, R, “Women in the boardroom and their impact on governance and
performance,” forthcoming, Journal of Financial Economics.
[xii]
Moodie, A., (2011) “The Chairman of the Future: Leading for Diversity in the
Boardroom”, Keeping Good Companies, August.
[xiii]
Torchia, M., Calabro, A., & Huse, M., (2011) “Women Directors on Corporate
Boards: From Tokenism to Critical Mass”, Journal of Business Ethics, Vol
102 No 2, pp299-317
[xiv]
The Asian Century White Paper, Prime Minister and Cabinet, Federal Government
of Australia, 2013. http://asiancentury.dpmc.gov.au/white-paper
[xv]
Interview with Ann-Maree Moodie, ABC News Radio, on the Federal Government's
Asian Century White Paper which recommends the composition of ASX 200 boards
include a third of directors with deep Asian experience" by 2025. October 29, 2012. www.abc.net.au/newsradio/listen/daily.htm
[xvi]
Durkin, P., “Top boards fail Asia test”, The
Australian Financial Review, 14 June 2013.
