Interview with David Gonski (2): The Curse of "Unconscious Bias"

The term “unconscious bias” has a rich academic pedigree steeped in psychological thinking. In layman’s terms, it describes the practice of judging others by stereotype: we hire people we like; people with whom we feel an affiliation. The lack of diversity on Australian boards and in senior executive ranks is often blamed on unconscious bias. In the second part of my interview with David Gonski, AC we talk about why familiarity is considered important in choosing our colleagues and how unconscious bias can stymie good decision-making.

 “We tend to choose from the circles we know and trust,” says Gonski, who is the chairman of Investec, Coca Cola Amatil and the Future Fund. “It’s regarded as less risky to take people who are already in those positions or to take people who’ve had to break in to those roles.

“But the circles you draw from won’t include diversity unless you consciously decide to make them diverse. And my theory is that it is worthwhile doing that. In fact, the actual exercise of exercising your mind to think outside of your circle is a good thing. You can create the benefits of diversity by breaking out and not just having people who are similar to yourself.”

Gonski cites the example of a board colleague with whom he rarely agreed. The director had completed his term on the board and Gonski spoke at his farewell party. “This person was from a very different world with very different thinking,” he says.

“At his farewell I stated publicly that he had created better decisions. He had done this because of his ‘needling’ and his constant questioning; I knew he would give us a hard time on any issue. But as a result, the decisions were more carefully framed and much more talked through. So he actually did a great service for the organisation. He made people think harder – and he made me think harder. I carefully checked everything he said.”

My research on “leading for diversity” at the board table concluded that chairmen who are experienced in leading boards of directors who are representative of their own type will need a set of additional skills to help them lead a diversely-composed board. The skills I identified include patience, understanding, the capacity to accept other viewpoints, the ability to listen and a tolerance for dissent - in addition to the traditional skills that a good chairman will bring to board leadership.

Gonski has the experience of serving on boards composed of men who are similar to him, as well as boards composed of a much broader range of people. He believes his style of chairmanship is congenial to homogeneously-composed boards as much as those boards which are heterogeneous.

“I would hope that my leadership style has not changed as a result of (having more diversity of views around the board tables I sit at),” he says. “I hope that I have always been inclusive and I hope that I have always led, whatever I’ve led, with a concept of diversity in it.

“However, within diversely-composed boards I think some of the decisions that have been made, the rigour with which they’ve been made and the vantage points from which they have been made may have changed. But my actual leadership style? No, I don’t think so.”

Diversity means much more than gender. Other dimensions of diversity include age, ethnicity and geographic location. There are already boards of listed companies in Australia which are diversely composed in the true sense of the term.

In my “leading for diversity in the boardroom” research I highlight the boards of Orica and BHP Billiton, for example. (See my article, International Governance: leading a truly diversely-composed board published in the peer-reviewed journal of Chartered Secretaries Australia, Keeping Good Companies, in February 2012).

The average age of company directors in Australia is already decreasing as many of the newly-appointed female directors are younger than their male counterparts. Gonski believes Australian listed entities are on the cusp of accepting “diversity” as meaning much more than gender.

“As the gender issue is addressed and moves forward, as the concept of diversity is understood more fully, and as the benefits of having both genders is recognised, it’s natural that we will want to see what benefits could be made in having diversity in other ways,” says Gonski.

The next step will be geographic diversity. “We already have some recognition of diversity of technical background,” says Gonski. “When I joined boards, most of the people on boards were lawyers. Now we’re seeing in the larger companies examples of geographic diversification – for instance, having someone who understands Asia is on the board. Someone who has lived there in an Asian country, who has worked there and who has done business there.”

But Gonski warns that exploring other dimensions of diversity may threaten the progress that’s being made on appointing women, especially at a time when 60 of the boards on the ASX 200 don’t have any female directors.

“I would hope that there’s a total positive to all of the aspects of diversity and it doesn’t have the effect of lessening focus on the gender issue in favour of the others,” says Gonski. “It shouldn’t happen, but we need to be aware of it.”

To ensure against a return to closed thinking about board composition, Gonski advocates a careful approach to using personal networks to gain a board seat.

“A personal network can be the very antithesis of breaking down the barriers to diversity,” he says. “You’re going right back to the old days when there was a club, and those in the club got the directorships and those outside the club, didn’t.  You need open windows and open doors to create good decision-making on boards.”

Interview with David Gonski (1): Diversifying Australian Boardrooms

David Gonski, AC is one of Australia’s most prominent chairmen. He has served on, and led, boards across sectors, most notably in listed companies and in the arts and higher education. As a proponent of good corporate governance, Gonski has championed diversity on Australian corporate boards, and he has actively backed appointments of female directors. In a two-part interview, he spoke to Boards and Governance about why it took a voluntary governance guideline to increase female representation in the boardroom.

“You never know with issues such as these as to whether they are a reflection of what’s going on or whether they instigate change,” says Gonski, referring to the revision of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations to promote more women in Australian boardrooms and in senior executive ranks.

“But there is no doubt that the coming of a new guideline promotes the issue as a board agenda item, it gets people talking and to start to think through whether they’re doing the right thing.”

The Corporate Governance Principles and Recommendations are voluntary guidelines for listed companies to report against annually under a concept of “if not, why not?”.  The Principles were introduced in 2003 and revised in 2007.

The changes to “Principle 3 Promote Ethical and Responsible Decision-Making” mean that companies must now establish a diversity policy. Boards must disclose in the annual report the measurable objectives for achieving gender diversity for the board as well as the progress that has been made towards achieving such set diversity targets.

The creation of a new guideline in October 2010 came at a time when the dearth of female directors on Australian listed company boards was becoming an issue of good governance. For the previous decade, the number of women on the ASX 200 had remained static – only about eight per cent of board seats were held by female directors.

Since the introduction of the new guideline, and aided by high profile mentoring programs such as that organisated by the Business Council of Australia, that figure has risen to 14.2%. (Nevertheless, 60 boards in the ASX200 do not have any female directors).

“The diversity guidelines have certainly had an effect,” says Gonski, who is the chairman of investment bank, Investec, Coca Cola Amatil and the Future Fund. “But even before they were put into effect, there was an enormous injection of discussion and consideration. And this is evident in the number of women on Australian boards now.”

A few months prior to the introduction of the new guideline, organisations such as Women on Boards (WOB) were agitating for the introduction of legislation to enforce gender balance on boards. 

WOB, which provides a registry of women who are "board-ready", had that year invited Arni Hole, the director-general of Norway’s Ministry of Children, Equity and Social Inclusion to speak to its biannual conference. Norway is well-known for introducing legislation to increase the number of women on listed company boards. Under the threat of delisting, the number of female directors rose from six per cent in 2002 to 41 per cent in 2009.

Gonski had also spoken at the same conference, telling the audience: “I would fight very strongly not to have quotas….people are foolish if they don’t have gender diversity but the way to do it isn’t through legislation.” 

Was the threat of black letter law the impetus for change in Australia? David Gonski disagrees.

“I think the new guideline was independent of any such threat (to regulate for gender diversity on listed company boards),” he told me. “I also think it was more of a possibility than a threat. Some people involved with government said that if things didn’t fix themselves it would have to be looked at; but nobody said at the time that it would be enacted. However, the concept of using legislation isn’t something that I favour.”

Gonski is well-known for mentoring women who want to pursue a board position. Boards on which he serves as either a chairman or a non-executive director have appointed women, and he has promoted women on to boards through his own network. But he concedes that the changes should have come earlier.                                                                                                                   

“The coming of more women in boards has been a fantastic development,” he says. “I’m not aware of any negativity and it has been, in my opinion, responsible for a number of positives.

“Firstly, boards are now able to draw from 100% of the population rather than 48%. Secondly, the diversity of views is a positive and the decision-making is greatly enhanced by having people who come from different walks of life and indeed different vantage points.

“There have been many occasions where having women on boards has not only taught people like me around the board table to think about things in a different way but also to solve them in a different way. But I think we left the issue probably too long. And it was wrong that it was left that long.”

In the second part of this interview to be published shortly, I talk to David Gonski about leadership in the boardroom and what’s next in the evolution of the diversification of board composition. We also discuss the concept of “unconscious bias” a term with an academic pedigree and which has become associated with boardroom diversity in Australia.