By Lucy Battersby
Laziness and a tendency to use personal networks are the main reasons why Australian company boards are still some of the least diversified in developed economies, according to a new report which confirms, if such confirmation were needed, that local company directors are nearly all men from similar backgrounds.
However, introducing a quota to install women or ethnically diverse board members would not improve the situation, the report from the Corporations and Markets Advisory Committee (CMAC) found.
Instead, shareholders should insist on more diversity because it could improve the company’s performance.
"Typically what happens is that casual vacancies are filled in the first place by the board themselves inviting people to come onto the board," the executive director CMAC, John Kluver, explained today.
"With some boards at least there may be an element of inertia - and therefore in some ways it is simpler to appoint people who are already known or who are familiar to you to the board for casual vacancies," Mr Kluver said.
CMAC said a formal structured process could be used to find new talent, rather than "relying on informal business or social networks or contacts", and that boards should explain to shareholders how and why new directors were chosen before shareholders approve of a casual appointment.
The "‘Diversity on Boards of Directors" report was commissioned by the former minister for Superannuation and Corporate Law, Nick Sherry, ahead of a March 2009 meeting of the Ministerial Council for Corporations.
The minister expressed concern that Australian boards were largely composed of men with similar ethnic, education and professional backgrounds.
Research by the Equal Opportunity for Women in the Workplace Agency has found there are 1504 board directors across the top 200 companies listed on the Australian Securities Exchange, yet only 125, or 8.3 per cent, of those directors are women.
There are no women at all on 51 per cent of the boards, and only four chief executives out of 201.
However, there is more diversity in not-for-profit and government sectors with women making up 30 per cent of directors at not-for-profits and 38 per cent on public boards.
More innovative options were needed to get more women on to boards, the federal Sex Discrimination Commissioner Elizabeth Broderick told BusinessDay.
"Time alone is not going to solve this issue, we need a frank discussion which does not throw out any of the options at any stage, such as voluntary targets or compacts to incentivise [boards to appoint more women]," Ms Broderick said.
The lack of women in senior management roles meant there were few females who were getting the necessary experiences for working at a director level, she added, and that female directors could also be taken from the not-for-profit and government sectors into the corporate sector.
"For so long as [boards] insist that you have to have chief executive experience, they are going to cut women out."
The Victorian Deputy Premier and Attorney-General Rob Hulls today said he was writing to the secretaries of the 200 largest listed companies about their board membership.
"I will be encouraging these business leaders to be more proactive in promoting women and people from diverse backgrounds through the ranks of executive management," he said.
Victorian government policy is for government boards and committees to be 40 per cent female, but CMAC does not recommend a quota system for the corporate sector.
The reports notes that in Norway, where a quota system has been in place since 2003, many boards have only a small number of women on them because companies cannot find women with ‘‘requisite experience or knowledge of the relevant industry’’.
"A quota would run counter to the responsibility of shareholders in this regard and, by cutting across their choice of candidates, dictate elements of the composition of the board which is to be accountable to them," the report found.
There was also a general lack of research on other characteristics of board members, such as their ethnic, national or socio-economic origins, the report said, and there was also little information on whether women were actively seeking directorships.