Why is board diversity important? This question is answered in part by the most recent Watermark Search International and Governance Institute of Australia Board Diversity Survey 2020 (read it here). This comprehensive survey of Australian companies explores the diversity issues in Australian companies in relation to gender, culture, skills, age, and tenure/independence. A major conclusion of the survey is that where diversity exists in the boards of companies there is significant evidence of improved business performance. The full report is a very interesting read, but a few highlights include:
- Gender Diversity – 41% of ASX300 boards in Australia have 30% or more women as directors, and there is an increasing role that a gender diverse board plays with regard to Corporate Social Responsibility and the impact of that.
- Cultural Diversity – which is an opportunity for business improvement, particularly for export-oriented companies.
- Skills Diversity – boards have an over-representation of accounting, finance and legal skills (average of 2.4 per board), and under represented by Human Resources and Change Management skills.
- Age Diversity – the average age of directors is increasing.
- Tenure and Independence – 21.3% of board positions are not considered independent.
Of particular interest in the report was noting that in August 2019 the Business Roundtable (181 CEOS of the world’s largest companies) publicly moved away for the established view that the purpose of companies is to increase profits, to the view that each stakeholder is essential, and to commit to deliver value to all of them. That is, profit is no longer the only responsibility of business.
In summary, the report concluded that “more diverse boards have a richer opportunity to meet the expectations of these multiple stakeholders.” Such diversity will allow “different contributions, a range of ideas, vast questioning of the status quo, robust debate and the willingness to think about things differently.” Why not read that report and see how the board of your entity compares, and meets this new imperative of business.