2020 Board Diversity Index

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Welcome to our sixth Board Diversity Index. We are very pleased to be working together with the Governance Institute of Australia to more broadly disseminate this ASX300 Board Diversity Index. Both organisations strongly support the creation of more diverse boards…but why?

Because there is:

significant evidence of improved business performance with diverse boards,
an increasing social imperative,
an increasingly large pool of better prepared diverse candidates; and
growing external pressure from several large Proxy Advisors and Fund Managers as well as the broader community to simply not invest in, those companies with homogeneous boards.

In this report we continue to throw a spotlight against five key areas of diversity:

"...what the past 12 months of hearings has really raised for directors is that culture is pretty much everything."

Gender Diversity

In 2020, at the beginning of a new decade, unfortunately we are still having to talk about the need for greater boardroom gender diversity. As we predicted last year, we are not going to be in a position to stop talking about it for at least another four years…and even that is an aggressive timeline based on the way things have shifted over the past six years. Positively, gender imbalance on boards is continuing to lessen, 561 of the 2004 board seats on the ASX300 are now filled by women; that is 28 more than last year. Another positive indicator is the fact that the number of boards that have 30% or more women on them has risen from 113 last year to 121 in 2020. This is also accompanied by a rise in the number of boards that have 50% or more women; 20 companies (up from 16 last year) are in that list.

"Research shows that companies with greater levels of gender diversity have stronger financial performance as well as fewer governance-related issues such as bribery, corruption, shareholder battles and fraud.”

Cultural Diversity

We have previously detailed just how demographically different our board and senior executive composition is in comparison to our broader population. In 2020, there has been no significant change.

Is that good enough for a society that prides itself on multiculturalism? We think not.

On the ASX300 the number of board directors from non-Anglo-Celtic cultural backgrounds has decreased to 5%.
The percentage of board directors from anywhere outside Australia has decreased to 29.3%.
71% of Women NEDs who are not from Australia are from North America, New Zealand or the UK.

" Today’s FTSE 100 and 250 boards do not reflect the society we live in, nor do they reflect the international markets in which they operate. Whilst we are making good progress on gender diversity in the boardroom, we still have much to do when it comes to ethic and cultural diversity."

Skills Diversity

The year on year changes in the area of skills and expertise that directors bring to their various boards moves slowly. Radical shifts are not what one expects when the only measurable new sets of experience in a specific area are provided by the new directors, and there are only 204 of those (10.2% of all directors). We are not implying that the current directors are not adding skills on an ongoing basis but we look at the core skills that directors bring to the board, not the additional expertise they gain.

2020 is likely to be a year without corporate precedence. As such, the way that our boards either get ahead of or react to the challenges thrown up will be key in determining how successfully their companies survive or even thrive in such a dynamic business environment. We believe that boards with a broad range of views, skills, educations and backgrounds will be in a better position to cope with the ensuing uncertainty.

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