Despite numerous initiatives to encourage gender diversity in the upper echelons of Australian business, momentum appears to have stalled, with the number of women in top executive roles remaining static. Top listed firms are now setting targets for gender diversity to change the status quo.
Women are currently just as scarce in top executive roles in Australian businesses as a decade or more ago, despite plenty of formal commitments to increase diversity and inclusion. A cascade of recent analysis paints a bleak picture and concludes change will only occur when there’s more active intervention, with target-setting for women in senior ranks one of the most practical steps. Boards play a crucial strategic role in introducing and supporting executive targets that are well-designed, realistic and deliver results.
Many leaders in the business community recognise something has to change. An increasing cohort of Australia’s top listed companies have introduced 40/40/20 male/female/flexible) gender targets based on a compelling economic and risk mitigation rationale.
Diversity of thinking makes for a healthy team and there’s clear evidence that better gender balance in leadership is not only fairer, but also good for business, says Debby Blakey GAICD, CEO of superannuation fund HESTA. Diversity also supports better performance, better governance and stronger long-term value for shareholders and investors, she adds.
Despite the growing pressure from investors, the latest annual Chief Executive Women (CEW) census report shows women still hold only 26 per cent of executive leadership roles in the ASX 300, well below the gender balance level of 40 per cent. Women continue to be significantly underrepresented in CEO, CFO and line roles that feed into top leadership: only 18 women CEOs in the ASX 300; and of 23 ASX 200 CEO appointments in 2020–21, there was only one woman.
It’s obvious from the census that action is needed right now, CEW president Sam Mostyn AO said while speaking at the report’s launch, and the push for targets will ensure the talent and leadership of women is no longer ignored or wasted.
Blakey notes the evidence increasingly shows that well-designed targets deliver results, with organisations that set targets for executive leadership more likely to achieve a balanced representation of men and women. For example, the targets set by the AICD and 30% Club Australia in 2015 to increase the number of female directors in the ASX 200 has been very successful, with an increase from 19% to 33.7% at the end of August 2021.
While a commitment to targets is key, it’s essential for boards to start by setting out a clear explanation of why diversity matters, says CSIRO chair and former Telstra CEO David Thodey AO FAICD. “It’s really important to understand why you think diversity and diversity of thinking is important as a board and as individuals,” he says. “Once you get there, you have to set targets, or you don’t know how you’re going. What you measure is what you achieve. It’s a leadership issue for boards, they set the culture and environment.”
Telstra had introduced targets before his tenure as CEO from 2009–15, and while the proportion of women in the executive leadership team has fluctuated (as at 30 June 2021, female representation at executive management level was 33 per cent) those shifts should not be a negative influence on where you want to be, he says. The idea that targets compromise merit is a false trade-off. “It’s like a lot of issues and we tend to put things at different ends of the spectrum. It’s not about meritocracy or gender balance — we can have both concepts.”
Choosing a CEO who has strong values around diversity and inclusion is another way the board can help, along with making sure there are a good number of female candidates. Targets, he adds, need to be set all the way through an organisation and not just at the top. “Then check and see how you are going, get the data and look at it. Where aren’t you making progress? That often comes back to leadership. And look at policies that may be disadvantaging any group… and I would then say you have to be an advocate for change.”
The board’s role is to demand data and once that is there, then get the executives to report on it and show them what’s behind it — why more men, for example, are getting through the ranks faster than women, says Dr Terrance Fitzsimmons, senior lecturer in leadership with the UQ Business School and managing director of the Australian Gender Equality Council. “That’s the critical role boards can play — and demand that they are told why any differences are going on. The board has to agree on targets and metrics, and hold people to account for them.”
Targets are not a new approach, and have long been applied in the public sector. Setting targets has boosted the ranks of women senior executives (SES) from 26.8 per cent in 2001 to 50 per cent in 2021, according to CEW data.
The Department of Foreign Affairs and Trade set targets in its five-year Women’s Leadership program, which delivered an increase of women at SES level from 36 per cent in 2015 to 43 per cent last year, while women heads of missions increased from 25 per cent to 43 per cent.
Making sure targets deliver, however, requires more than setting a broad goal and expecting results to emerge quickly. It’s essential to ensure there are pipelines for women into top jobs, says Thodey, and to keep a close eye on where women are being employed in an organisation, while creating opportunities for them to get experience in critical line roles.
Breaking down barriers
It’s also about interrogating the barriers to entry for top jobs. It could mean the board asking if you really need, say, an engineer for a CEO role, says Fitzsimmons, who has conducted research studies for the Workplace Gender Equality Agency (WGEA) and with the AICD. “One WGEA Employer of Choice asked, ‘do we need an engineer?’ You don’t have to get wedded to the idea it has to be a certain skill set.”
While there has been progress for women on listed company boards, the need for targets at executive level is a different challenge, he says. “There’s a similarity in the starting position. You are over the hurdle of supply with boards, but that’s a fight that has to be re-won with women in executive ranks.”
Companies can be proactive on this issue, according to Mirvac CEO Susan Lloyd-Hurwitz. She told the CEW launch that Mirvac interrogated its workforce data to identify points in their workforce at which women were disappearing. The company then engaged with women about their reasons for exiting the workforce at these critical points.
The pressure is building, however, with institutional investors increasingly pressing for results. HESTA, for example, has launched a campaign — 40:40 Vision — to encourage organisations to sign up to delivering change and boosting numbers, pledging to achieve a gender balance of 40:40:20 in executive leadership by 2030. Signatories to 40:40 Vision include ANZ, BlueScope Steel, South32, BHP, Origin Energy, Tabcorp, Ramsay Health Care, Viva Energy, Webjet and Domino’s Pizza.
Nevertheless, the current environment is very different to 2009, says Fitzsimmons, when pressure built to get more women on listed boards. It’s not the same world and it will take the corporate sector and leaders to force the issue and make progress. “You can’t pick and choose or say, ‘there’s a target and we’ll get there one day’. It’s not a simple journey, even with the right frame of mind and metrics, it’s about the bias that you have to overcome. A 40:40:20 can’t do it in a decade, it will take longer.”
It will be slow progress with lots of bumps in the road and will not proceed as fast as we’d like, agrees Thodey.
But it’s also becoming apparent that investors understand the true financial risk associated with a lack of gender diversity, says Blakey. Which means now more than ever, companies that fail to measure, manage and improve the diversity of their teams, risk getting left behind. “Gender equality is not about compromising merit — a more diverse workforce makes good business sense; it’s an economic imperative.”
Companies can take further action by:
- Defining precise targets for all leadership roles, particularly for line roles to build the CEO pipeline
- Breaking down gender balance targets by division to demonstrate contribution to an organisational target
- Ensuring targets are based on current workforce data, including growth, promotions and attrition, and that they are achievable and provide stretch goals
- Incorporating targets in leaders’ KPIs to improve accountability and sponsorship
- Sharing gender targets and updates on achievements, internally and externally, including reporting to the board on a regular basis.
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