The Royal Commission’s allegations of serious wrongdoing in the financial services sector have sent shockwaves through corporate Australia.
This article originally appeared in The Australian on 9 May, 2018.
The allegations have dominated newspaper headlines, and for good reason. These are serious issues that undermine the integrity of Australian businesses and the community’s trust in it. They cannot be ignored.
But somehow the conversation has been hijacked. Its focus has shifted from serious issues of ethics, transparency and accountability to attacks on the goal of increasing gender diversity.
Australia needs more diversity on its boards, not less. Diversity of thought, experience, background, ethnicity and — yes — gender, guard against groupthink and enhance decision-making.
Effective boards must have a breadth and depth of individual experience to interrogate management, oversee strategy, deliver long-term value for the organisation and, most important, challenge each other.
The business case for diversity on boards is irrefutable. Diverse boards and leadership teams lead to better outcomes for stakeholders and for shareholders. Diversity leads to greater innovation, more rigorous questioning and stronger bottom lines.
Despite the known benefits of diversity, many company boards remain remarkably homogenous. The composition of ASX 200 boards is evidence of this.
It is not only diversity in gender that is lacking. You only have to look at the number of directors from Asian backgrounds to realise there is also a dearth of cultural diversity in Australian boardrooms. And people with backgrounds in science and technology are under-represented in a nation focused on innovation.
A culture of diversity has not been deliberately and consciously created by those at board and executive ranks, and changing this will take deliberate and conscious steps. The leadership of most Australian businesses does not reflect their staff, their customers or the broader community.
It is good business sense for a board, at least in part, to reflect the diverse stakeholders for whom and with they work. I suspect most people already know this. Only the wilfully ignorant dispute the overwhelming evidence in favour of diversity on boards.
What we are seeing is good old-fashioned sexism thinly veiled as reasoned “commentary”.
One commentator recently criticised a senior female director’s experience as working in the “rag trade”. It characterised her as working on the shop floor sewing dresses rather than as the chief executive of a large and successful fashion retailer. It was a cheap shot and never would have been said about a man.
In fact the same commentators who now think “women are the problem” have been scathing in their criticism of the “boys’ club” for years. A criticism that for the large part is probably fair and we have been too slow to act.
Implying that the downfall of one chairwoman is evidence that the “gender experiment has failed” is ludicrous.
I do not recall the same commentary about the competency of male directors in general following other high-profile collapses of Australian companies. Instead we focus on the breakdown in governance that led to them and the corporate failings that devastated investors, employees and customers. These discussions result in valuable lessons being extracted for the benefit of all Australian companies.
If debate about the systemic issues under the spotlight in financial services is sidetracked by a rearguard action against board diversity, this will be an opportunity lost. There are important questions to be asked about the selection process for board members. Are the processes appropriate? Rigorous? Transparent? But those questions are not gender specific.
The Australian Institute of Company Directors ramped up our focus on increasing gender diversity because we saw that the directors of our largest companies were being drawn from a far too shallow pool. This is not good governance and does not meet community and stakeholder expectations.
It is not an unreasonable expectation that the boards of our largest companies should reflect, in a broad sense, the societies in which they operate.
The women being appointed to these roles must have the necessary skills and experience to discharge their responsibilities. This is as true of women as it is of men. However, I am yet to see any evidence that there are not enough suitably qualified women to fill these roles.
The issue is still one of demand, not supply. And let’s not forget, the vast majority of directors on ASX boards are men. Even when the AICD’s gender diversity target is achieved, 70 per cent of the seats at the table still will be filled by men.
The royal commission is turning a spotlight on the governance of Australia’s largest corporate institutions. We should not excuse unacceptable behaviour. The individuals appointed to these important positions are of course accountable for their performance, whether male or female.
Changes must be made. The lessons of the royal commission do not concern only financial institutions; they are relevant to the governance of all organisations.
We owe it to the community to ensure the focus of the debate is on the critical issues of ethics, transparency and accountability — not gender politics.
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