Board directors on notice to act on positive duty

Thursday, 01 February 2024

Emma Foster & Denise Cullen photo
Emma Foster & Denise Cullen

    How are boards responding to new positive duties to rid workplaces of sexual harassment, sex discrimination and victimisation? 

    When Susie Corlett GAICD’s father recently pulled out a long-forgotten letter she’d written to him some 30 years ago, while working as a geologist, it was a shock reminder of the sluggish pace of change. “It went along the lines of, ‘Dad, how do I get my manager to believe, let alone act on, the incidents of sexual harassment that are happening all the time?’” recounts the board director with 30 years of mining industry experience across exploration, operations, finance and investment.

    “That I had to ask my father shows how little support there was,” she recalls of her “rugged” induction to an industry rife with sex-based discrimination, including fellow miners’ threats to strike if she was allowed underground (because women in mines were thought to bring bad luck).

    Corlett believes the new laws compelling employers to proactively eliminate workplace sexual harassment will be “game-changing” after decades of slow progress. “For us to be in this position now where we have legislation being enforced, albeit long overdue, is an absolute watershed,” says the director of Mineral Resources, Iluka Resources and Aurelia Metals.

    But recent research by the AICD, Australian Council of Superannuation Investors (ACSI) and Australian Human Rights Commission (AHRC) shows there’s much to do for company directors to get on top of the new duties. The findings report, Positive Duty: preventing and responding to workplace sexual harassment — insights from Australian directors, shows experienced directors recognise the need to move beyond mere regulatory compliance and seize the opportunity to drive meaningful cultural transformation.

    Seasoned director Simon McKeon AO FAICD says while there’s a groundswell of understanding that the new duties need to be prioritised, now is the time for boards to take “real action”.

    “There’s no-one who can avoid it — it needs to be what I’d call routine knowledge,” says McKeon, a director of Rio Tinto, which in 2021, engaged former Sex Discrimination Commissioner Elizabeth Broderick AO to lead an external expert review of its workplace culture. “It’s just like every other issue we don’t know enough about. There’s no alternative but to roll up the sleeves and get informed.”

    Not just a box tick

    Catherine Brenner FAICD, a director of Scentre Group, Emmi, Schools Plus and the George Institute for Global Health, and chair of Australian Payments Plus, believes that a good starting point for boards is to recognise that the issue is not simply about compliance. “The Rubicon many boards have to cross is that this is more than just a box-ticking exercise that can be satisfied by having some policies that say: ‘We don’t tolerate sexual harassment’,” she says.

    “What we’re aiming for is a culture of prevention, just like we do with physical safety. It’s really a sharpening of an existing obligation, which is to have a culture where individuals can thrive, do their best work, and go home safely. That needs systems and processes, it needs risk controls, regular dashboard reporting, KPIs, investigations, so that it’s kept on the agenda. Most importantly, it needs observable leadership. Getting the tone from the top right is critical.”

    The penny drops

    Many mining industry businesses have moved quicker than others to bed down their response following the release of damning statistics revealing an estimated 74 per cent of women had been subject to sexual harassment in the past five years. Among the lessons learned from this “wake- up call”, Corlett says the most salient for all industries was the realisation that a lack of incident reporting does not mean that a workplace is free from sexual harassment — rather, it is more likely to be indicative of an unsupportive reporting system and culture.

    “The reasons that we don’t see incidents being reported — [including] fear of retribution, shame or mistrust in the systems — have all been prevalent for years,” says Corlett.

    “The penny has now dropped that we need to shift towards a culture where it’s safe to speak up, which requires visible, unequivocal, consistent leadership that cascades throughout the entire organisation.”

    Breaking down bias

    But there’s concern in some quarters this message hasn’t reverberated widely enough as some directors appear yet to acknowledge sexual harassment might be an issue in their organisation. It’s a view McKeon believes stems from ignorance and may also reflect lack of diversity around the board table.

    “Diversity is powerful,” he says. “It actually makes for a more competitive organisation, because you have the ability at the top level to really understand what can be for other people in the organisation an all-consuming issue.”

    Experienced director Andrew Stevens MAICD adds that biases — both conscious and unconscious — may be at play, and urges board directors to seek exposure to people who have lived experience of the issue.

    “Understanding the causes or preconditions sheds powerful light on culture and conduct, which the positive duty seeks to establish and change,” says Stevens, a director at Stockland and oOh! Media, and chair of Industry Innovation and Science Australia (IISA).

    “This is an issue where we all need to commit to action, collaborate with those who can help and be transparent about results, good and bad.”

    Trust through transparency

    In fact, “warts and all” public disclosure of confirmed incidents and outcomes is crucial to addressing the problem, regardless of the reputation risks, says Corlett.

    “The more we’re open, the greater confidence and trust in the system victims have,” she says, noting a temptation to “contain” information will simply prevent needed action. “It’s uncomfortable to talk about these things publicly, but any discomfort we feel is nothing relative to the discomfort of those at the receiving end of it.”

    Brenner is hopeful that as more leaders continue to raise the bar through transparent external disclosures, a “reframing” of the issue will emerge.

    “If we disclose that people have been dismissed, it shouldn’t mean we’re a bad organisation. It is actually showing that we have a healthy culture where we prioritise the safety and wellbeing of our people,” she says.

    Competitive advantage

    Openness on this issue will also be expected by long-term investors interested in gauging the way companies are managing the risk. It will be equally important to companies’ positioning in a fiercely competitive talent market, says McKeon.

    “It is a top-order issue for a board to know how appealing its workplace environment is and whether you have factors in your organisation that have the effect of turning away talent,” he cautions. “The younger generation is demanding more openness. They want to know before they go inside a place what its culture is really like. So this is not an era to feel that your organisation is not competitive.”

    Rallying roadmap

    To get that understanding, beyond seeking training, conducting a gap analysis against the AHRC’s guiding principles and standards, and putting in place risk controls, Corlett recommends that board members simply ask employees about their experiences.

    “The best practice I’ve seen is directors engaging through listening sessions,” she says. “It gives you an accurate baseline, an understanding of the hazards and a very clear set of steps to ensure that you control the risks. It’s also about the competence of leaders — whether it be sitting around the board table as directors, the CEO, or frontline leaders within the business — to recognise and know how to act. That is really what champions a respectful workplace culture.”

    High-priority, but patchy preparation

    Grappling with the prevention of sexual harassment has become a regular boardroom topic since the 2020 Respect@Work report highlighted its prevalence in Australian workplaces, with 85 per cent of directors who were interviewed agreeing that it’s a high-priority issue for their board.

    Yet only 20 per cent of women directors interviewed and 39 per cent of men said their board had a “very adequate” understanding of the full spectrum of unlawful behaviour covered under the new duty, such as subjecting a person to hostile workplace environments on the grounds of sex or certain acts of victimisation. Only 41 per cent indicated their board had received training.

    Meanwhile, just 32 per cent of women directors and 45 per cent of men “strongly agreed” that their organisation was well-prepared to meet its obligations.

    “Boards are not ready for the positive duty,” said one respondent. “The compliance sections, general counsel and human resources are more ready and they will drag the boards with them.”

    To improve readiness, respondents suggested boards seek briefings on the full scope of the new obligations and engage experts to review and benchmark their organisation’s response.

    Tone flows from the top

    While emphasising the distinct roles of management versus the board in meeting the new obligations, directors surveyed overwhelmingly agreed that boards set the ultimate “tone from the top” on culture, respect and safety. “If the board doesn’t believe in the positive duty,” summed up one respondent, “then neither will the CEO, and that attitude will flow all the way down.”

    Most directors observed that setting the tone required boards to regularly and proactively engage and question management on the issue, handling it not as a compliance exercise, but as an opportunity to drive cultural change. Many also cited the need for directors to personally model expected behaviours.

    Other key board levers included selecting a CEO who champions respectful workplaces, embedding safety and culture into remuneration incentives for executives, and progressing towards gender equality targets at all levels of the organisation. Seventy per cent of directors indicated their organisation had set targets to achieve gender balance in management roles via recruitment and promotion strategies.

    Different safety risks, same frame

    Framing psychosocial safety risks — such as sexual harassment — in the same way as physical safety risks was seen as fundamental. “If there is a trip hazard in a hallway,” explained one respondent, “I would be responsible for moving it... Similarly, if I saw sexism in the hallway, I should also be accountable for speaking up. That is the culture we need to create.”

    In some organisations, this has led to positive duty risks being integrated into existing enterprise risk and work health and safety frameworks, thereby reinforcing leadership accountability and collective responsibility for the new obligations.

    However, most respondents agreed progress on this front was slow. “I don’t think the behavioural element of sexual harassment is generally safe to talk about yet, compared to physical safety risks,” said one respondent.

    Another added, “In physical safety, if something is reported, it’s celebrated. But the problem with sexual harassment and assault is that there are pejorative issues around both parties... sometimes the person accused gets fired and then the person who made the report gets blamed for ruining someone’s life and career.”

    Sharpened cultural visibility

    Directors agreed that the unlawful conduct covered by the positive duty was linked to organisations’ cultures, yet it was often difficult to gain visibility of the extent of the issue. “Boards... feel accountable for culture, but also struggle with how to measure it,” said one respondent. “There has been an effort to identify metrics which provide companies with qualitative results... but there’s no silver bullet yet.”

    Evaluation often requires the triangulation of different data sources, such as engagement and pulse surveys, complaints data, whistleblower reports and exit interviews. Several directors said they also “walked the floors” searching out informal staff interactions to better gauge culture. Others said warning signs could often be found in the circumstances under which key personnel may have left the organisation and the language and behaviour of senior leaders around transparency of information.

    Suggestions to sharpen visibility further included expanding the internal audit function to cover positive duty conduct in investigations and reports, assessing “lead” indicators (particularly measures of gender inequality) as well as “lag” indicators (such as poor retention rates for women) and finding unchaperoned opportunities to listen to employees’ experiences without senior leaders being present.

    Transparency sends a cultural signal

    Many directors concurred that transparency was not where it should be when it comes to revealing the prevalence and consequences of sexual harassment and other positive duty conduct. Some reasoned that transparency was limited so as to maintain privacy and confidentiality obligations to employees who made reports. Others suggested a common concern that disclosing unlawful conduct within the workplace would damage the company’s reputation.

    “The main issue that many companies see with respect to transparency around bad behaviour is that they are scared [that] the public will see them as a terrible company,” said one director.

    “I actually think the opposite is true. If you do publish this data people know you care. It shows that you prioritise it, you address it, investigate it, and report back. If it is swept under the carpet and everything is kept confidential it creates a culture of mistrust.”

    A number of directors advocated the benefits of comprehensive, de-identified internal and external disclosure — including the strong cultural signal that it sends out around expected behaviours and the opportunity that it creates to demonstrate accountability and a strong commitment to best practice.

    “The best approach,” concluded one respondent, “will be shining the light on examples of organisations being courageous enough to release the data — and this will lead the way.”

    Boosting reporting

    Despite rising societal expectations around stamping out sexual harassment, which are backed up by the new laws, directors concurred that the rate of incident reporting within organisations was unlikely to reflect the true number.

    Some suspected underreporting reflected an enduring tendency for people to minimise their experience of unlawful conduct; to be fearful of victimisation, retaliation or re- traumatisation if they do report; or to lack trust and confidence in reporting and complaints mechanisms.

    Directors suggested tackling these hurdles required building a “listen-up” culture among senior leaders to underpin the psychological safety required to build a “speak-up” culture. Meaningful staff engagement was also needed to understand the reasons for underreporting, cultivate confidence in workplace systems and train bystanders on their responsibilities

    Human rights enforcement powers

    With the introduction of Respect at Work legislation, the onus is on employers to initiate change to eliminate sexual harassment and discrimination in the workplace.

    The introduction of the Anti-Discrimination and Human Rights Legislation (Respect at Work) Act 2022 (Cth) in December 2022 has tossed out the traditional reactive, complaint-based model for a proactive stance that places the onus squarely on employers to initiate change.

    Employers now hold a positive duty to stamp out sexual harassment, sex-based harassment, sex discrimination, hostile work environments and victimisation in connection with work. Should they fail in this duty, the Australian Human Rights Commission (AHRC) has new regulatory powers to enforce compliance, according to AHRC Sex Discrimination Commissioner Dr Anna Cody.

    Respect the report

    This change follows on the heels of the 2020 Respect@Work: Sexual Harassment National Inquiry, which found sexual harassment to be prevalent and pervasive in Australian workplaces. It revealed that two in every five Australian workers had experienced some form of sexual harassment within the past five years, with a disproportionate impact on women (39 per cent) as opposed to men (26 per cent). Respect@Work further emphasised inadequacies in current reporting mechanisms, with less than one in five (18 per cent) of those who experienced harassment formally reporting it.

    “[The report] demonstrated to us that having a complaints-driven model isn’t working,” says Cody. “It’s not fair on complainants to have to bear the onus and the responsibility of driving good work practice, through them individually having to make complaints.” While enforcement activities were important, they would not shift the dial on their own, she warns.

    Cultural change

    Sexual harassment and related behaviours were still often perceived as a series of unrelated incidents, rather than a broader cultural issue, with lower-level forms of these behaviours creating a climate in which more serious conduct could flourish. Cody thus encourages business leaders to apply a “cultural lens” to the issue. “In the same way that we, as a society, decided that drink driving was unacceptable behaviour that created far too much harm... this is another sort of behavioural shift that needs to occur.”

    Recognition of harm must be accompanied by the realisation that sexual harassment, sex- based harassment and hostile work environments disproportionally affect women from culturally and racially marginalised backgrounds, as well as First Nations women. “It’s recognising we don’t want those sorts of harms,” adds Cody. “We don’t want those sorts of workplaces and we’re committed to changing that.”

    CEO selection is a key lever boards can use to ensure clear expectations and positive cultural attitudes flowed from senior management through to the rest of the organisation. “It would be a very unwise board that would hire a CEO who blatantly disregards their obligations,” says Cody.

    Consultation counts

    The AICD-ACSI-AHRC research underlines the need for organisations to consult with employees.

    “Employees are the ones who know what is going on — they know where the trouble spots are, they know the risk areas and will have some really creative solutions of how to deal with them,” says Cody.

    Gaining visibility over organisational culture, particularly different subcultures, is a key priority for directors and often requires the analysis of different data and information from surveys, focus groups, whistleblower reports, exit interviews and complaints data. The hoped-for result? Cody would like to see an increase in people making complaints, because it means these problems are coming to the surface, rather than being suppressed.

    “When there are allegations or concerns raised, we’d like to see a non-defensive response from employers, an openness to transparency and monitoring. We’d like to see organisations perhaps publishing ways they’ve decided to consult with their employees and some of the measures they’ve put in place.”

    Employers would also release post-complaint outcomes and limit the use of “destructive” non- disclosure agreements, which let them hide behind a payout to affected parties. “Transparency, accountability and monitoring are key parts of the process that should be public,” says Cody. “That will demonstrate to me there’s been a shift.”

    Enforcement actions

    In December 2023, the AHRC published its compliance and enforcement policy, detailing how it intends to wield its new powers. “Our first step will be very much an educative [and] collaborative approach,” says Cody, emphasising that directors must ensure they understand what the new duty entails, with education flowing down through the workforce and the development of internal policies that support the new approach.

    “If, after a period of time, the positive and constructive approaches haven’t worked, then [the process] will move into a more regulatory structure, where we can issue compliance notices... enforceable through Federal Court order,” says Cody, noting this action also served to “name and shame” the most flagrant offenders.

    In its positive duty compliance guidelines, the AHRC says “senior leaders”, including board directors, are required to actively oversee the development and implementation of appropriate measures to prevent unlawful conduct.

    Cody urges leaders not to view it as a compliance exercise, but a chance to drive much- needed cultural change. “It’s a time with hope — a real opportunity for Australia to lead the way and make real, lasting change to make our society and our workplaces fairer.”

    The investor perspective

    Board directors should be on notice for rising investor scrutiny over their response to new positive duties to eliminate sexual harassment and other sex-based discrimination in workplaces, says ACSI CEO Louise Davidson AM GAICD.

    Long-term investors have long been aware that workplace sexual harassment can result in serious financial impacts and also inflict reputational damage, according to Australian Council of Superannuation Investors (ACSI) CEO Louise Davidson AM GAICD.

    “The aftermath at AMP Capital from the sexual harassment matters... is a good example of the huge potential financial impact of mismanaging such issues,” she says, referring to the widespread investor anger and share price falls following the decision by the investment manager to promote an executive despite a sexual harassment case against him in 2017. “Now, the positive duty makes very clear, both legally and from the community more broadly, what’s expected from organisations on how they manage their duty of care for their employees — and will help to focus boards on the inherent financial risks.”

    The new duties, enforceable by the AHRC, have for some years been in the sights of ACSI, whose members include asset owners and institutional investors with more than $1 trillion in funds under management. The powerful proxy adviser has a mandate to influence boards and policymakers on long-term investor concerns, such as board diversity, climate change and corporate culture.

    In judging companies’ responses to the positive duty, Davidson notes ACSI members will be looking through a combination of cultural, reporting and transparency lenses.

    “A key issue has been that employees don’t feel confident to report sexual harassment because it can be a really damaging process for them,” says Davidson, who has led ACSI since 2015, following a 20-year career in the financial services and superannuation industries.

    “If a board is not getting any line of sight of sexual harassment reports, they really have to assume that’s not because it’s not happening, but because they’re not hearing about it. Boards need to be able to point to how they’re putting in place those structures to encourage a ‘speak-up’ culture, how they’re making sure their framework for reporting is trusted and credible — and their overall cultural approach to gender equality as a key lever in achieving required change.”

    Disclosure on this issue is still in its relative infancy, but Davidson says transparency is critical for both investors and organisations in reinforcing internal cultural expectations. “Investors don’t need case-by-case reports, but will want to see evidence of reporting and how it’s been managed within the organisation. My hope is that as more organisations report frankly about the incidents of sexual harassment, it will become easier for others to do so. We need to see the normalisation of this reporting.”

    Room for development

    Davidson says that while boardrooms are making progress, there’s plenty of room for development, as reflected in the findings from the recent research led by the AICD, ACSI and the AHRC.

    “A few years ago, many boards didn’t really see this as being an issue that sat with them,” she says. “That has broadly changed and it’s now being viewed as fundamental to creating a safe workplace. That’s a really positive step, but I will always think the progress is too slow whilst ever there are people still being harassed.”

    Among her key concerns is for the issue to be championed by all board members, rather than being reliant on women directors, as has broadly been the case.

    “Having more women on boards has played a really critical role in changing the conversation and raising these issues. But it’s crucial that it’s taken on as a whole-of-board issue and not left to be dealt with by the women, otherwise we won’t see the change we need to see.”

    While acknowledging the challenge for directors of adding this issue to an ever-expanding list, Davidson says organisations that don’t prioritise it will be penalised. “This is a fundamental issue about people being able to go to work, perform their job and go home without having been sexually harassed. That’s a human right. Long-term investors have an interest in supporting the companies in which they invest to be well-run, safe for their people and desirable to work at.”

    This article first appeared under the headline 'What Now?’ in the February 2024 issue of Company Director magazine.

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