If they are serious about diversity, Australian policymakers and companies need to ensure every workplace is one that supports diverse employees, rather than just establishing ‘set and forget’ numerical representation targets, Akshaya Kamalnath writes.
The big diversity headline in December 2021 came from the United Kingdom. The news, that women hold more than 50 per cent of non-executive positions on the boards of companies listed on the Financial Times Stock Exchange (FTSE), came from the Spenser Stuart Board Index 2021.
While Australia might not have reached this milestone, it too has been making some gains. In November 2021, the Australian Institute of Company Directors reported that 34 per cent of directors on the 200 top companies listed on the Australian Securities Exchange (ASX) were women.
And all this without mandatory quotas – in either the United Kingdom or Australia. On the surface, it sounds like the ‘softly-softly’ approach of both countries, comprising of disclosure requirements and informal targets rather than mandatory quotas, is working well. But are these fixes at the top enough to ensure that Australian corporations do not miss out on the benefits of diverse talent?
Reasonable people agree that they want to live in a country where corporations are welcoming to all candidates based on their merit. This includes a diversity of people in terms of gender, ethnicity, age, ideological orientation, disability, or anything else, and this is why increasing the number of women on boards has been the focus of the corporate diversity agenda.
That said, other types of diversity are important too. The United Kingdom and United States have become alert to racial and ethnic diversity on corporate boards in recent years.
In 2017, the Parker review in the United Kingdom recommended that each FTSE 100 company should have at least one director of colour by 2021 and each FTSE 250 Board should have at least one director of colour by 2024.
Even though this is not a legal requirement, it added a strong voice to the conversation on racial and ethnic diversity in the country. In the United States, a quota requirement in California and a disclosure requirement introduced by Nasdaq, the corporation that runs its stock exchange, require companies to appoint members from diverse backgrounds, including members of ‘under-represented minorities’.
These regulatory measures, coupled socially with the Black Lives Matter movement, have pushed American companies into looking more closely at some other facets of diversity for board appointments too.
As for Australia, as one report published in 2021 rightly notes, ethnic diversity on boards in the country is ‘modest at best’, with boards of ASX 300 companies consisting overwhelmingly – around 90 per cent – of directors from an Anglo-Celtic background.
Unfortunately, this shows that there is not enough discussion of non-gender forms of diversity on Australian boards. Further, diversity in management positions and in the workforce more generally receive scant attention.
These issues need to be addressed if Australian policymakers want corporations to embrace diversity in the long-term.
Merely appointing more women or people of colour to boards to meet targets will not do enough to help those groups at lower levels of the hierarchy nor enough to help other candidates with diverse backgrounds achieve their full potential.
Rather than simply meeting targets, the way ahead for corporations and policymakers is to address workplace culture problems, and ensure every Australian workplace is one that supports and promotes all sorts of diverse employees. Addressing cultural issues that prevent diverse candidates from succeeding in the workforce will help companies retain talented employees.
Unfortunately, so long as the policy focus is purely on numerical representation on boards, fewer companies will commit their resources to enabling diverse candidates to succeed, opting instead to just ‘fill in the numbers’ to meet requirements, without creating structural change.
Eventually, regulators could even opt to walk away from quotas and targets, focusing instead on workplace culture. They must consider how they are incentivising companies to address any cultural issues hampering diversity and ensure that the workforce as a whole is able to change in this area. If they do so, it will be for the betterment of workers, and of corporations, which will have secured a talented and diverse workforce for Australia that will serve it well into the future.