Gender diversity - it's time to get on board

Purple 12 Feb 2019
3 mins

Late last year, California Governor Jerry Brown signed into law a bill that requires publicly-held companies based in the state to have at least one woman on their board by the end of 2019.

That’s just the first step. By 2021, boards with five members will be required to have at least two women and boards with six members or more will need at least three women. Shock horror!  By 2021 that means that boards with six members will be required to have 50:50 gender representation.

For companies in California who thumb their noses at the law, a series of fines has been introduced: $US100,000 for the first violation and $300,000 for any subsequent violations.  This measure makes it clear that California lawmakers are serious about boards representing gender diversity and that allowing it to happen naturally, just isn’t an option.

For those people screaming “tokenism” – read on:

  1. A January 2015 report by McKinsey and Company called “Why diversity matters” concluded that companies with more diverse workforces – and by default diverse leadership – performed better financially. In fact, “Companies in the top quartile for gender diversity are 15 per cent more likely to have financial returns above their respective national industry medians.”
  2. McKinsey followed up with another report on diversity in 2018, which used a sample size of more than 1000 companies from 12 different countries – measuring not only profitability, but also “longer-term value creation exploring diversity at different levels of the organization, considering a broader understanding of diversity (beyond gender and ethnicity), and providing insight into best practices.” The expanded study only confirmed more strongly what the earlier study had suggested: that the presence of women (and other minorities) on boards meant these companies performed better.
  3. In 2012 Credit Suisse conducted a study and found that “Large-cap companies with at least one woman on the board have outperformed their peer group with no women on the-board by 26 per cent over the last six years”.

But why do women make a difference?

Women make up more than 50 per cent of the world’s population.  In some industries, such as the hospitality industry, women comprise the vast majority of the workforce, yet are still not adequately represented at a leadership level.

One reason suggested for the success of more gender diverse boards is that they more closely mirror their workforce and/or their customer base. Others suggest that the gender diversity provides balance and it “changes the way that conversations take place.”

It is also suggested that both women and men perform better in a gender-balanced environment which encourages collaboration and information sharing.  There is another school of thought that people tend to contribute more openly in gender-balanced teams.  Other studies even draw a correlation between attracting top graduates to companies and  gender diverse leadership.

But instead of asking why we should have more women in board leadership positions, the real question we should be asking is “why not?”

No one is advocating for token appointments – that would set any kind of reform back decades.  But what we should be looking at are appointments based on merit.  Why not appoint a female board member who has the requisite operational, financial or human resources experience, in place of a traditional male board appointment?  It’s not a new idea in some parts of Europe where boards must comprise at least 30 per cent female directors.

With California aggressively moving towards gender inclusion to produce more diverse boards, it stands to reason that other parts of the US may follow suit.  And Australian companies – especially those who are doing business in the US  – should be thinking along the same lines.

On the flipside, in August 2018, Allbright an all-women’s private British members club appointed a male chairperson, Allan Leighton. When criticised, the response was that not only was Leighton the best person for the job, but that men needed to be part of the solution.  This is gender diversity at its best – appointing the best person for the job, while maintaining the need to achieve balance.

Imagine what true gender diversity in board leadership could do?  If the evidence is to be believed, at the very least, it could see companies outperforming their peers and achieving record financial success.

But at the most, imagine providing role models in earned leadership positions for the next generation of leaders – both male and female. That’s the real win.

Peta Baldwin is Purple’s State Director in Queensland and an expert in investor relations and the resources industry, who has worked in in-house roles at Mount Isa Mines, Alcoa and most recently AngloGold Ashanti. Contact Peta