Ben Travers
Just over a quarter (26%) of the Non-Executive Directors (NEDs) of Australia’s top 200 companies are female, according to new research by KPMG Australia for the ASX Education and Research Program.
The study also showed that at the smaller end of the listed market – the ASX 500+ companies – only 23% had any women board members. The KPMG report covers compliance with the ASX Corporate Governance Council’s diversity recommendations on disclosure of gender diversity in the boardroom, senior management and across the whole organisation.
Key findings of the report included:
- There was a very high of compliance, with 99% of the top 200 companies establishing a diversity policy.
- For the top 200 companies, overall, 22% of board members were female. This encompasses executive directors and NEDs.
- The ASX 201-500 companies saw a fifty percent rise in the proportion of women on boards in the past two years, up from 10% in 2013 to 15% in 2015, while ASX 500+ companies had just 6% women on boards in 2015.
- Among the top 100 companies, the % of women in CEO and COO/deputy CEO roles has not changed in the past five years, while female representation at CFO level reduced – in both 2011 and 2016, 5% of CEOs and 10% of COOs were women; the proportion of CFOs fell from 8% in 2011 to 6% in 2016, but female representation in HR (65%), General Counsel (39%) and Marketing (33%) roles has increased. There was also a notable improvement in women in senior IT roles, up from 19% in 2011 to 29% in 2016.
- In terms of reporting, most companies disclosed measurable objectives for improving diversity. However, very few companies set or disclosed transparent quantitative objectives such as ‘30% of director seats to be held by women by 2018’.
- Most of the measurable objectives reported by companies involved an action, such as setting up a new process, rather than an outcome.
- The majority of entities recognise that diversity goes beyond gender, with most diversity policies specifically identifying other areas such as age, ethnicity and cultural background.
Ben Travers, KPMG People Advisory Partner, said: “KPMG has been producing these studies since 2012, and the quality of disclosure has improved since our first report, with most companies now having a diversity policy. However, we would have expected by the fourth year that the bigger companies would be setting and disclosing quantitative objectives to improve diversity.
“Our studies have shown that those companies which disclosed clear quantifiable objectives like ‘achieving 35% of women at a senior management level by 2015’ demonstrated a higher level of gender diversity than those which did not set quantitative targets. Publicly committing to quantifiable objectives really does drive good diversity outcomes.”
Across the whole spectrum, the lowest level of disclosure was in respect of the proportion of women at the senior executive level.
Ben Travers said: “It is to be expected that the proportion of women at senior executive level may take longer to emerge due to the lead-in time for initiatives such as sponsorship and mentoring programs. But the slow pace of change in female representation in these roles over the past four years highlights the need for companies to rethink their strategy. The Male Champions of Change approach to setting ‘Targets with Teeth’ involves tying executive incentive payments to achieving quantitative diversity targets and has been adopted by some of the entities we surveyed. Others might wish to consider this policy.”
A second report by KPMG for the ASX, also released today, covered listed companies’ compliance with the new recommendations in the third edition of the ASX Corporate Governance Principles and Recommendations. The report revealed a high level of adoption and acceptance of the new recommendations. The report also identified room for improvement in the reporting of the board skills matrix, and on exposure to economic, environmental and social sustainability risks.
Ben Travers said: ”Most companies outlined a wide variety of board skills and capabilities in their board skills matrix. We were a little surprised that geographical, and technology or digital experience were not identified by more companies, particularly in the top 200. Companies tend to describe the current skills the board has, but few identify the gaps in the collective board skills or address what may be needed in the future, which is the purpose of the recommendation.
“We would encourage companies to improve their disclosure on the diversity component of boards. A mix of skills, expertise, background, age, ethnicity and gender is important to enhancing decision-making capabilities, lessening the risk of group-think and to ensure stronger connection with customers, employees and other stakeholders.”
On sustainability risks, Ben Travers added: “The report showed there was potential for improvement in reporting, especially outside the top 200. Firstly, there seems to be significant differences across the ASX companies on what constitutes a material sustainability risk. And secondly, a number of companies provide little or no information to support the way in which they determined whether they had any material risks.”
Kevin Lewis, ASX’s Chief Compliance Officer, said: “The two KPMG reports provide valuable insights into how ASX listed entities are meeting their ‘if not why not’ reporting obligations under the third edition of the ASX Corporate Governance Council’s Principles and Recommendations.
They enable listed entities to benchmark their governance disclosures against their peers and identify areas where governance disclosures can be improved. Listed entities should find them especially helpful as they come to prepare their corporate governance disclosures for their FY16 annual reports.”