Posted: 28 Mar. 2017 05 min. read

Gender Diversity

The real reason we are still talking about it

Why has progress towards gender equality been so slow, when it is widely acknowledged that more heterogeneity is required in teams and boards of directors in Australia? And why are men named Peter still more likely to be on a board of directors than any women at all? AMP Capital recently examined why answers to these questions are critical to investors.

A mountain of highly credible research now documents that gender diversity on boards delivers business value. By way of example, Credit Suisse (2014) and Catalyst (2013) found that companies with gender diverse boards generate significantly higher returns on equity, sales and invested capital when compared to all male boards. AMP Capital (2016) found that when companies have two or more women on the board, they have a better quality of corporate governance. And it gets even better with gender balance, i.e. 50/50 men: Deloitte (2016) and Credit-Suisse (2016).

This is not news. Indeed the business case for diversity has been known for some time and it is one of the main reasons that corporates, think-tanks and governments have been talking loudly about the importance of increasing women’s representation in leadership. That noise has been paying off. Since 2010 there has been substantial increases in women on boards in Australia, Canada, France, Germany, Japan, Netherlands, Norway, the UK and USA.

Some fear that with all of this noise, people may have become inured to the issue, or perhaps overwhelmed by the complexity of the change required. In order to maintain, if not accelerate the momentum, investment fund manager AMP Capital has released a recent report entitled “Gender diversity: The real reason we are still talking about it”.

AMP Capital’s report details (i) why investors should care about diversity in general and gender diversity in particular; (ii) the nature of successful change initiatives in Australia; and (iii) the actions investors can take to improve gender diversity.

Why investors should care about diversity

Echoing findings from “Which two heads are better than one: How diverse teams create breakthrough ideas and make smarter decisions” (Bourke, 2016), AMP Capital argues that “teams best able to generate strong returns for shareholders will be those who are happy, engaged, collectively intelligent, but also cognitively diverse”.

More than just reciting data, AMP Capital argues that each person needs to experience a personal “ah-hah moment” in order to perceive the “un-level playing field” as, in the words of Michael Kimmel: “privilege is invisible to those who have it”. For some, this will occur through an understanding of biases and gender stereotypes, for others the discussion will revolve around fairness, or recognition of the positive impact on men “when workplaces become gender equal”.

Assuming that there is nothing more that needs to be said to make the case for gender diversity on boards, AMP anticipates that some investors might still ask “but how much will diversity and inclusiveness cost?” Turning that question on its head, AMP Capital suggests that “it’s more important for organisations to ask whether they can afford to continue ignoring diversity and inclusiveness?”

The nature of successful change initiatives

Seeking to build on the recognisable momentum in Australia since 2010 (the year that the percentage of women on Australian boards started to increase significantly), the report catalogues the matrix of self-reinforcing change initiatives including:

  1. ASX Corporate Governance Council’s requirements on diversity reporting
  2. Australian Institute of Company Directors’ Mentoring and Scholarship Programs
  3. 30% Club (campaigning for 30 per cent women on ASX 200 boards by 2018)
  4. Male Champions of Change group

Investor action: Top things to improve gender diversity

AMP Capital makes recommendations for both individuals and organisations to improve gender diversity. The recommendations for individuals are:

  1. “Acknowledge we are part of the problem”
  2. “Understand our biases and address them”
  3. “Champion benefits of diversity”
  4. Set measurable targets and report progress”

The recommendations for companies include:

  1. “Promote an inclusive culture from the CEO down”
  2. “Make diversity a KPI for companies”
  3. “Decrease bias in recruitment with gender balanced short lists and interviewing panels”
  4. “Pay men and women equally”
  5. “Develop and promote all employees equally”

When can society stop talking about gender diversity?

AMP Capital’s report on gender diversity provides a helpful summary of the state of play in Australia – progress, aspirations and shortfalls. Critically, it highlights the importance of each individual candidly challenging themselves about their level of engagement with the issue and being personally accountable for making personal and organisational changes. AMP Capital concludes by urging continued discussion about diversity, because it is only when each individual fully understands that they are part of the complex problem, and the source of the solution, will it be possible to “hurry up history”

For more information, contact Tara Atkinson 

To read the full report, see AMP Capital (2016) “Gender Diversity: The real reason we are still talking about it

This blog was originally authored by Tara Atkinson.

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