Australian gender diversity reporting does not allow boards to make meaningful and valid comparison with their peers
10/02/2017
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The efforts of Australian listed companies to achieve greater gender diversity on their boards has been a success. Progress has been easy to track and assess from standard company disclosures.

Unfortunately, this cannot be said for reporting gender diversity standards and achievements outside of company boards.

ASX-listed companies have been required since 2010 to disclose in each annual report the proportion of women across the organisation, in senior management and on the board.

In 2014, the ASX Corporate Governance Council released a third edition of its Recommendations, including a provision stating that compliance with WGEA gender pay reporting can be treated as compliance with the ASX CGC diversity requirements, streamlining the process.

Unlike the recent initiative to increase the number of women on boards, the WGEA standard does not even permit simple cross company comparisons. For example, how companies determine members of “senior management” is open to interpretation and are therefore not comparable. It is also open to also gaming.

Therefore, while many companies have stated gender diversity objectives, it is difficult to compare and assess their performance across peers.

In order to draw meaningful like-for-like comparisons – or to identify industry leaders and laggards – Australia could benefit from standardised requirements for employment bands and look to the UK regime as an example.

The UK Government released a revised version of the Gender Pay Gap Reporting (GPGR) regulations in December 2016 (see HERE), with an accompanying explanatory memorandum (see HERE).

Those regulations are now in “final draft” format awaiting parliamentary approval, following a consultation process first launched in February of last year.

Subject to parliamentary sign-off, the updated requirements will come into effect in April 2017, and continue to apply to non-public sector employers with 250 or more employees (similar guidance for the public sector is expected to follow shortly). This contrasts with Australia’s Workplace Gender Equality Agency (WGEA) requirements for non-public sector employers with 100 or more staff to report gender-related pay data.

The UK regulations require relevant employers to capture “snapshot” pay data annually on 5 April, and to publicly release the data within a year. Initial reporting is due on or before 4 April 2018 covering the period 6 April 2016 to 5 April 2017.

UK companies will have to publish the following metrics:

  • The difference between the mean hourly rate of pay of full-pay male and female employees;
  • The difference between the median hourly rate of pay of full-pay male and female employees;
  • The difference between the mean bonus pay of male and female employees;
  • The difference between the median bonus pay of male and female employees;
  • The proportions of male and female relevant employees who were paid bonuses; and
  • The distribution of male and female full-pay employees in each quartile pay band across the organisation.

The final draft regulations enhance guidance on how certain data should be captured and disclosed.

It is now clear that bonuses relate solely to amounts paid during the year. Deferred short-term incentives are reported in later years when realised. Non-cash incentives, e.g. equity, are included in “bonus” pay when the recipient becomes liable for the tax.

Further, it is understood that the workforce will be divided into four equal parts comprised of equal numbers of employees in each band. The bands are referred to as the “lower”, “lower middle”, “upper middle” and “upper” quartiles in the final draft regulations.

© Guerdon Associates 2021
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