Panel on board and executive diversity beyond gender
11/04/2022
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Guerdon Associates and CGI Glass Lewis hosted their 16th annual Remuneration and Governance Forum, as a webinar, on the 17th of March attended by over 500 directors, investors, regulators and executives.

This article covers the second panel, focussing on diversity on boards and in executive ranks.

The panel began by questioning whether poor board decisions are the result of boards being filled with people who have similar beliefs and experiences. In these environments, poor decisions are not as likely to be challenged.

The issue of similar beliefs and experiences are exacerbated further by over-boarding, when the same people are on many boards.

The panel added that board and executive diversity can help attract talent. Employees increasingly want to work at a company that is reflective of who they are. Clients wants to deal with companies that are reflective of the community they are operating in.

The Australian focus on gender diversity may preclude other measures of diversity that contribute to better quality decisions. Yet, while gender diversity has been the starting point for board and executive diversity it has inadvertently increased age and career background diversity on boards as well.

Diversity data other than gender is lacking in Australia and the Asia Pacific region. There is no quantifiable racial or ethnic data on board members presented in annual reports. The US and UK have started including disclosures on gender, race and ethnicity. In Australia companies have been reluctant to seek this information as it involves engaging with their workforce in a way that could be considered intrusive.

The panel opined shareholders currently prioritise value over values, and will continue to do so. However, the two are not mutually exclusive. Communication is necessary to show shareholders why ESG targets are being changed and how they are relevant to the value of the business and therefore the shareholders investment.

The panel observed that companies may not have a diverse skillset internally available to replace their executive management, but should consider developing their pipeline so that in 5 – 10 years, there are more diverse options to fill these roles.

© Guerdon Associates 2024
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