The factors holding boards back from cultural diversity

Recent research by the University of Sydney’s Business School (and supported by the AICD) has attempted to pinpoint the factors behind the lack of cultural diversity in Australian boardrooms.

“Australian data consistently reveals that culturally diverse individuals are underrepresented in the leadership of the public and private sector,” the report states, drawing on numbers from previously conducted Australian Human Research Council research.

While 95% of 2,500 executives surveyed for AHRC research were of Anglo Celtic descent, only 58% of the Australian population has Anglo Celtic roots. Of the remainder, 18% had European origins, 21% Asian origins and 3% Indigenous Australian origins.

According to the University of Sydney research, this imbalance comes back to five key factors:

1. Limited supply of board talent at the executive level

The usual path to the board involves an executive career first.  So, in the same argument as that used for gender diversity, the lack of cultural diversity on boards has been blamed on the lack of diversity in the executive suite.

2. Assimilationist attitudes and a preference for a western leadership style

A confident approach that involves promoting your own view is one of the traitsthat have been identified as a “traditional male leadership” behaviour by the report. Such behaviours are not prevalent across other cultures, especially Asian cultures.

Most interviewees reported an “assimilationist mentality” to boardroom culture, requiring directors to fit in rather than the board valuing and capitalising on cultural difference as a differentiator.

One interviewee stated that the goal was to find a candidate who understands a certain culture, but communicates their understanding in the western way that the board performs. “Because if they can’t, they have a lot of knowledge they’ll never share.”

3. Biased filters in promotion and recruitment and selection

There does not appear to be conscious discrimination on the part of those who are promoting talent to the executive suite. However, the report does conclude that biases do filter out particular groups when promotions occur.

“A particularly important filter is found in the personal and professional networks permeating Australian business’ upper echelons, which create an ‘in group’ that is key to information sharing, visibility, trust and reputation building,” it states.

This in group is then extended to the board recruitment process, which is often limited to board member networks.

4. Lack of awareness and contact with culturally diverse talent

Cultural diversity was often considered to be covered off by recruiting  a director who had experience in a particular market – they would be considered to have cultural awareness and global understanding. Hence there is no need to have someone from a different cultural background.

This substitution of one group of people for another enables a lack of cultural diversity by reducing awareness of the true state of affairs.

Meanwhile, the networking bias reduces contact with culturally diverse talent.

5. Closed and personal circuit in the recruitment process

Trust was identified as a major element of the recruitment process. “There is too much risk involved in taking on a candidate that no one knows,” according to one interviewee. This fosters a tendency to limit the recruitment process to board member networks.

And while many boards might consider that appointing an executive search firm will fix this problem, the report noted the same biases were mirrored in the search firms.

One interviewee stated that the mandate the client provides is strongly adhered to, which at times “interfered with broadening the mix”.

Another stated:

I think they’re [search professionals] all very conservative in what they present … so they always feel a lot safer if they know the candidate is already on an ASX board or if they have the endorsement from the chair of a big board… Then they will be more likely to present them. They aren’t particularly brave I don’t think, in terms of taking some bets on people that, you know, are very good operators, yeah, they don’t really step up.

The report revealed action was needed to increase cultural diversity on boards.

  • Grow and develop the supply of culturally diverse leaders
  • Develop transparent pathways to board membership
  • Broaden networking arrangements
  • Implement learnings from what has worked in the gender diversity campaign
  • Clearly define cultural diversity
  • Consider setting targets and report progress

Those interested in the research can find it HERE.

© Guerdon Associates 2024
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