Why is board diversity important for investors?
Companies are likely to be most successful when they harness collective intelligence and approach problems with different mindsets. Diversity of thought allows boards to set and challenge company strategy, and to better understand the markets in which they operate.
The clients, customers and other stakeholders of any business are diverse. To properly understand their interests and how they impact the organisation, the organisation’s governing body should be reflective of its stakeholders.
A properly structured board should include appropriately skilled directors and draw on a range of criteria, including gender, ethnicity and age, in addition to core skills and experience.
Companies with a demonstrated commitment to diversity attract the best talent and do better over the long-term.
Diversity has a material benefit to governance outcomes and strengthens decision making. That is why we strongly supports efforts to improve gender diversity on boards and management teams, and why, over the last 10 years, our members have engaged with companies to increase the number of women on boards.
How do we engage on board diversity?
Companies should set a timeframe within which they will achieve gender balance (40:40:20) on their boards. In the meantime, ACSI expects no gender to make up more than 70% of board positions in an ASX-listed company.
We work with companies to understand their plans to meet these targets. ACSI encourages companies to advance gender diversity at executive level and to disclose the actions that they are taking to achieve this.
Applying the ACSI Governance Guidelines, we will recommend our members vote against the boards of ASX300 companies with poor gender diversity on a case-by-case basis.