Boardroom Diversity

In a previous article published in CFO Magazine A/NZ, titled ‘Transitioning to a Board Role’ I discussed my work in helping women transition from their corporate careers to board roles.

I am very passionate about this program and the success it has achieved in bringing more women onto boards.

According to the AICD, board diversity is the mix of skills, experiences, backgrounds and characteristics present at the board table. Diversity, in its broadest sense, includes gender, age, ethnicity, cultural background, disability, sexuality, education, and professional experience

Proxy advisors take great pains to chastise companies that don’t have sufficient female representation on their boards. However, many aspiring women directors feel that they are not getting a ‘look in ‘as the same select group of women keep getting more and more roles as  – success breeds success.  A significant director role almost assures the offer of other director roles.

However, creating an effective and diverse board has to be done for the right reason. 

When I suggested to the Chair of an ASX company that he should replace the Chair of Audit, who had presided over a massive accounting fraud, one of his responses was, “If this director leaves the Board, we will have an all-male Board. This will attract criticism from a broader group of shareholder associations and activists, which we don’t want at this time. I expect for the next 18 months or so we will find it very difficult to replace them”. I suspect that shareholder associations and activists would have been more concerned about the share price, which had gone to zero, and the huge fraud; I don’t believe Board Diversity would have been on their agenda.

Do women bring a different perspective to men around the board table? Does this imply that all men think the same way, and where do I, as a male, fit in. A couple of years ago, a friend of mine was the chair of a university Medical Advisory Board that was looking for a new director. This was not a paying position and involved an enormous amount of work.  He asked me if I know anyone who was interested, and I volunteered myself, as I ticked every box. I was surrounded by friends and a partner in the medical industry, had great insights into many issues, and had access to some of the smartest medical professionals, all friends of mine. He said no, as he was looking for a woman. Most of the women I knew looking for positions, needed paying positions after having given up high-paying corporate careers but still need to cover expenses. I was not unhappy with decision but felt I could have brought a lot to role, more than many others.

On a board, I can sometimes be referred to a ‘black hat’ thinker. One of my strengths is the ability to consider unintended consequences, question what doesn’t seem correct, and help formulate solutions.  I remember sitting on a retail board with an equal mix of sexes and a female CEO. The CEO gave a great presentation of a Gantt Chart showing the steps and work taken to secure a lease for new store, while other members of the board raised the issue about store cleanliness.

All good points, and the board, other than me, was pleased with the presentations. Why was I the lone voice in this supposedly diverse group concerned about how to attract more customers?  Our like-for-like sales were steadily declining. Getting new stores was not an issue, and all the stores I visited were clean enough, but somehow this very diverse board ignored the declining sales.

On another board in Manilla, and after a presentation by the Call Centre team, why was I the only person, much to the chagrin of the CEO, to raise the issue of how the Call Centre handled churn, which was by far the business’ biggest issue? The call centre managed to acquire thousands of new customers each month but lost nearly an equivalent number, so why were we only addressing one part of the equation and ignoring what most concerned the analysts. This was a very diverse board, but diversity does not guarantee competence.

The Harvard Business Review on March 27, 2019 concluded:

Evidence that board diversity benefits firms, however, has been mixed. A 2015 meta-analysis of 140 research studies of the relationship between female board representation and performance found a positive relationship with accounting returns, but no significant relationship with market performance. Other research has found no relationship to performance at all. The research found that ‘diversity doesn’t guarantee a better performing board and firm; rather, the culture of the board is what can affect how well diverse boards perform their duties and oversee their firms’.

I have been privileged to sit on the boards with some wonderful female directors and some terrible ones, but equally with some wonderful male directors and terrible ones. I have only ever had one director give a perspective from what could be attributed to their gender, either female or male. In their desire to be liked, and appease a large fellow-director shareholder, who had appointed them to the board, they put forward positions and statements that were not good for the business and proved very detrimental.  

Having a diverse board is necessary and now demanded, but care has to be taken that the individuals are appointed to the board for the right reasons and have the necessary qualifications. Board members need to add value and understand, though not necessarily be experts in, financial statements. A lot of time is spent at the board level, discussing performance, and all board members need a fundamental understanding of all matters pertaining to the workings and performance of a board. 

Creating an effective, diverse and inclusive Board can contribute to the success of an organisation and lead to a better culture which is now not only desirable but almost mandatory.

Author:  Jon Brett

Jon Brett is a Non-Executive Director of Corporate Travel (CTM) and Chair of the Audit and Risk Committee. Jon is also a Non-Executive director of Raiz Invest (RZI) and the NASDAQ listed Mobilicom.

Jon is the author of the very successful podcast series “The Taking of Vocus” which chronicles the extraordinary rise of Vocus, what went wrong with the M2 merger and concludes with the privatisation of Vocus. The podcast can be found here via LinkedIn: https://www.linkedin.com/in/jon-brett-95734732/