Hot Topics: Encouraging greater boardroom diversity
Gender diversity on boards has been a talked about topic for a while, but what about age diversity? Generation X (aged between 36-50) occupies 21% of the Australian workforce. Gen Y (aged between 22-35 ) occupies 31%. So, should they be better represented on the boards of super funds? For this week's hot topics panel we ask Fiona Trafford-Walker, director of consulting at Frontier, and Paul Smith, founder and chief ideas officer at XY on Boards, their views on addressing the diversity divide in Australia's boardrooms.
Fiona Trafford-Walker
Director of Consulting, Frontier Advisors Pty Ltd
Should investors be demanding greater diversity in the boardroom? Why?
Diversity of membership for any group brings broader and more imaginative thinking. However, that doesn't mean a female trustee can't represent male fund members, or that a 50 year old trustee can't represent a 20 year old's interests. The main thing to ensure is that a super fund board has the right combination of skills, plus a strong internal and external support network, to enable it to do its job as the guardian of other people's money. The best combination for a board is a group with strong collective skills, and a willingness to commit the time, energy and focus to their roles.
Why is it that boards are not more representative of the broader population?
Super fund boards guide the strategy for the fund and make decisions on recommendations. I do think experience offers the advantage of having seen similar circumstances and challenges before and in that sense age and experience are closely related. Young trustees by definition often won't have that catalogue of experience to draw on but they can and do have other skills and perspectives that are valuable. These skills and perspectives can be captured via the broader network that surrounds the board. I do think however, that the nature of super fund boards, plus that support network, means they can represent the broader population without necessarily having to look like them.
How can the investment community encourage greater diversity in the boardroom?
Where diversity can be really effective is within the teams, both internal and external, that develop ideas and advise trustees in the boardroom. Certainly as a young woman I was given that opportunity early in my career and some of the best trustees I dealt with then were older white men, but they had a preparedness to listen to me, to have confidence in me, but also to challenge my ideas and advice. I have also been strongly supported by other women in the industry over the years. It's been great to see evolution in the make-up of boards since then, but we do have some way to go in the industry before we truly achieve diversity in all forms. One way to address this is to have some form of "diversity gap assessment" when new trustees are being sought but I would always have skills at the top of my list.
Paul Smith
Founder and Chief Ideas Officer, XY on Boards
Should investors be demanding greater diversity in the boardroom? Why?
Quite simply, yes! I believe it is vital and to an extent critical. We are seeing the rapid change of business creating shifts in the economy. Technology and disruptive products and services can outplay traditional business models and hence, the risks associated with entrenched or homogeneous mindsets could be detrimental to company performance and in some cases, worse. Diversity in the boardroom can help mitigate these risks.
Why is it that boards are not more representative of the broader population?
It doesn't seem to make sense. If your customers are representative of the population or as is more normal predominantly female or at the younger end of the spectrum, I find it hard to understand why the board, in its governance and strategic role would not have members that reflect that base. There is the story of the childcare centre group with a board full of men! There are many perceived and actual barriers to entry on both sides of the equation. Our research has shown that younger directors believe they are too young and too 'inexperienced' to join boards. Many boards think younger people are not interested. In our experience, these are just myths. The boardroom boys-only club is now being disrupted by the gender debate and we hope this leads to a deeper diversity debate.
How can the investment community encourage greater diversity in the boardroom?
At XY on Boards we advocate for increased age diversity in the boardroom (XY stands for Gen X and Gen Y). In essence though, our belief is in diversity of experience, mindset and perspectives. The investment community can apply a deeper lens to the recruitment of new directors. They can insist that more diversity related needs analysis is conducted, and is reflective not of the resume of the director but reflective of the business. With the data increasingly pointing to the fact that financial performance is positively correlated to greater boardroom diversity, then it seems to be in shareholder best interests, and therefore, in the case of superannuation boards, a duty of care for members.
Want to join the conversation? Email us to add your voice and we'll publish your views in next week's blog.
