Summary
Professionelle supports the proposed new paragraph to Rule
10.5.5 to require issuers to include additional and specific
disclosures in their Annual Reports as to gender diversity.
New Zealand lags the rest of the world, including our Australian
neighbours, when it comes to the participation of women in senior
management teams and Boards. The Human Rights Commission's
2010 Census of Women's Participation revealed women hold only 9.57%
of the New Zealand Debt Market (NZDX) directorships, 9.32% of the
New Zealand Stock Market's (NZSX) and 6.82% of the New Zealand
Alternative Market's (NZAX). In addition, according to the
Census, only 4% of the NZSX Top 100 CEOs were women, and, of
management positions reporting to CEOs in the top 100, only 21%
were women.
There has been progress over the last five years but it can only
be described as glacial. Worse still, according to Korn Ferry
International's more recent figures of 2011, of the 100 largest
domestic companies by market capitalisation in Asia, there are
currently no female chief executives in New Zealand. That means we
are getting worse.
Meanwhile, across the Tasman, there has been a marked leap forward
in terms of the number of women appointed to ASX 200 boards. The
trigger was the suite of diversity-based recommendations in the
mid-2010 amendments to the ASX Corporate Governance Council
Principles and Recommendations. The surge in women directors from a
stubbornly static level around 8.5% to over 14% is striking:
Percentage of Women on ASX 200
Boards
- 2004:
8.6
- 2006:
8.7
- 2008:
8.3
- Jan 2010: 8.3
- Dec 2010: 10.7
- Dec 2011: 13.4
- May 2012: 14.2
(source: Australian Institute of Company Directors'
website)
According to Women on Boards' "Traffic Lights
Index", the gender statistics improve as you move up the ASX, with
boards of ASX50 companies having higher percentages of women
directors and making more efforts with their gender diversity
policies.
It has been demonstrated that since the ASX Corporate Governance
Council announced in December 2009 that it would amend the
Principles and Recommendations to require companies to report on
gender at board and senior executive level, there has been a grab
for female directors. Between November 2009 and December 2010, 57
women were appointed to the boards of 54 ASX 200 companies,
compared to only 11 for the whole of 2009.
The Business Case for Women on Boards
New Zealand will continue to fall further behind other OECD
nations who have seen and acted on the business case for improving
diversity in their leadership ranks. According to the 2010 Census
of Women's Participation, New Zealand lagged Australia (10.32% of
ASX 200), the USA (15.2% of Fortune 500), Canada (13%), the United
Kingdom (12.2% of the FTSE 100), most European countries and South
Africa (14.6%) in the percentage of female directors in
companies.
Professionelle views NZX companies as a high priority as they are
the benchmark for economic activity in New Zealand, yet are the
worst performing sector in relation to women in leadership
positions across New Zealand society as outlined below.
% Female Participation on Boards By Sector
(2010)
- School Boards of Trustees: 51.0
- Public Sector Managers:
37.8
-
Judges:
26.0
- National Sports
Boards: 24.0
- Top Legal Partnerships:
18.2
-
Mayors:
17.9
- University
Professors:
17.2
-
Agribusiness:
11.8
- NZSX Top
100:
9.3
(source: The Human Rights Commission's 2010 Census of
Women's Participation in NZ)
The Business Case for Women on Senior Management Teams
From a senior management perspective, New Zealand is also doing
very poorly indeed. The 2010 New Zealand Census of
Women's Participation shows that only 21% of New Zealand's
second-tier positions (ie reporting to the Chief Executive Officer)
were held by women, and at least 30% of the NZSX Top 100 companies
had no women at all in their senior management teams.
This is bad news for New Zealand, as the presence of women on
senior management teams has been comprehensively shown to have a
direct and positive impact on the bottom line. Below is a
quick summary of recent studies on this topic.
'Connecting Gender Diversity and Financial Performance' -
Catalyst 2004
Catalyst studied 353 Fortune 500 companies and used Return on
Equity (ROE) and Total Return to Shareholders (TRS). They
divided companies into quartiles, based on the gender diversity of
their top management teams. The 88 companies with the highest
gender diversity in their top management teams were referred to as
"top-quartile" companies, and the 89 companies with the lowest
representation were referred to as "bottom-quartile"
companies. Top quartile companies had an average of 20.3% of
women on top management teams. The bottom quartile had 1.9%
women on their management teams.
Catalyst's key findings were that top quartile companies
experienced statistically significant higher performance using
their measurements. Specifically:
- ROE which was 35.1% (or 4.6 percentage points) higher.
And;
- TRS which was 34.0% (or 32.4 percentage points) higher
By industry sector, the difference between the top and bottom
quartiles was most pronounced in:
- Consumer Staples - 17.5% greater ROE and 87.7% greater TRS
- Consumer Discretionary - 7.8% greater ROE and 70.2% greater
TRS
- Financial - 4.1% greater ROE and 84.0% greater TRS
'A Business Case for Women' - McKinsey and Co 2007/8
McKinsey and Co found that companies with three or more women in
their senior management teams scored higher on all of the nine
organisational criteria determined to be linked to higher operating
margins than did companies with no senior level women. And in turn,
the companies with the highest organisational ratings significantly
outperformed those with the lowest in terms of operating margin and
market capitalisation.
'Women Work: The Business Benefits of Closing the Gender Gap'
-DDI 2011
Research by the global talent management experts, DDI, found
that leaders from organisations with a majority of women had over
50% more leaders rating their leadership quality as high compared
to organizations in groups with fewer women. Furthermore,
organizations with a higher percentage of women in leadership
positions more frequently reported their financial performance as
better than the competition. The relationship between having female
leaders and financial performance was the strongest of all the
criteria they looked at, including engagement and retention.
New Zealand women are an underutilised resource
Women represent a substantial talent pipeline for organisations
globally, and specifically in New Zealand because of their high
educational attainment. In New Zealand, recent statistics
from the Ministry of Women's Affairs show that young women aged 15
to 24 years are more likely than men to be studying at tertiary
level and to be achieving higher qualifications at degree level and
above. Young women aged 18 to 24 years are the majority of
students in all fields of study except information technology,
engineering, architecture and agriculture. Significantly,
they are particularly present in the fields of management and
commerce.
New Zealand women aged 25 to 34 years are more highly qualified
now than ever before and are either similarly or more highly
qualified than men in this age cohort. In 2010, 63% of those
graduating with a bachelor's degree or higher were women compared
with 37% for men (source: Ministry of Women's Affairs
presentation to NACEW, March 2012)
By 2006, 52% of women aged 25 to 29 years had a post-school,
bachelor or higher qualification, compared with 45% of men that age
(ibid).
Unfortunately, the Ministry's figures also show that women,
although highly qualified, have a workforce participation
rate in the 30-34 year age group of 72.7% compared with 92.6% for
men (ibid).
There
is no nation, government, industry or sector that can sustain such
a significant loss of highly educated, experienced and professional
workers over the long term. If New Zealand continues its trend of
undervaluing and underutilising its female talent it will struggle
to remain internationally competitive and innovative in its
business practices.
The participation of women in leadership roles in the NZX will
remain stagnant and may even reduce further unless serious,
positive and urgent action is taken. Given our consistent and
growing gap in productivity, New Zealand can ill afford to
underutilise any of its talent pool. Furthermore, it can be argued
that talented, capable and highly effective women may choose to go
to Australia to pursue a career in an environment that better
values and rewards their talent.
Proposed Additions to Rule 10.5.5
In addition to the proposed new paragraph to Rule 10.5.5 to
require issuers to include additional and specific disclosures in
their Annual Reports as to gender diversity, Professionelle
advocates for the inclusion of bullet points 2 and 3 on page 6:
- Require issuers to disclose whether or not they maintain a
diversity policy, and if so to describe the content of that
policy;
- Require issuers to maintain a diversity policy that includes
measurable objectives and to include in their Annual Report a
description of progress against such objectives;
Professionelle proposes that the bullet points above should
require companies explicitly to outline how their diversity policy,
supported by the measurable objectives, will in practice progress
women in the company to greater levels of seniority.
Professionelle argues that 'what gets measured gets done'.
Indeed, as demonstrated above, the changes made at the ASX have
resulted in substantial progress to the number of women on boards
there. But, if we are really to ensure there are women in our
pipeline here in New Zealand, greater scrutiny should be placed on
what companies are actually doing.
In their 2008 publication, 'The Business Case for Women', McKinsey
and Co wrote:
Explicit diversity indicators allow companies to monitor their
progress and to define priorities for action. Frequently used
indicators include
- the proportion of women in a company's business units at each
level of employment
- the pay levels and attrition rates of men and women in
comparable positions
- the ratio of women promoted to women eligible for
promotion.
Companies seem to promote and retain women most successfully
when senior executives monitor those indicators and incorporate
them into regular reviews.
In conclusion
Without scrutiny, the best we can hope for is more of the same
glacial progress. New Zealand can ill afford this continual
underutilisation of over 50% of our population.