The ASX Corporate Governance Council (Council) has released the final version of its Corporate Governance Principles and Recommendations (Recommendations), putting gender diversity squarely on the corporate governance agenda and into the media spotlight.
The impetus for change
The revised Recommendations are part of a broader movement in Australia and globally to address the low levels of female participation at the senior levels of company management and at the board level.
Of particular influence on the Council was the August 2009 report of the Corporate and Markets Advisory Committee, an independent report requested by the federal government to investigate corporate governance concerns in relation to gender diversity. The report identified that women comprised just 8 per cent of directors among the ASX's top 200 listed entities, a figure largely unchanged since 2002.
The Key Changes
The Council has amended the Recommendations to introduce a number of new key issues. Listed companies that do not adopt the Recommendations are required to explain why not in the corporate governance statement of their annual reports.
The principal changes that have been introduced are:
- Diversity policy – companies should have a policy concerning diversity, and disclose the policy or a summary of that policy. Diversity is not, in this case, limited to gender, but also includes other areas such as age, ethnicity and cultural background. The policy must include requirements for the board to establish measurable objectives for achieving gender diversity and for the board to assess annually both the objectives and progress towards achieving them. These objectives and their progress should also be disclosed in the annual report. The policy should be supported by procedures to ensure that the policy is implemented properly and that internal review mechanisms are in place to ensure that the policy is effective
- Measurable objectives set by board and reported on – the annual report should disclose the measurable objectives for achieving gender diversity set by the board, and progress towards achieving them
- Proportion of women employed – the annual report should disclose the proportion of women employees in the whole organisation, in senior executive positions and on the board, and
- Board diversity – the annual report
should include a statement as to the mix of skills and diversity
which the board of directors wishes to achieve in membership of the
board. Greater transparency in board selection is encouraged, as
well as reporting on matters such as:
- whether the board uses a skills matrix to identify any gaps in skills and experience
- the factors taken into account in the section process
- whether professional intermediaries are used
- steps taken to ensure that a diverse range of candidates is considered, and
- whether succession plans are in place to maintain an appropriate mix of skills, experience, expertise and diversity on the board.
The Recommendations were finalised after public consultation, the Council receiving 23 submissions on its exposure draft from listed companies, industry groups, investors and other stakeholders including the Australian Institute of Company Directors, Chartered Secretaries Australia and the Australian Human Rights Commission.
Response by business and the community has been positive, with debate centering on how gender diversity is best achieved rather than whether or not new strategies are needed.
The revised Recommendations will apply to the entity's first financial year starting on or after 1 January 2011. However, the Council considers that listed entities with a balance date of 30 June 2010 should be able to establish a diversity policy and report against the new Recommendations in respect of the financial year commencing 1 July 2010.
What do companies need to do?
Listed companies should prepare for the new reporting requirements imposed by the ASX Recommendations by:
- collecting intelligence on gender diversity performance and initiatives within their business (including developing strategies and initiatives to deal with increased public scrutiny and expectations in this area)
- developing or revising company-wide and board-specific diversity policies
- developing or revising internal processes to assist with measuring and reporting on gender diversity performance (including internal processes which will enable the Board to establish measureable objectives for achieving gender diversity and to review objectives and progress annually), and
- ensuring checks and balances are in place to prevent inadvertent breach of anti-discrimination laws.
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