October 22, 2021

In the next article in Minerva’s Australia peak season preview series, we look at the issue of board diversity. 

The fourth edition of the Australian Stock Exchange’s Corporate Governance Principles strengthened its recommendations around board diversity. 

An assessment by Minerva of ASX100 boards for financial years ending between 1 April 2020 and 21 March 2021 found the average level of female representation to be 34.16%. Whilst this represents positive progress, only eight companies had a female executive director. The lack of female representation in senior positions highlights the importance of effective gender talent management and succession planning of executive roles.

The analysis also identified 31 boards that fell below the recommended 30% level. The presence of companies that have yet to reach the target of 30% women on boards highlights the drawback to voluntary targets. Investors may wish to review the progress made by these companies when making voting decisions this season.

Beyond Gender

In May 2020, Rio Tinto destroyed 46,000-year-old rock shelters in Western Australia’s Pilbara region, which were highly significant to the area’s Aboriginal traditional owners, the Puutu Kunti Kurrama and Pinikura people. The Juukan Gorge shelters were destroyed as part of an extension of the Brockman 4 iron ore mine despite opposition from traditional landowners. The destruction was met with international outcry and led to the departures of key executives, including Rio’s CEO.

The incident has been a driver for calls for greater rights and power for Indigenous people and stronger cultural heritage protection laws. The blast resulted in the Australian Parliament tasking the Joint Standing Committee on Northern Australia with investigating its immediate causes and consequences and its wider ramifications for the protection of Indigenous heritage. Whilst the final report has yet to be published, the interim report entitled ‘Never Again’ was published on 9 December 2020 and found that despite evidence provided to Rio over many years about the cultural importance of the rock shelters to the PKKP people, it made a deliberate decision to choose the only one of four expansion options that required the destruction of the rock shelters on the basis that it would maximise access to the lucrative iron ore body located in the area.

This has also led to calls for greater cultural diversity on boards of listed companies. Research by the Governance Institute of Australia found that whilst progress has been made in the area of gender diversity, in terms of diversity of cultural background, the Australian boardroom is moving at a much slower pace of change, remaining dominated by those of Anglo-Celtic and European ethnicity. The analysis found that 90% of directors in the ASX300 came from an Anglo-Celtic background and 2.5% from a European background. Based on current trends, the analysis estimates it is going to take 18 years for the boardroom to be reflective of Australia’s cultural diversity. With the increasing focus on Indigenous rights in Australia and the Black Lives Matter movement, there may be calls for the introduction of targets on board ethnic diversity, as seen in the UK.