In 2017 the number of ASX 200 companies with an all-male board halved from 14 to 7. While that’s good news, it’s astonishing that 7 of Australia’s largest 200 listed companies still don’t have at least one female director.

The statistics for female representation on Australian listed company boards can be deceptive. Only 11 of the ASX 200 companies have a female chairperson, and 64 have only one female in the boardroom. It should be obvious to large listed companies with large boards – one female director does not equal diversity. 

Macho is bad for business

All-male boards are bad news for investors in large listed companies. Companies with only male boards perform worse financially, and create risks for shareholders through entrenchment and groupthink.

While the improved financial results for shareholders should be enough motivation, companies are facing increased external pressure to lift their game on gender diversity. The Australian Institute of Company Directors is pushing for companies to have 30% female directors by the end of 2018, and Australian Council of Super Investors is urging its members to vote against the re-election of male directors to all-male boards.

Image source: 12 Angry Men

Future Super supports the target of 30% female directors on company boards. While there’s been progress towards this target, this progress appears to be stalling. Between 2009 and 2016, the percentage of female directors on the ASX 200 increased from 8.3% to 25.3%. In the last year, this only increased to 25.4%.

There’s no excuse for large, billion dollar companies not to do better on gender diversity. There are as many qualified women as there are men. The lack of gender diversity is therefore either deliberate, or a complete lack of trying. Future Super therefore supports mandated targets for Australian listed companies to achieve gender diversity.

What is Future Super doing?

Our view is that influential shareholders like super funds should encourage gender diversity on company boards. That’s why we’re:

  1. Engaging with companies to do better
  2. Divesting from listed Australian companies with all-male boards
  3. Helping create ethical investment products with gender diversity screens

1. Engagement

We are proud to have had some success engaging with smaller and mid-sized listed Australian companies on gender diversity. Two companies have added female directors to their boards after we have raised this as an issue of concern with their executives. The feedback we’ve received is that these companies had been talking about gender diversity informally, and that the questions from institutional shareholders acted as a catalyst for increasing female representation on their board sooner.

2. Divestment

There remains only two listed Australian companies in the Future Super portfolio without a female director: Fluence and Megaport. Neither of these companies are in the ASX 200. Our investment team have met with executives of these companies, and both have made a commitment to us that they will appoint a female director in the first half of 2018. We are hopeful that these companies will fulfil their promise to Future Super as a shareholder, otherwise we will sell out of these companies if no female is appointed by 30 April 2018. By May this year, Future Super will not be invested in any listed Australian company without a female director.

3. A new fund with gender diversity screens

Last year we partnered with specialist Exchange Traded Fund (ETF) provider Betashares to launch an ethical Australian shares ETF called FAIR. (An ETF is a managed fund that you buy and sell through the ASX). Future Super is contracted by Betashares to assist with the ethical methodology for FAIR, and to perform the ethical screening work for the fund. We are also the initial investor for the fund, with it now making up the majority of Future Super’s Australian share portfolio.

The FAIR ETF listed on the ASX in November 2017, and is the first ethical ETF in Australia that has a specific rule to exclude investment in companies with all-male boards.

Image source: Bigstock

4. The challenge of gender diversity on global company boards

Australia is, unfortunately, no worse than many other countries when it comes to gender diversity at large listed companies. Globally, females make up only about 15% of listed company board positions.

Future Super invests in global equities through the Betashares Global Sustainability Leaders ETF, ASX code ETHI. Future Super has assisted Betashares with the ethical methodology for ETHI as well as performing the ethical screening. There is no specific gender diversity screen for ETHI.

Of the 100 global companies that Future Super invests in via ETHI, there are 6 companies without a female director. These 6 companies all have one key thing in common: they are all Japanese companies.

In Japan, just 4% of board positions are filled by women. It doesn’t get much better in other Asian countries either. In China women make up 9% of listed company board positions; South Korea is at just 2%.

It’s a challenging position for our team. While we don’t want to invest in companies with all-male boards, does this mean that we should exclude almost all Asian domiciled companies from our global share portfolio? Our first step is to work with Betashares and our ethical research partners to engage with these companies on an issue which they have generally not been receptive to.

A final note on board diversity

It should be noted that gender diversity is just one area where companies are lacking. As discussed earlier, for 64 of Australia’s largest 200 listed companies it is one female sharing a boardroom with mostly old, white men with similar backgrounds.

Diversity improves decision making for boards, and in turn improves financial returns for shareholders. The best performing companies are more likely to be those with a board which have a diversity of gender, age and backgrounds.