View from the top: Why having women in the boardroom gives companies a boost

A study published in 2020 by the Bankwest Curtin Economics Centre and the Workplace Gender Equality Agency showed that having more women at the top meant better company performance, greater productivity and greater profitability.

It found an increase of 10 percentage points or more in female representation on the boards of ASX-listed companies had led to a 4.9 per cent increase in company market value. The appointment of a female chief executive was also good for business – that resulted in a 5 per cent increase in the market value of ASX-listed companies, worth the equivalent of $80 million on average.

Dr Meraiah Foley, deputy director of the women, work and leadership research group at Sydney University business school, says the evidence is increasingly clear that diversity is beneficial to businesses.

“Organisations that are open to – and governed by – people from diverse backgrounds are more innovative, resilient, and profitable,” Foley says. “They benefit from the productive friction that arises that when multiple perspectives and experiences are brought to bear on difficult issues and are less susceptible to groupthink.”

Purpose Bureau’s research suggests the benefits of board diversity apply to small- and medium-sized firms, not just big corporations.

Rhonda Brighton-Hall, co-founder of small technology and consultancy company, Mwah.live, says her firm since its inception five years ago has sought to embrace diversity. It has four female and four male directors and seeks to draw staff from a range of cultural backgrounds.

“We recruit deliberately to be diverse,” says Brighton-Hall.

Having people with different life experiences enhances the team and promotes innovation, she says. “You lose blind spots if you’re [not] all thinking the same,” Brighton-Hall says.

Emma Lo Russo, co-founder of Sydney software firm Digivizer, tells a similar story. She believes having a diverse company leadership team is a key to effectively engaging with both staff and clients.

“If you are not reflecting your employees and customers then how can you be making decisions?” she says.

“There will be a bias that’s always there, no matter how empathetic you think you are, that voice will not be there.”

Having “different viewpoints” in the leadership team benefits the whole business, says Lo Russo.

But mixed-gender boards are the exception rather than the rule.

Purpose Bureau’s study identified the gender for every director in almost 900,000 Australian businesses across all industry sectors. It revealed 68 per cent of Australian companies had male-only directors while 17 per cent were female-only and only 15 per cent mixed gender.

Sectors with the biggest share of mixed-gender boards were agriculture, forestry and fishing (22 per cent) and financial services (20 per cent). Male-only boards were most prevalent in mining (81 per cent) and construction (80 per cent) while the highest share of female-only boards were in education and training (15 per cent) and health care and social assistance (15 per cent).

Overall, the profile of Australian company directorships remains very blokey. Kamper says one reason for this was the large number of small companies, and individual contractors, in sectors dominated by male employment, while in sectors dominated by female employment, there are a relatively small number of firms.

“Male-leaning industries like construction account for the largest number of businesses in Australia, 11 times more than education and training which has the highest female representation,” he says.

“It certainly seems that the contractor economy is an overwhelmingly male one.”

However, the gender balance at the boardroom tables of Australia’s biggest corporates has shifted during the decade.

Back in 2009 females had just 8.3 per cent of board seats at the 200 biggest firms listed on the Australian Stock Exchange (the ASX 200). But that share had climbed to 34.2 per cent in November 2021, according to data collected by the Australian Institute of Company Directors. All ASX 200 firms now have at least one female board member.

Research by the University of Queensland Business School found that Australia was one of the first countries in the world to reach a target of at least 30 per cent women on top listed boards and this was achieved without mandated quotas. Australia now has a bigger share of women on large publicly listed companies than the average for wealthy country members of the Organisation for Economic Co-operation and Development.

Louise Petschler, general manager of advocacy at the Australian Institute of Company Directors, says a growing recognition of the benefits of board diversity by Australian companies is demonstrated by “how far we have come” in recent years.

“Boardroom diversity matters because it leads to better corporate outcomes,” she says.

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“Different perspectives around the board table improve the quality of decision-making by introducing new perspectives and lived experiences. Having diversity in the boardroom also fosters an environment that encourages healthy debates and discussions which again can lead to more considered decision-making.”

There are still eight with all-male boards among Australia’s largest 300 listed firms (ASX 300) while across all listed companies on the stock exchange there are 67 boards with no women.

But there is public and investor pressure to appoint more female directors.

One ASX 300 company with an all-male board is Melbourne-based voice recording software provider Dubber Corporation. When this masthead put questions to Dubber’s directors asking if there were advantages to having an all-male board, a spokesperson for the company said it was changing tack. Dubber has recently “commenced an international search” to find a suitable female independent director to join the firm’s board.

When that happens, Dubber will join the 54 boards among Australia’s biggest 300 listed firms with only one female board member.

Dr Foley warns simply appointing a female director does not guarantee the superior performance associated with greater diversity.

“It’s about embracing how all that diversity entails,” she says. “It means recruiting for a diversity of opinions and allowing for that productive tension that can occur when you bring an array of perspectives and experiences to bear on challenging issues. It can’t be done in a tokenistic fashion.”

Research by Canadian academics Camélia Radu and Nadia Smaili underscores this point. They found firms with three or more female board members were more likely to have adequate cybersecurity risk measures in place, and to report significant cybersecurity breaches. But anything less than that “critical mass” of three female board members was not sufficient to achieve the high standard.

“One token woman is insufficient for triggering greater cybersecurity disclosure,” says the study published in the Journal of Business Ethics. “Although visible, she has no impact on ‘old boys’ club’ decisions.”

The benefits of diversity are not limited to improving the gender balance of directorships. Dr Foley says firms with more racial and ethnic diversity in their executive management teams also outperform their less diverse competitors in terms of profitability.

Australia’s biggest firms are lagging on this measure. A 2021 study of board diversity found nine out of 10 ASX 300 board members were from an Anglo-Celtic background and only one in 20 were aged less than 50 years.

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Based on current trends it will take nearly 20 years for the boardrooms of the nation’s biggest companies to reflect Australia’s cultural diversity, the report by Watermark Search International and the Governance Institute of Australia concluded.

The Purpose Bureau’s study is just the latest to draw attention to how more diversity in company leadership results in superior performance. But many Australian firms – both big and small – still have a long way to go on that front.

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