Australian businesses should consider setting cultural diversity targets for their most senior ranks, according to a new report from Sydney University Business School.

The report titled Beyond the pale: Cultural diversity on ASX 100 boards identified Australia’s board members are overwhelmingly Anglo-Celtic men who “display traditional male leadership traits” and who are selected from male-dominated business networks.

Biased filters in promotion and recruitment selection, a lack of awareness and contact with culturally diverse talent and relying on a closed and personal network in the recruitment process are the main barriers to progressing cultural diversity on Australian boards, according to the report.

Race Discrimination Commissioner, Dr Tim Soutphommasane.
Source: Humanrights.gov.au

Speaking at the launch of the report in Sydney this week, Australian race discrimination commissioner Tim Soutphommasane, took the recommendation to introduce targets a step further, calling for a legislative mandate for cultural diversity.

“What I have detected around cultural diversity over the last five years in my job is that there’s a lot of risk aversion in Australian organisations around cultural diversity. People don’t want to be the first on cultural diversity but they do have a fear of missing out,” Soutphommasane said.

“The only way we might be able to get through this cultural barrier is if we get legislative mandates on this issue. If we have to wait for enlightened self-interest and for the leadership in corporate Australia to get this across the line we might be awaiting a while.”

Research for the Beyond the Pale report was undertaken by Dr Dimitria Groutsis, Professor Rae Cooper and the Dean of the Business School, Professor Greg Whitwell. It was supported by the Australian Human Rights Commission and the Australian Institute of Company Directors (AICD) and is based on interviews with 18 ASX 100 board members and nine executive search firms.

Recommendations

The qualitative research recommends targets be put in place, but doesn’t go as far as saying what those targets would look like in practice. The report also recommended growing and developing the ‘supply’ of culturally diverse leaders and broadening networking arrangements to open up access to potential directors from culturally diverse backgrounds.

The AICD aren’t yet advocating for cultural diversity targets on boards but say they have seen a growing interest from their membership base around the topic.

Also speaking at the event, Louise Petschler, general manager – advocacy for the AICD, noted there is a lack of research and analysis around the drivers of cultural diversity on boards in Australia.

“We see this as an important step in opening up and helping build that business case and the research base that we know is incredibly persuasive for directors and that will be a really important tool in shifting the conversation,” Petschler said.

As well as supporting the report’s recommendation to improve networking arrangements, Petschler highlighted the role of the investor community in pushing for greater diversity at board level.

“The boards of listed entities do not exist in isolation. Shareholder activism and shareholder demands are incredibly important and we have seen that in terms of the representation of women on boards,” Petschler said.

For example the Australian Council of Superannuation Investors has advised the boards of the ASX 200 it would start voting against all re-nominating directors for election if their boards did not have a clear path to at least 30 per cent of the seats around the table being held by women, Petschler said.

Tracking diversity

Before any kind of target could be put in place, the data around diversity figures has to be more clearly defined and collected.

“It is a welcome recommendation… but targets only make sense when you have the data. Here I believe there is much, much more work to be done. Unfortunately there is too much hiding behind a lack of numbers when it comes to cultural diversity,” Soutphommasane said.

The outgoing Race Discrimination Commissioner noted “there seems to be a deep reluctance in Australia to collect data on cultural diversity”.

“I hear very often that there are concerns about privacy, anti-discrimination law which prevent organisations from collecting data on cultural diversity. Well it is possible to collect data on these things. It doesn’t breach anti-discrimination laws and if you are in doubt about all of this just look at our cousins in other English speaking democracies,” he said.

Ming Long, Chair of AMP Capital Funds Management Limited
Ming Long, Chair of AMP Capital Funds Management Limited

Ming Long, Chair of AMP Capital Funds Management Limited, also said she had difficulty getting diversity data from human resource departments she has worked with.

“It’s so important to get the data because without the data we can’t get to targets and I’m an absolute massive proponent of targets, even if it is just to remind us that we are biased in our thinking,” Long said.

Rather than a 50/50 gender split, Long suggested organisations adopt a 40/40/20 target; 40 per cent women, 40 per cent men and 20 per cent (of either gender) that addresses another category of diversity.

“We need to do a lot more work on targets and we need companies to start accumulating all of that [data] so we can do more research, work out what’s going to work for these culturally diverse people as they move into leadership positions and hopefully on to boards,” Long said.

‘Riding the coattails of gender diversity’

Long said the most effective way she has found to advocate for cultural diversity is to “come through on the coattails of gender”.

“A lot of the issues are very similar… it is very simple to come through and say, ‘We are the same as gender. Why wouldn’t we think of it in the same way?'”

Soutphommasane argued cultural diversity has a long way to go before it has the same base of support and advocacy as gender diversity has achieved over the last decade.

When the AICD started tracking gender diversity on boards in 2009, only 8 per cent of the directors around the table of the ASX 200 were women. Today that is 27.9 per cent.

“The progress on gender equality reflects decades of organising, advocacy and networks being brought to bear, you simply don’t have anything equivalent on cultural diversity yet,” Soutphommasane said.

“Imagine there’s a board vacancy in an ASX 100 company, let’s assume this company has no history of having a female director ever, I will bet you very confidently that the phones would be ringing to the chair of that company and he … would be fielding phone calls from various people being lobbied on this. Would you imagine that being done for an ASX company that hasn’t had a non-European background before? Who is doing the lobbying there?”

Soutphommasane argued complacency around the issue could lead to “backwards steps in cultural diversity”.

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