The NZX has a tiger by the tail. Its proposed diversity listing rules, released for consultation in March and since adopted, pending FMA approval, have created a momentum for change which has the potential to transform our corporate culture.
The formation of the “25 Percent Group”, dedicated to increasing women’s representation on New Zealand boards to 25% by 2015, virtually guarantees that. It’s an ambitious target – more than doubling the number of woman directors within two and a half years - but the Group is well-positioned to achieve it as its 12 founding members have a lot of reach and influence.
They also have history on their side. It is clear from the public response to the NZX’s proposals that this is an idea whose time has come.
On every available measure, New Zealand’s rate of participation for women in the top echelons of the corporate sector is poor.
We came dead last in a 14 country comparison by the Human Rights Commission in 2010 of the percentage of NZX top 100 companies with women on their boards and on the proportion of board seats held by women, scoring 43% and 9.32% respectively.
Next worst was Australia on 53.5% and 10%. But Australia has since lifted its game, having increased the presence of women directors from 10% to 12.7% since ASX brought in gender diversity rules on 1 January 2011. So when - 15 months later - the NZX proposed similar but more modest amendments to its disclosure rules the only real questions were why so long and do the changes go far enough?
This is especially so as the NZX discussion paper quotes “credible research based evidence” to suggest that diversity in general and gender diversity in particular contributes to improved performance and “promotes diversity of thought which stimulates more innovative problem solving and may promote identification and better management of risk”.
Deloitte in a commentary on two major US studies, both of which found that the more women a company has in its leadership the better it is likely to perform across almost all indices, noted that neither study was actually able to argue a direct and causal link to explain the correlation. So Deloitte hazarded its own interpretation of the results, as follows:
“The story is not about the increased representation of a particular demographic group bringing extra ‘sparkle’ to the workplace because of their special skills and talents. Rather, the story is about organisations with a more diverse talent pool, especially at senior levels, manifesting a workplace culture of openness, merit and rational decision-making. At heart the story is one of diversity and inclusion of all employees, so that a richer knowledge bank is fully leveraged and better business outcomes are achieved”.
Let me acknowledge at this point that Chapman Tripp’s record on the promotion of women is no cause for complacency. Women comprise 15% of our partnership and 31% of our board and senior management. But since 2007 we have had a programme – Women@CT – to address this and we have made, and are continuing to make, measurable progress.
So what has the NZX done and how does it measure up against the task at hand?
It is inserting into Rule 10.5.5 two new requirements:
a requirement on issuers to include in their annual report a quantitative breakdown as to the gender composition of the board and officers, including comparative figures for the previous year, and
a statement from the board, where the company has a diversity policy, as to how it is measuring up with respect to that policy.
These changes fall short of the ASX provisions which not only require ASX members to establish a diversity policy but also to disclose the contents of that policy and to include in it “measurable objectives for achieving gender diversity and for the board to assess annually both the objectives and progress in achieving them”.
Chapman Tripp considers that the ASX approach is better because it requires a more holistic, serious and integrated response. ASX’s emphasis on qualitative rather than quantitative measures underlines that diversity is an ongoing exercise with no end point and also recognises that companies (and even industries) will be starting from different positions and will need to develop policies which reflect their specific circumstances.
The NZX, by contrast, is introducing what is in essence a head count test that could be satisfied by a couple of token appointments. And the NZX’s unwillingness to require (rather than suggest) that members develop a diversity policy will provide the laggards with an escape clause.
These qualifications aside, however, it is a definite step in the right direction and the emergence of the 25% Group should ensure that real change is achieved.