Improving Female Leadership in Australia

Key points

  1. Women continue to be underrepresented in leadership positions all over the world
  2. A reality disconnect: attention over the past decade risks dulling the sense of urgency
  3. The remaining work that needs to be undertaken does not lie with industry
  4. WGEA reporting requirement should be expanded to require targets for achieving diversity improvements, and timeframes for achievement
  5. WGEA reporting requirements should be expanded to require organisations to detail the incentives for, and penalties for not, meeting targets
  6. WGEA reporting requirements should be expanded to require further detail on governing bodies
  7. Gender Equality Indicators relating to flexible working arrangements should be enhanced

Introduction

The unexpected election of Donald Trump as President of the United States has triggered a frenzy of analysis about the implications for women both in the United States and the rest of the world, with his victory regarded by many as a phenomenal setback for the cause of gender equality. Amongst a list of concerns being discussed are the future of abortion laws, access to female health care services and the appropriateness of language used about women by the President himself.

One issue which was discussed in markedly more positive terms by many during the Presidential campaign was progress on closing the gender leadership gap. The expectation that Hillary Clinton would break the world’s ‘highest, hardest glass ceiling’ generated optimistic analyses about the implications for women: a greater number of women being inspired to run for political office; the likelihood that her election would give critical mass to women’s voices and lead to a wave of women’s-focused initiatives.  Perhaps naively, one prominent line of analysis involved celebratory pronouncements that women would soon be ‘ruling the world’ – leading the three largest economies in the West and running the Federal Reserve Board and the IMF.

In fact, rhetoric about this presumed milestone – and the fact that it was not ultimately reached – draws attention to the realities of the female leadership gap in America and the rest of the world, including Australia. While the United States may have had its first female Presidential candidate – and Australia had its first female Prime Minister – women lag substantially behind men in reaching top leadership positions in both nations, and the forward trends are concerning. Despite the topic capturing the attention of policy makers and businesses, and impressive gains by women in education over past decades, statistics across a range of indicia could be argued to reveal a “stalled revolution”[1].

With predictions from the World Economic Forum that at the current rate of progress gender parity is still 170 years away[2], the Australian government continues to have an ongoing obligation to implement policy responses to the clearly ongoing problem of gender balance in leadership.  It is argued that there is a role for government in two areas:

  • An enhanced focus on the regulatory reporting framework which is already in place (the focus of this paper)
  • A new focus on broader set of responses, looking at specific industries and sectors with ingrained diversity challenges which haven’t received the attention of policy makers to the same extent (the focus of part 2 of this series).

Women continue to be underrepresented in leadership positions all over the world

Available data presents concerning indications about the ability of women to reach top leadership positions and evidence of women being locked out at all levels of the leadership pipeline.

In the US, where proclamations about women having broken the last glass ceiling abounded throughout Hillary Clinton’s Presidential run, the figures are discouraging.  Women constitute 50.8% of the population[3] but hold just 19.9 percent of board positions at S&P500 companies[4] and 5.4% of CEO positions at America’s 500 biggest companies[5].  A seemingly endless list of disappointing statistics and anecdotes come out of the US: recent studies have found that 80% of media reports about business crises cite the CEO as the source of the crisis when a female CEO is at the helm compared with 31% involving male CEOs[6]; female CEOs are more likely to be criticised by shareholders and investors than male counterparts[7]; even that female CEOs are disproportionately blonde because people feel less threatened by females they see to be “young and/or docile”[8].

The figures in Australia are similarly bleak. In Australia women constitute 50.6% of the population[9].  For the past fifteen years women have been consistently more likely than men to have attained a bachelor degree or higher[10], and in the ten years to 2015-16 female labour force participation rates increased 13% to 59%[11].  Despite these gains, and despite making up nearly half the total workforce, most senior roles in organisations in Australia are heavily male-dominated. 74.9 % of ASX200 board positions are held by men[12] and there are still 16 ASX200 boards with no female members[13]. At the top levels of organisations, women hold just 16.3% of CEO positions and 28.5% of key management personnel positions within companies reporting to the Workplace Gender Equality Agency[14]. Among ASX100 companies, 5% of CEOs, 10% of COOs/Deputy CEOs and 6% of CFOs were women in 2015[15], and Australia has never had a female Reserve Bank Governor, Secretary of the Department of Prime Minister and Cabinet or CEO of the AFL or NRL.

A reality disconnect: attention over the past decade risks dulling the sense of urgency

In light of the available data, it is clear that major interventions are required to build a robust pipeline of women leaders.  However, there are several risks to the ongoing activity that is required to see real progress on this issue.

Australia has been singled out by various international research organisations for its efforts in implementing meaningful public policy actions to support female leadership.  The Center for American Progress described the measures in Australia’s 2012 Workplace Gender Equality Act (WGE Act) as a “strong example” of federal government action incentivising companies to increase their efforts in hiring and promoting women[16].   The WGE Act introduced a new reporting framework for non-public sector employers with 100 or more employees.  Since 2013-14, employers have been required to provide reports to the Workplace Gender Equality Agency (WGEA) on the gender composition of their workforce and its governing body and the availability of flexible and family-friendly working arrangements. Companies must implement strategies specifically addressed towards improving gender equality, or face potential sanctions which include being named on the WGEA website, reported as being non-complaint to the Minister, being considered ineligible for government contracts and grants.

Catalyst has also identified developments in Australia from a regulatory perspective[17], citing the Australian Securities Exchange (ASX)[18] requirement for companies to disclose the involvement of women in its workforce and board.  On international comparisons, PwC has highlighted Australia as the only region to show an increasing trend in female CEO appointments in the five years to 2015[19].

However, there are clear signs that Australian policy makers must not pat themselves on the back for a job well done, but rather commit to a renewed push and increase in the pace of change. Overall statistics are not promising, and are either moving too slowly or in some cases moving backwards.  Since WGEA’s reporting requirements were introduced, the proportion of female CEO positions has only increased by 0.6% and female Key Management Personnel positions have only increased by 2.4%[20]. The proportion of female chairs of WGEA-reporting companies went down from 14.2% in 2014-15 to 12.9% in 2015-16[21]  and S&P/ASX 501+ firms experienced a 3% decrease (from 9% to 6%) in the proportion of women on boards from in 2015[22].  In the S&P/ASX 100 there have been minimal movements in the proportion of women at CEO and COO/head of business unit level since 2009, and a decrease in the proportion of female representation at CFO level[23].

Faster action in creating a critical mass of women at the top is critical: more women in leadership positions leads to a greater number of women in director seats[24], and other research has estimated that it takes three or more women at the top ranks of organisations for benefits to be realised[25].   Another key data point relates to the type of jobs in which the movements are occurring.  Women are not progressing in the senior leadership roles (CFO, COO or head of unit) which yield the top assignments and ‘hot jobs’ that create the runway for CEO leadership.  For example, in the S&P/ASX200, the 2015 increase in women at senior executive level was primarily due to increases in women in Chief HR Officers or Company Secretary positions[26]. The same PwC research praising Australia for its appointment of CEOs also identified a greater proportion of outsider CEOs hired in ASX companies than the global average[27] rather than promoting internally from the existing talent pool.

Ongoing, vigorous action is required to work against assumptions that gender parity is solved, firm-level decisions that gender diversity is not a priority, or what the Australian Institute of Company Directors described as the “voices that strongly disagree with the push for gender diversity”[28].

The remaining work that needs to be undertaken does not lie with industry

Another threat to progress centres around an argument that efforts to address the problem should now lie at the level of firm-led innovations, in light of the regulatory reforms that have already been implemented in Australia.

Perhaps the leading market for considering industry-led solutions is the United States. The US government has not implemented a mandatory reporting regime akin to Australia’s WGEA reporting requirements.  A handful of less stringent requirements apply across government, which have either been largely resisted or criticised as ineffective[29]. In lieu of legislative and regulatory reporting requirements, the response in the US has been characterised by innovations at an organisational level.  One stream of activity stems from a focus on the bottom-line implications of failing to adequately respond to gender issues and risks of risk investor and societal backlash. Pressure is applied by shareholders at annual meetings, and from external activist investment firms which buy large stakes in public companies to put pressure on firms to publicly disclose gender metrics[30]. According to a 2016 PwC report, shareholder influence was responsible for nearly half of companies adding a diverse board member[31]. In the finance field, examples of gender-based investing are also emerging, with firms putting money into companies that support women[32].

The US is also seeing a stream of activity, much of it driven by technology, by third parties joining the effort to track progress. Joining established organisations like Catalyst are a suite of niche websites directed towards collecting and sharing gender-related data for the benefit of the public.  Sites provide salary information allowing gender comparison[33]; track gender metrics for circulation within the industry to push improvements[34]; rate firms for female progression and flexibility opportunities[35]; list brands employing women in top leadership roles and ranks companies across their commitments to women’s leadership[36].

Australia is beginning to follow the lead of the US, with a smaller but growing list of websites collating data through a gender lens. Individual Australian firms are also attracting attention for their positive efforts towards female advancement: Telstra and the ASX’s focus on allowing all jobs to be worked flexibly; ANZ, Rio Tinto and Telstra setting targets linked to rewards; BHP’s widely reported goals for a 50% female workforce by 2025 and linking bonuses of senior staff to annual increases in female staff by 3%.

These developments are welcomed and should be supported, but need to be matched by continued public policy activity.  In light of the glacial pace of progress, the onus and effort cannot be on activists, and companies cannot be relied upon to simply ‘do the right thing’.  While it appears likely that the US will continue to go down the path of relying on industry to drive progress, particularly under a Trump Presidency, Australian policy makers have shown a willingness to be more interventionist and should continue to do so.

Recommendations

Ameliorating the significant disparity that exists clearly requires intense attention across a range of issues: ensuring equal pay, addressing entrenched gender biases and prioritising work-family policies are huge parts of the equation in getting women into leadership positions, and should be aggressively pursued by public policy makers.  The topic has also been the subject of extensive analysis and scholarly attention, including from prominent Australian academics, which have generated suggestions for reform across a range of areas.  These include recommendations in the area of anti-discrimination law, paid family leave, early childhood education and the introduction of mandatory quotas promote gender balanced representation[37].   This brief paper will not discuss the myriad recommendations made by scholars across those broad areas but instead focus on specific suggestions in relation to WGEA reporting requirements.  Australia has an advantage over other nations in the reporting framework that is already established, and at first instance improvements can be made to this existing mechanism.

The WGEA framework has an essential role in allowing disclosures and the collation of data, important both internally for benchmarking continuous improvement, and externally for customers to be able to apply pressure and hold companies accountable.  It is acknowledged that the existing WGEA reporting requirements impose a burden on industry, but with progress stagnating, it is recommended that additional requirements should still be considered to incentivise organisations to step up their efforts.

Recommendation 1: WGEA reporting requirement should be expanded to require targets for achieving diversity improvements, and timeframes for achievement

Organisations are currently required to report on the targets, if any, that have been set for the gender composition of the organisation’s governing body[38] [emphasis added], but are not currently required to report targets for the broader gender composition of its workforce.

There is considerable evidence supporting the benefits of setting targets for achieving diversity goals[39]. KPMG’s 2015 ASX diversity report found that firms disclosing quantitative numeric objectives demonstrated a higher level of gender diversity than firms which did not[40]. While companies have been encouraged to set targets by the WGEA, some notable businesses are doing so[41] and the Australian Institute of Company Directors has set an ASX-wide goals for 30% by 2018[42], according to KPMG “the development of measurable objectives and the ongoing assessment of progress has not yet normalised”[43]. Mandatory reporting would be instrumental to doing so.

The WGEA itself suggests that organisations should be given the opportunity to set goals which take into account their particular circumstances, and it is not suggested that a mandatory target be set at this time.  Rather, Gender Equality Indicator 1 could be updated to require organistions to explicitly list numeric targets for achieving gender equality. These should be numeric targets, not aspirational statements.  They could include both overarching specific time-bound targets and interim milestones on all matters, including numbers of women appointed and promoted to roles at each job level, pay gap differences and the take-up of flexible options.

Gender Equality Indicator 2.3 should be also amended to remove the wording “if any”, requiring all organisations to set a numeric target for the composition of its governing body as well as their proposed timeframe for achievement.

Recommendation 2: WGEA reporting requirements should be expanded to require organisations to detail the incentives for, and penalties for not, meeting targets

While a number of organisations in Australia should be praised for implementing targets ‘with teeth’, this should be entrenched as an Australia-wide requirement, to ensure that organisations do not drag their feet with reporting obligations.  The Business Council of Australia has recommended that CEOs need to “invest personal and reputational capital” in achieving objectives[44].  To avoid discrepancies between intended results and actions, the accountability of organisational leadership teams is essential.  The Gender Equality Indictors should be amended to require organisations to report on the tangible implications for achieving or not achieving targets; setting out:

  • The individual manager/CEO/ executive/board level at which accountability lies
  • Details of incentives for achievement including salary, bonus payments and any short-term incentives
  • Consequences for poor performance, including salary and bonus implications or removal from the position.

Recommendation 3:  WGEA reporting requirements should be expanded to require further detail on governing bodies

Gender Equality Indicator 2 requires organisations to provide detail on the gender composition of governing bodies as well as details of selection policies or strategies for governing body members.  An issue affecting the ability of women to be appointed to boards in rapid numbers is the importance placed on having previous board experience. Previous experience is highly prized amongst board candidates, giving sitting directors a leg up over new prospects.  It is common for directors to serve on multiple boards simultaneously, and attention must be paid to both (a) the incidence of organisations seeking ‘like’ and regularly appointing male multi-boarded directors, and (b) whether the increase in gender diversity is expanding the field of female directors or simply adding existing female directors to new board seats. As set out above, women are also failing to progress rapidly into C Suite positions which provide a leadership runway towards board appointment, and Australia appoints outsider CEOs at a higher rate than other organisations.

Gender Equality Indicator 2 should be amended to require organisations to provide further detail on the make-up of governing bodies, and to also provide more specific detail on organisational leadership.  Specifically, reporting should be required on:

  • Whether member of the governing body serve on other governing bodies, and if so how many;
  • Whether the CEO was appointed from inside or outside the organisation.

Recommendation 4: Gender Equality Indicators relating to flexible working arrangements should be enhanced

The McKinsey Global Institute[45] has identified a major pipeline “pain point” of women who fail to advance in to middle management roles drop off the “middle management cliff”, in part because the child raising years are associated with women either leaving the workforce or accepting lower-ranked roles in a forced choice between career and care[46].  Flexible work options are critical for ensuring that high-potential women stay in the talent pipeline.  While many Australian organisations are offering flexible working arrangements and the WGEA requires firms to report on the availability of such arrangements, a range of research has reported low take-up of available flexibility options including due to fears of recrimination by employers or discrimination[47], and for men in particular, fears of being regarded as lacking commitment[48].

The possibility of flexibility is not enough to create the difference.  Currently, Gender Equality Indicator 4 requires employers to provide details of the availability and utilisation of parental leave[49], but disaggregated data is not required on the utilisation of other flexible working options.  This requirement should be extended to require organisations to explicitly state both the availability and the take-up of a range of flexible working options available, including flexible work hours, time-in-lieu, telecommuting, job sharing and unpaid leave.  Providing a clear picture would help to contribute to normalising and increasing the acceptability of workers taking advantage of available options.

Gender Equality Indicator 4 was updated in 2015 to require reporting on the proportion of employees who ceased employment during or at the end of a period of parental leave[50].  This Gender Equality Indicator could be even further strengthened to require organisations to explicitly refer to the measures undertaken to support women returning to work after family-related career breaks.   Helping highly accomplished women return to work, particularly in STEM and rapidly changing industries, can help overcome major barriers in keeping future female leaders in the leadership pipeline. Such support measures include sharing critical information during period of leave, collaborating on job design and retraining and skills upgrading for parents[51] – and mandatory reporting could incentive firms to implement such measures.

Conclusion

Gender parity has received considerable attention over recent years, yet equality in leadership eludes many companies and the overall statistics for Australia suggest the issue is far from solved.  While business focus is an important part of the equation, the government must refine its efforts to boost female advancement and ensure the benefits of existing mechanisms have not peaked.  The government must also cultivate a broader conversation about female leadership and ensure that key elements of the equation are not sidelined.  As will be discussed in part 2, public policy must be directed towards wider progress: cultivating gender parity in workforces with particularly low rates of female advancement and ingrained gender disparity should be the next focus, to work to move the needle on this entrenched issue.

[1]Warner, J 2016, The Women’s Leadership Gap – Women’s Leadership by the Numbers, Centre for American Progress, viewed April 2015 <https://www.americanprogress.org/issues/women/reports/2015/08/04/118743/the-womens-leadership-gap/>

[2]World Economic Forum 2016, The Global Gender Gap Report 2016, p24

 

[3] Bureau of the Census, State & County QuickFacts–USA viewed February 2017 <https://www.census.gov/quickfacts/table/PST045215/00 >

[4] Catalyst 2016, 2015 Catalyst Census: Women and Men Board Directors

[5] Catalyst 2017, Women CEOs of the S&P 500

[6] Rockerfeller Foundation and Global Strategy Group 2016, Does the Media Influence How We Perceive Women in Leadership?, viewed October 2016 <http://www.globalstrategygroup.com/wp-content/uploads/2016/10/100×25-CEOS-Gender-Report.pdf>

[7] Arizona State University 2016, Are Female CEOs Getting Bullied by Shareholders?, viewed August 2016 <https://asunow.asu.edu/20160811-asu-news-are-female-ceos-getting-bullied-shareholders>

[8] Catuerucci C 2016, Researchers Find That Female CEOs and Senators Are Disproportionately Blond, Slate, viewed August 2016 <http://www.slate.com/blogs/xx_factor/2016/08/25/why_are_female_ceos_and_senators_disproportionately_blond_blame_sexism.html>

[9] Australian Bureau of Statistics Cat No 3010.0, June 2016

[10]Australian Bureau of Statistics Cat No 4125.0, August 2016

[11] Australian Bureau of Statistics Cat No 4125.0, Economic Security, August 2016

[12] Australian Institute of Company Directors 2016, 30% by 2018: Gender diversity progress report -Gender Diversity Quarterly Report Volume 6, p2

[13] Australian Institute of Company Directors 2016, op cit, p10

[14] Workplace Gender Equality Agency 2016, Australia’s Gender Equality Scorecard – Key Findings from the Workplace Gender Equality Agency’s 2015-16 Reporting Data, p8

[15]KPMG 2016, ASX Corporate Governance Council Principles and Recommendations on Diversity: Analysis of Disclosures for Financial Years Ended Between 1 January 2015 and 31 December 2015, p7

[16] Warner J 2014, For Women to Lead, They Have to Stay in the GameWhy we Need Public Policy to Level the Playing Field¸ Center for American Progress, pp18-19.

[17] Catalyst 2014, Increasing Gender Diversity on Boards: Current Index of Formal Approaches

[18] ASX Corporate Governance Council 2014, Corporate Governance Principles and Recommendations, viewed February 2017 <http://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf>

[19] PwC 2016, 16th Annual CEO Succession Study – Australian CEOs outlast Global CEOs, viewed January 2016 <http://www.strategyand.pwc.com/media/file/ANZ-CEOs-outlast-global-CEOs.pdf>

[20] Workplace Gender Equality Agency 2016, Australia’s Gender Equality Scorecard – Key Findings from the Workplace Gender Equality Agency’s 2015-16 Reporting Data, p8

[21] WGEA, op cit, p9

[22] KPMG, op cit, p5

[23] KPMG, op cit, p34

[24]2020 Women on Boards 2016, Boardroom Diversity: When Women Lead, viewed February 2017 <https://www.2020wob.com/sites/default/files/2020GDI-2016Report.pdf>

[25] Kramer V, Konrad A and Ekjut S 2006, Critical Mass on Corporate Boards: Why Three or More Women Enhance Governance, Wellesley Centers for Women

[26] KPMG, op cit,  p33

[27]PwC, op cit

[28]Australian Institute of Company Directors 2016, op cit, p2

[29] As of March 2018, companies with 100 employees or more will be required to disclose pay data broken down by gender to the U.S. Equal Employment Opportunity Commission[29]; the Securities and Exchange Commission requires publicly held companies to disclose information about the “consideration of diversity” in their proxy statements[29]; the Dodd-Frank Wall Street Reform and Consumer Protection Act created offices charge with monitoring diversity in agencies which regulate the financial services industry

[30] A prominent example is Arjuna Capital which submits proposals to tech companies in which their investment firm has a stake asking them to publicly disclose gender data.

[31] PwC 2016, The Swinging Pendulum: Board Governance in the Age of Shareholder Empowerment, viewed January 2017 <https://www.pwc.com/us/en/corporate-governance/annual-corporate-directors-survey/assets/pwc-2016-annual-corporate–directors–survey.pdf> p1

[32] Notable examples are Plum Alley Investments which charges a membership fee to bring investors together to invest in women-led companies; and PAX World’s Ellevate Global Women’s Index Fund which invests in the highest-rated companies globally for advancing women’s leadership.

[33] including Payscale and Comparably

[34] A notable example is Silicon Valley’s ‘Project Include’.

[35] Including Glassdoor, InHerSight and The Muse

[36]Including Ledbetter and ByUpIndex

[37] The question of whether to introduce quotas was discussed during the debate on the introduction of the Workplace Gender Equality Act 2012 and was the subject of a WGEA Perspective Paper in 2016

[38] Workplace Gender Equality (Matters in relation to Gender Equality Indicators) Instrument 2013 (No. 1), section 2.3

[39] Including a February 2016 study by the Centre for Ethical Leadership at Melbourne University and the Melbourne School of Psychological Sciences – Reporting requirements, targets, and quotas for women in leadership

[40] KPMG, op cit, p5

[41] Male Champions of Change 2016,Listening, Learning, Leading with Action –  Progress Report 2015, viewed August 2016 <http://malechampionsofchange.com/wp-content/uploads/2016/03/MCC-Progress-Report-2015.pdf>, p6.

[42] Australian Institute of Company Directors 2015, Tracking Gender Diversity, viewed August 2016 <http://aicd.companydirectors.com.au/advocacy/board-diversity/tracking-gender-diversity>

[43] KPMG, op cit, p6

[44] Business Council of Australia 2013, Increasing the Number of Women in Senior Executive Positions – Improving Recruitment, Selection and Retention Practices, p5

[45] Krivkovich A, KutcherE and Yee L 2016, Breaking Down the Gender Challenge, McKinsey and Company, viewed April 2016 <http://www.mckinsey.com/business-functions/organization/our-insights/breaking-down-the-gender-challenge>

[46] Sanders M, Zeng J, Hellicar M and Fagg K 2016, The Power of Flexibility: A Key Enabler to Boost Gender Parity and Employee Engagement, Bain and Company viewed October 2016 <http://www.bain.com/publications/articles/the-power-of-flexibility.aspx>

[47] For example, Australian Human Rights Commission 2014, Supporting Working Parents: Pregnancy and Return to Work Review – Report 2014, Australian Human Rights Commission

[48] Deloitte 2016, Parental leave survey: Less than half of people surveyed feel their organization helps men feel comfortable taking parental leave, viewed January 2017 <https://www2.deloitte.com/us/en/pages/about-deloitte/articles/press-releases/deloitte-survey-parental-leave.html>

[49] Workplace Gender Equality (Matters in relation to Gender Equality Indicators) Instrument 2013 (No. 1), section 4.3

 

[50] Workplace Gender Equality (Matters in relation to Gender Equality Indicators) Instrument 2013 (No. 1), section 4.8

[51] Examples across the world include the Goldman Sachs Returnships program and the UK’s Daphne Jackson Trust