Small caps and the case for more women on boards

A new report commissioned by the Australian Institute of Company Directors (AICD) on gender diversity at a board level has found listed small-cap companies are significantly lagging behind their bigger counterparts.

The report found that female representation on ASX 201-500 boards is at 15.8%, significantly lower than the 27.9% on ASX 200 boards.  

The report, which was prepared by executive consulting firm Heidrick & Struggles, also found 38% of ASX 201-500 companies have no women at all on their boards. Again, in contrast, only 2.5% of ASX 200 companies have no women on their board.

The report’s other key findings are that:

• Only 16% of the ASX 201-500 companies have achieved the 30% target for female representation on boards internationally set by advocacy group the 30% Club;
• Over 50% of ASX 201-500 boards comprise of five directors or fewer;
• Companies that have listed in the past five years show greater gender diversity, with 25.3% either hitting or exceeding the 30% mark for women on boards, while in comparison, only 13% of companies that have been listed longer than five years achieved the 30% target; and
• Fewer women are on the boards of companies that operate in traditionally male-dominated industries like construction, utilities and mining.

In her introduction to the report, the Chairman of the AICD, Elizabeth Proust, says: “This report has confirmed our expectations. There are relatively few women on ASX 201-500 boards.”

Proust acknowledges some mitigating factors for the difference in results between small caps and their bigger listed counterparts.

“Boards beyond the ASX 200 tend to be smaller, with a lower rate of turnover,” she says, “and cost is more likely to be a limiting factor, both in terms of remunerating independent directors and employing professional search firms to provide a balanced list of candidates for a board position.”

She notes the signs of generational change are positive: “We expect to see a growing number of female entrepreneurs floating their own companies and we look forward to generational change as millennials, who have grown up with diversity, take over as the dominant group in the workplace.”

In the conclusion to the report, Tony Featherstone, the Consulting Editor of the Governance Leadership Centre, says Australia’s scorecard is similar to that of the US and the UK: “Although global share market indices are not directly comparable, the data implies that Australian small caps are matching gender diversity levels on boards in similar markets.”

He concludes small-cap companies are likely to follow the big end of town, even if the rate of change is staggered. “Several trends suggest gender diversity will become a larger governance issue for ASX 201-500 companies this decade and next and that their boards will have a measured response through appointing more women, as is happening in ASX 200 companies,” he says.

Better representation of women on company boards and more diversity generally at board level is as vital for good governance as it is for fairness and equity. The empowerment of women at all levels of society needs to be understood and reflected by businesses that seek to serve their communities. Women have long been the chief purchasing officers of their homes. Increasingly, they are also occupying C-level executive roles in business too. Women are making up a higher proportion of the general workforce and slowly gaining greater independent financial clout.

The report’s findings indicate Australia’s small-cap companies have plenty of work to do, but there are also positive signs of a gradual shift in the right direction.

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