On 7 December 2009 the ASX Corporate Governance Council issued a media release regarding new requirements around diversity for listed companies. The anticipated implementation date for these changes is the financial year commencing 1 July 2010. The proposed changes have been hailed by the Sex Discrimination Commissioner, Liz Broderick, as ‘an historic development’.
What’s changing?
The Corporate Governance Principles and Recommendations will be expanded to include new recommendations requiring listed companies to:
- establish a diversity policy that includes measureable objectives relating to gender. The policy must be disclosed to the market in full or in summary.
- disclose in their annual reports their achievement against the gender objectives.
- disclose in their annual report the proportion of women employees in the whole organisation, in senior management and on the board.
These requirements must be met on an ‘if not, why not’ basis, that is, where a company takes a different approach than that set out in the recommendations, then, provided it explains why the recommendations have not been followed, how its practices accord with the spirit of the relevant principle and that the company understands the relevant issues and has considered the impact of the alternative approach, then this will be sufficient for compliance.
Changes will also be made to the existing commentary for the recommendation dealing with the establishment of the board nomination committee to encourage the nomination committees of listed companies to include in their charters a requirement to continuously review the proportion of women at all levels in the company.
Commentary regarding a further existing recommendation will be amended to require that the performance review of the board include consideration of diversity criteria in addition to skills. Boards will also be required to disclose what skills and diversity criteria they look for in any new board appointment.
Importantly, these changes will not require listed entities to employ set proportions or percentages of women in senior positions within the entity. The effect of the changes will be to increase transparency in relation to targets, achievement of those targets and the proportion of women in senior positions within listed entities.
It has long been a cause for comment and concern that women are not properly represented in senior positions in business. The 2008 Australian Census of Women in Leadership (research conducted by Macquarie University and commissioned by the Equal Opportunity for Women in the Workplace Agency) found that the proportion of women to men on corporate boards and in executive leadership roles had declined since 2006, with women holding 8.3% of board directorships and 10.7% of executive management positions. Clearly this initiative is aimed at addressing this trend.
Impact
The impact of these changes should not be underestimated. In particular, the changes compel the elevation of gender diversity to a board level and drive transparency. This is good news for businesses who are already driving diversity at senior levels. The reporting requirements will also drive accountability on the issue within listed companies.
For those listed companies who have not yet taken these steps, the development of a policy with measurable targets should be a priority issue for the first part of 2010.
What listed entities need to do
To get ready for the new requirements, listed companies should:
- conduct a review of gender diversity within your business, so that you have a benchmark or starting point
- develop a diversity policy that includes measurable objectives relating to diversity. In this regard, businesses should be careful to ensure that the policy itself does not fall foul of relevant discrimination laws, and
- develop a system for measuring and reporting on the effectiveness of diversity initiatives.
We can assist you in developing these policies and systems if required.
This article was written by Elizabeth Ferrier, Special Counsel and Justine Turnbull, Partner, Sydney.
More information
For information regarding possible implications for your business, contact a member of the Employee Relations team.