Diversity has been a hot topic for Australian employers in 2010.
On 22 April 2010, the ASX released its much-awaited Exposure Draft of the proposed ASX Recommendations.
The proposals mean that publicly listed clients will need to consider reviewing existing policies, or creating new ones, around board and company wide diversity initiatives.
The impact of the ASX Recommendations is however not only limited to listed companies. The impact of new positive obligations on employers under the Equal Opportunity Act 2010 (Vic) means all employers should consider whether their business should take additional steps to achieving diversity in the workplace.
Background
Late last year, the Australian Securities Exchange (ASX) issued a press release which shone a spotlight on the issue of board diversity of ASX listed companies. In that press release, the ASX signalled a change to its Corporate Governance Principles and Recommendations (the ASX Recommendations) requiring disclosure of board and company wide diversity initiatives.
Proposed changes to the ASX Corporate Governance Principles and Recommendations
The ASX Recommendations will require listed companies to:
- establish a ‘diversity policy’ that includes measurable objectives relating to gender diversity as set by the board
- disclose in their annual report the measurable objectives for achieving gender diversity as set by the board in accordance with the diversity policy, and
- disclose in the annual report the proportion of women employees in the whole organisation, in senior executive positions and on the board.
Changes are also proposed to the guidance commentary:
- highlighting the responsibility of nomination committees for recommending strategies to address board diversity, considering diversity in succession planning, and having a charter that regularly reviews the proportion of women at all levels in the company, and
- requiring boards to consider diversity objectives in their performance review, and disclose the mix of skills and diversity they are looking for in their membership.
The emphasis of the ASX Recommendations is on disclosure—a company will be required to disclose what it has in place, and if not, provide an explanation why. Non-compliance with the ASX Recommendations could result in a breach of the ASX Listing Rules.
The first step to ensuring compliance with the ASX Recommendations (anticipated to be implemented on 1 July 2010 with effect from the first financial year after 1 January 2011) is for listed companies to prepare a ‘diversity policy’ for their boards, and consider implementing a diversity strategy to support the policy.
What does a ‘diversity policy’ look like?
The ASX Recommendations set out some suggestions for content to be included in a diversity policy, including:
- commitment to diversity and articulation of the corporate benefits arising from employee and board diversity (eg the needs of the company may point to the need for directors with particular skills and experience)
- commitment to and identification of ways to promote a corporate culture which embraces diversity (eg recruitment of employees and directors from a diverse pool of qualified candidates)
- identification of factors that should be taken into account in the selection processes and whether professional intermediaries should be used to identify or assess candidates
- identification of programs that assist in the development of a broader pool of skilled and experienced board candidates (eg initiatives focused on skills development such as executive mentoring programs or more targeted practices relating to career advancement)
- articulation of a corporate culture which not only supports workplace diversity but also recognises that employees at all levels of the company may have domestic responsibilities, and
- transparency of board processes, review and appointments.
‘Diversity’, for the purposes of the policy, includes gender, age, ethnicity and cultural background. The ASX also recommends that companies introduce appropriate procedures to ensure that the policy is properly implemented, and an internal review mechanism established to assess the effectiveness of the policy.
But we already report to EOWA?
The ASX Recommendations build upon the reporting requirements under the Equal Opportunity for Women in the Workplace Act 1999 (Cth) (EOWA Act). Under the EOWA Act, non-government organisations with more than 100 employees are required to develop an equal opportunity for women in the workplace program, and report annually to EOWA on the program and its effectiveness. This year, the report will be due by 31 May 2010.
Large employers should therefore already have developed some policies and statistics in the area. However, the new requirements will entail development of a policy specifically for boards—an area not traditionally captured under EOWA. The recommended reporting requirements will also leave organisations open to increased exposure and public scrutiny in respect of their diversity policies and performance. There are also proposals that the EOWA requirements be increased in future.
In addition to ensuring compliance with the ASX proposal, organisations should also be mindful of their obligations under federal and state discrimination laws, particularly when preparing their diversity policies.
Other diversity developments – Victoria’s positive duty to take measures to eliminate discrimination
The Victorian Government recently passed the Equal Opportunity Act 2010 (new EO Act). The new EO Act comes into force from 1 August 2011 and imposes some new and significant positive duties on employers to take ‘reasonable and proportionate measures to eliminate discrimination, sexual harassment and discrimination as far as possible’.
This is not unlike the current ‘defence’ to an action for breach of the current Equal Opportunity Act 1995 where an employer is required to show it has taken ‘reasonable precautions’ to prevent the unlawful behaviour occurring.
The important difference with the new duty is that a positive obligation is imposed on employers to take these measures, instead of an employer only being required to demonstrate the steps it takes to prevent unlawful behaviour if and when a complaint is made.
This new positive duty is particularly important in the context of diversity. The fact that a company has established a diversity policy to target potential areas of unlawful indirect discrimination in the workplace will assist an employer to show it has taken reasonable and proportionate measures to eliminate discrimination.
Therefore, all employers, not just publicly listed employers, can take guidance from the ASX Recommendations.
What should you be doing now?
Over the next six months ASX listed employers should be:
- preparing for the introduction of the new ASX Recommendations by putting into place a ‘diversity policy’ for their board and considering the implementation of a diversity strategy to support the policy
- considering whether they can point to some other tangible initiatives that they have introduced or will introduce which facilitate opportunities for women in particular to gain experience that will equip them for board roles (for example mentoring or board ‘intern’ programs), and
- considering in advance the need to persuasively deal with the likely increase in questions (both on the floor of the AGM and on an ongoing basis) from shareholders and the media regarding the composition of the board and senior executive team.
In addition, as a matter of priority, all employers should consider reviewing existing diversity policies, or putting these policies and procedures in place where nothing currently exists.
Finally, you will need to prepare your EOWA report to be filed by 31 May 2010.
This article was written by Kate Jenkins, Partner, Lisa Croxford, Special Counsel and Kate Moore, Solicitor, Melbourne.
More information
For information regarding possible implications for your business, contact a member of the Equal Opportunity, Discrimination & Diversity team.