GENDER DIVERSITY - ampcapital.com.au · I realised the problem isn’t that too few women want ......

GENDER DIVERSITY: The real reason we are still talking about it DECEMBER 2016

INSIGHTS.IDEAS.RESULTS.

2 AMP CAPITAL GENDER DIVERSITY

KARIN HALLIDAYSenior Manager, Corporate Governance

Karin Halliday’s career in the finance industry has spanned over 30 years.

While Karin admits she didn’t expect she’d still be working with AMP 32 years after joining the company’s graduate recruitment program, she’s even more surprised that we’re still talking about gender diversity in 2016.

Much has changed since Karin joined AMP. Businesses have quickly embraced technologies such as fax machines, personal computers, mobile phones and the internet – yet over the same period Australia’s progress with regard to gender equality has been implausibly slow.

In this Insights Paper, Karin investigates how this can be and what we can do to help hurry up history.

AMP Capital is one of Asia Pacific’s largest investment managers and one of the longest-standing managers of responsible investment funds in Australia. Understanding how a range of environmental, social and governance (ESG) factors may affect the investments made on behalf of clients has long been an integral part of AMP Capital’s investment process.

As AMP Capital’s Senior Manager of Corporate Governance, Karin is afforded many opportunities to discuss a broad range of ESG risks and opportunities with Australia’s most senior business leaders.

As recently as the 1990s all-male boards were accepted as the norm. Pleasingly, this has changed and improving gender diversity has since progressed beyond being seen as ‘right’ to where it is now considered the ‘smart’ and ‘necessary’ thing to do.

TABLE OF CONTENTS

We have a problem 3

Why investors (should) care about diversity 3

Why gender is not a bad place to start 4

Don’t tune out … this is important 4

The “Ah-hah moment” 5

> ‘Happy’ equals ‘productive’ employees

> We are biased… and we have two brains

> It’s personal… and it’s not fair

> The numbers stack up

> New thinking about thinking

> Privilege makes us blind

> Win-win: the great news for men

Where (why) do the women go? 10

The woman’s world 11

OK, I get it … but, how much will diversity & inclusiveness cost? 11

Progress on diversity: Australia leads the charge 12

Successful initiatives 12

> ASX Corporate Governance Council’s requirements on diversity reporting

> Two-strikes Rule

> Australian Institute of Company Directors’ Mentoring Program

> 30% Club

> Male Champions of Change

> Being flexible about work

> Gender-aware policies and processes

What should companies be encouraged to do? 16

Board quality 16

> New directors

When can investors stop talking about gender diversity? 17

Would diversity help investment management? 18

Risk: Enron, Lehman Brothers, the GFC and whistle-blowers 18

Case Study: Lehman Brothers 19

SYNOPSISThe world is more complex. Change happens fast, news travels faster. We’re increasingly aware: aware of injustices, aware of disruption and aware of what we want to be a part of.

For our organisations to succeed, we’ll need to harness our collective intelligence and approach problems with cognitive diversity. It’s no longer OK for workplaces to lack gender equity; not only is it not fair, it’s not smart.

But we’ve known this for a while.

Why then is there so little diversity in the composition of leadership teams and boards of directors?

We know women are different to men and can bring a different perspective to team dynamics and problem solving but rather than excluding women on the basis of these differences, they should be included for them.

We generally understand the need for greater diversity, yet it appears each of us has roadblocks and bias so deeply entrenched they make us part of the problem and hence contribute to the inertia.

This paper aims to clarify the issue but more importantly it aims to help each of us identify and overcome the roadblocks that hold us back on the road to greater gender diversity. Our own particular roadblocks are likely to differ; for some it will be a lack of understanding around our own biases or about how diversity can impact productivity and performance. For others the roadblocks may well be a lack of understanding around fairness, about the impact of cognitive diversity or privilege, or how diversity also benefits men. One thing is certain: gender diversity is a hugely complex but rewarding issue.

The implementation of a number of successful initiatives in Australia during the last five years has resulted in better gender diversity on company boards. Despite this progress, the answers given by some company chairman in relation to gender diversity show how harmful unconscious bias can be.

It’s no longer OK to simply agree that someone needs to do something. As employers, employees, educators, men, women and, yes, even investors, we all need to take ownership and become part of the solution.

It’s time to hurry up history.

AMP CAPITAL GENDER DIVERSITY 3

WE HAVE A PROBLEMYes, people aren’t being treated fairly. Yes, people aren’t being given the opportunity to contribute their best. But the real problem is even bigger than that.

The problem is that we’ve become so accustomed to looking at things through our own narrow lens that we miss half the picture but, worse still, we don’t even realise our view is impaired.

While it is important to acknowledge there may be many points of view, it is equally important that each of us accepts that our own perspective will be impacted and distorted by the sum of our experiences.

When seeking to address increasingly complex problems it makes sense to approach them from a broader perspective, bringing different ideas, different ways of thinking and different ways of processing information.

... the problem is that we’ve become so accustomed to looking at things through our own narrow lens

that we miss half the picture

Why, when most of us agree that two heads are better than one, do we select homogenous teams (or boards of directors) that are full of people we understand and trust; people just like us.

Despite having been involved in countless discussions about board diversity over the years, I admit it did take some time for the complexity of this issue to truly sink in.

The ‘ah-hah’ moment came for me when sitting in yet another room full of women talking about the importance of diversity.

I realised the problem isn’t that too few women want to be directors. It isn’t that there aren’t enough talented senior women in the pipeline. And it’s not even that men simply prefer to work with like-minded colleagues. It dawned on me that the problem is we’ve been talking about gender diversity for so long that we’re becoming dulled to the issue. We heard the arguments so many times that we’ve hard-wired our opinions and responses and we stop listening. Ironically, just when the focus should be on embracing new and diverse ideas, we may be choosing to shut them down.

Despite progress being made on improving gender diversity, much remains to be done.

At the very least, companies should be encouraged to examine their position and then establish, implement and measure the success of diversity policies. Ultimately women and minorities need to find themselves in a position where there is unconditional acceptance and inclusion.

By making sweeping generalisations about men versus women, it makes it easier for us to talk about the topic. But it must be recognised that in doing so we reinforce the stereotypes and unconscious bias that are at the very the root of so many problems in relation to the way that gender is perceived.

The power of diversity is evident when asking a range of people to describe what they see in a certain scene. Different people will notice different things depending on how familiar they are with the scene and also the context they bring. Some people will see the big picture while others will be more inclined to notice people, activity, movement or colours.

WHY INVESTORS (SHOULD) CARE ABOUT DIVERSITYAMP Capital has long argued that investors benefit from digging deeper and looking beyond financial statements when valuing companies. We maintain that, over the long term, the way in which companies approach the environmental, social and governance (ESG) risks and opportunities they face is likely to have a far greater influence on company value than the tangible factors traditionally considered by investment analysts. The greatest driver of company value is not what you can see but what lies beneath the surface.

Diversity is one such issue. If one accepts that a company’s value is largely driven by the actions of its people, it follows that teams best able to generate strong returns for shareholders will be those that are happy, engaged, collectively intelligent but also cognitively diverse.

... teams best able to generate strong returns for shareholders will be those that are happy, engaged, collectively intelligent, but also cognitively diverse

Investors care about diversity for two main reasons: we not only see it as the ‘right’ thing to do but increasingly as also the ‘smart’ and ‘necessary’ thing to do. When society first focussed on diversity and anti-discrimination, it was seen as a moral and ethical issue. In fact, in 1984 when Australia passed the Sex Discrimination Act it did so to promote equality between men and women and eliminate discrimination on the basis of sex, marital status or pregnancy.

In an increasingly complicated and fast-moving world, companies are likely to be most successful when they have assembled diverse teams who not only understand customers and disrupters but can also brainstorm what can (and can’t) be done. Such teams are well equipped to build an appropriate strategy, and then also communicate, implement and evaluate it.

In diverse teams, alternative points of view will be offered and considered. By having diverse boards, companies signal that a range of people and points of view are valued.

The greatest driver of company value is not what you can see, but what lies beneath the surface.


WHY GENDER IS NOT A BAD PLACE TO STARTWhile diversity isn’t, and shouldn’t be, simply about gender, it’s actually not a bad place to start the discussion as:

> Most Australian boards and management teams are predominantly male.

> Women are not a minority group, they make up half the population and half the university graduates.

> Research shows that when women are added to decision-making groups, the groups are likely to have increased focus on ethics, risk management, reputation and cooperation as well as on the context of the problem and the broader impact of decisions.

> Women generally think differently and make different ethical choices; where women tend to be more contextual, collegiate and focussed on relationships, men tend to be more factual, tactical and focussed on winning.

> Statistics show companies perform better when they have more women in leadership.

... women who make up half the population and half the university graduates are not a minority group

It is argued that men and women’s brains are wired differently but even if women’s brains were the same, it can’t be denied women have generally been socialised differently.

Interestingly, we are so fixated by gender that when we learn that someone has had a child our first question is usually “is it a boy or a girl?” Why do we ask that instead of something like “are the mother and child healthy?” According to philosopher Marilyn Frye, we ask whether the baby is a boy or a girl because we do not know how to relate to this new being without knowing its gender.1

While diversity is beneficial, it is hard to assess how diverse a group’s thinking is simply by looking at its members. Visible signals such as gender or racial differences can certainly encourage group members to rethink their usual working habits and expectations, and behave with fewer assumptions about the ‘right’ way to address an issue.

WHY DIVERSE GROUPS MAKE BETTER DECISIONS > They are more likely to see the problem differently.

> They are more likely to see different ways to solve it.

> Diversity generates more rigorous discussion and questioning.

> Everyone lifts their game; less reliance on group-think.

> More pieces of the puzzle get discussed.

DON’T TUNE OUT … THIS IS IMPORTANTHaving heard so much about gender diversity, there is a real risk many of us either intentionally or unintentionally tune out of the discussion. Despite the many benefits, we appear to have an even greater number of reasons, biases and excuses holding us back.

In recent discussions with companies and investors, it has become apparent that different aspects of the issue resonate with different people. Some people won’t be convinced of the need for action until at least one of the following occurs:

> They have first-hand experience of diversity delivering better staff engagement, productivity and/or performance.

> They come face to face with their own prejudices and unconscious biases.

> They see their sister, daughter or wife become so disillusioned by discrimination they lose all aspirations to reach top management.

> They see performance numbers that demonstrate the superior performance of companies with gender diverse management and boards.

> They become aware of research on cognitive diversity and collective intelligence and begin to understand how diverse team members bring new perspectives.

> They see how uneven the playing field has been or how women have needed to jump much higher hurdles to progress.

… it became apparent that different aspects of the issue resonate with different people

THE PENNY DROPS WHEN WE UNDERSTAND: > ‘Happy’ equals ‘productive’ employees.

> We are biased… and we have two brains.

> It’s personal… and it’s not fair.

> The numbers stack up.

> New thinking about thinking.

> Privilege may make us blind.

> Win-win: the great news for men.


THE ‘AH-HAH’ MOMENT For most of my finance career, I have been one of the few women on the team. Despite this, I will admit it took some time for me to truly understand the complexity of the diversity issue.

I was often asked why there weren’t more women working in funds management. I didn’t have a good answer; I didn’t understand the obstacles women faced because I hadn’t faced them. Having been able to reach my career goals, I initially assumed the lack of women was due to them having different career goals to mine. I was blissfully unaware that many women weren’t being given the same opportunities as their male counterparts.

Just like my male colleagues, not having experienced discrimination and the effects of the un-level playing field, I was oblivious to its existence.

Frustrated by the slow progress on gender equality in the companies we invested in, I began to investigate what was really happening. The more work I did on understanding the issue of gender diversity, and the more people I spoke to, the more complex I found the issue to be. What I learnt was that most people appeared to have some specific roadblock that was holding them back from truly understanding the problem.

I found it helped for the penny to drop when people began to understand the following:

... not having experienced discrimination and the effects of the un-level playing field,

I was oblivious to its existence

a. ‘Happy’ equals ‘productive’ employees

It is likely that the bulk of a company’s value can be attributed to the actions of its people: the wisdom and strategic guidance of boards, the leadership of the executive and the commitment and productivity of the workforce. Given the reliance on people to drive value, it is clear companies must attract, motivate, reward and retain the best team.

Time and time again research2 has shown that employees are most loyal, engaged and productive when they feel valued by their employers. It is important employees feel safe and free of discrimination. When employees are treated fairly and see how their work contributes to something they consider to be worthwhile, they tend to be happier and more productive. This is particularly evident when companies provide equal opportunity and equal recognition to their employees, regardless of their gender. As awareness of these factors increases, companies have begun to invest more in employee development and diversity and inclusion programs.

Unconscious bias and mindfulness training has been helpful in raising awareness of the roadblocks that unintentionally hold people back from being able to contribute to the best of their ability. When we are more aware of others, we are more likely to act thoughtfully rather than succumb to automatic evaluations based on previously established associations3.

b. We are biased… and we have two brains

Each of us has a view of the world. That view has been shaped by our own experiences; by what we have seen, heard, felt and learnt. While no two people will have shared identical experiences, there is a tendency for each of us to assume we are seeing the world as it really is.4 If others have a different point of view, it takes us a while to see it because our first instinct is to say ‘they are wrong’.

... while no two people will have shared identical experiences, there is a tendency for each of us to

assume we are seeing the world as it really is4

We are so often guided by the things we expect to be true in the world. We unconsciously make decisions based on assumptions that are so hard-wired into our brains that we don’t even know we have them. While this tendency to jump to conclusions based on learned patterns helps us save time, it risks limiting the options we are willing to consider. For example:

> If we associate price with quality, we may unconsciously avoid the cheapest (hence lowest quality) option when forced to make a quick decision.

> When reviewing a long list of applicants to a share house, it is likely our first cut will be made on the basis of conscious and unconscious biases we have in relation to the names and ages of the applicants. Once we meet the short-list of candidates, the next cull of candidates may be influenced by our biases regarding how suitable we perceive people of that ethnicity, age and appearance to be.

A useful way to think of how these thought-patterns are formed is to think of each of us as having two parts to our brains:

Brain One: Conscious

> Our conscious brain does about 10 per cent of our thinking.

> This part of the brain is controlled, logical and reflective. It weighs up alternatives.

> Being controlled and explicit, it will only think when it has time to process the information.

> This part of our brain may be passionate about gender equality, believing that men and women are equally competent.

Brain Two: Unconscious

> Our unconscious brain does about 90 per cent of our thinking.

> This part of the brain can be described as fast, intuitive, implicit, reflexive, lazy, automatic and addicted to patterns.

> It does its thinking quickly and without fact-checking and therefore relies on patterns rather than taking the time to think things through.

Our unconscious brain acts on learned patterns; it’s the part of the brain that causes us to jump out of the way of a bus. We’re not conscious of that decision, we just do it. This part of the brain is lazy so once it’s decided something to be true it basically says, ”got it, don’t bother thinking any further”.

Perceptions of gender are often used to demonstrate unconscious bias. For example, men are traditionally considered to be strong, task-driven leaders. In contrast, women are considered to be caring, emotional and collaborative. Unfortunately, these patterns once learned are hard to unlearn especially as we will often ignore information that is contrary to our beliefs. We tend to like men and women who follow the norms; when they exhibit the opposite characteristics, men are likely to be judged as being soft and weak and women as cold and aggressive.

... stress and time-pressures will increase the likelihood that decisions will be impacted by an over-reliance on

learned patterns and unconscious biases

Interestingly, stress and time pressures will increase the likelihood that decisions will be impacted by an overreliance on learned patterns and unconscious biases.

The part of our brain that is responsible for unconscious bias likes to simplify things by categorising them. It prefers to allocate items to one of two clear groups. For example, man or woman, competent or incompetent, tall or short, good or bad. Imagine how long we could have a discussion with or about someone without knowing his or her gender.


Once someone or something has been assigned a group, they are not only expected to be like that group but also different from the other group. Unfortunately such patterns become seductive and can lead to distorted expectations. If we classify men as tall and women as short, we’ll form the opinion that women are shorter than men and then that all women are shorter and all men are taller. This thinking, however, unconsciously ignores the fact there’s a big overlap and most people fall into a normal height range.

An example of how pattern matching and unconscious bias relates to the perception of women can be seen in the situation where a parent needs to collect a sick child from school at midday. Who do we assume will collect the child and why? It’s usually assumed the mother will collect the child because “she’s the mother after all” and “it’s not right for her husband to leave work early, he’s sure to have something important on that afternoon”. These typical answers demonstrate unconscious bias. Why is his job considered to be more important than hers?

Conformation bias and the halo effect also play a role here. Not only are we usually more open to information that confirms our first thoughts on a subject but if we have a negative view of a person/situation there’s a chance further negative things will be inferred. If in our example, the woman does leave early to collect the child, it is considered ‘proof’ that she’s not really serious about her work. Interestingly, if she does not collect the child it is likely she will be considered cold and hard.

We need to stop building these unhelpful stereotypes and biases in the first place but in the meantime we need to be aware of them so we don’t rush into false and harmful responses.

The first step to overcoming bias is to acknowledge the potential for it, remembering that most people think they aren’t biased (that’s why it’s called unconscious bias). Once people acknowledge the potential for bias it is important to introduce strategies to address it and ‘group think’. This may include mindfulness or intentionally gaining exposure to diverse people and ideas.

It would also be beneficial to build awareness of confirmation bias, especially given the tendency for people to place more value on information that confirms what is already believed to be true, and dismiss evidence that contradicts the hypothesis. For example, if a chairman thinks adding a woman director to a board will disturb its effectiveness, they are more likely to ‘see’ traits that confirm this opinion and dismiss others as anomalies. To counteract such double-standards, it is useful to take a step back and specifically focus on being objective.

... there is a tendency to place more value on information which confirms what we already believe to be true and

dismiss any evidence that contradicts the hypothesis

Such biases are also evident in the responses given by company chairmen to questions about gender diversity on their boards.

DID THEY REALLY SAY THAT?Company chairmen have given some interesting answers when asked why they don’t appoint more women to their boards:

They’re different, it would spoil the harmony of the board We can’t find any

women with skills the board needs

We’re only looking for directors that have CEO experience

Women ask too many questions; the board meetings will go to long

We hire on merit only; and besides we haven’t appointed any gays, blacks, Asians or transvestites either

They’re too risk-averse

We had one once, but it didn’t work out

YES. THEY REALLY DID SAY THAT!

Oh, I don’t think of Anne as a woman; she’s really smart


c. It’s personal… and it’s not fair

While this paper primarily argues that poor gender diversity is not smart, it should not be forgotten that it is also not fair.

If women are paid less than men in the same role, and if companies (either consciously or unconsciously) give more leadership opportunities to their junior male employees rather than females, it should come as no surprise that men quickly become more qualified for senior roles than their female colleagues.

It is often observed that men with the greatest passion for gender diversity are men who:

> Have seen the women in their sphere discriminated against.

> Have a personal need (or desire) to be more involved in child rearing.

> Acknowledge skills and intelligence are not solely a male trait.

Many of us may have suspected that women often face greater obstacles than their male colleagues but have not truly understood how uneven the playing field really is. It is essential that employers identify and the address any practices that treat women unfairly. Companies must be true meritocracies where the opportunities and measures of success are applied equally and where hard work pays off.

... companies must be true meritocracies where the opportunities and measures of success are applied equally, and where hard work pays off

Stakeholders are encouraged to question employers about pay parity and recruitment processes and then hold companies accountable for any unfair practices.

A recently released study5 on Australia’s pay gap stated that the national gender pay gap in Australia is currently 17.3 per cent and has hovered between 15 per cent and 19 per cent for the past two decades. As a consequence, by the time women enter retirement, they have superannuation balances that are around half that of men.

Gender Wage Gap %

40

Korea

Japan

Netherla

nds

Austra

lia USA UK

Germany

OECD AVERAGE

France

Italy

Norway

New Zealand

35

30

25

20

15

10

5

0

Source: OECD https://www.oecd.org/gender/data/genderwagegap.htm

Global average, annual earnings6

Source: The Global Gender Gap Report 2015

d. The numbers stack up

Given that much of a company’s value can be attributed to the skill of its people, it makes sense that companies would want to assemble the best team possible. But what does the ‘best’ team look like? What will make one team more successful than another? While many potential variables would have been considered, research has found a positive correlation between a team’s gender diversity and its effectiveness. Not only does gender diversity make intuitive sense but study after study has demonstrated it also makes economic sense7.

Over recent years, a broad range of academics, management consultants, gender advocacy agencies, human rights groups and stockbrokers have published statistics showing the business case for improving gender diversity. While it is not the focus of this paper, a brief overview of some performance data follows.

Research conducted by organisations such as Credit Suisse8 and Catalyst9 show that, even after adjusting for sectoral impacts, companies with more women generally demonstrate higher returns on assets, higher return on sales and higher return on invested capital. These companies also exhibit lower risk of insolvency and higher dividend payouts.

McKinsey has been examining diversity in the workplace for several years. Its 2015 report, Diversity Matters10, examined proprietary data sets for 366 public companies across a range of industries in Canada, Latin America, the United Kingdom and the United States. The research, which looked at metrics such as financial results and the composition of top management and boards, reported clear findings:

> Companies in the top quartile for gender diversity are 15 percent more likely to have financial returns above their respective national industry medians.

> Companies in the bottom quartile both for gender and ethnicity are statistically less likely to achieve above-average financial returns than the average companies in the data set (that is, bottom-quartile companies are lagging rather than merely not leading).

> Racial and ethnic diversity has a stronger impact on financial performance in the United States than gender diversity, perhaps because earlier efforts to increase women’s representation in the top levels of business have already yielded positive results.

> In the United Kingdom, greater gender diversity on the senior-executive team corresponded to the highest performance uplift in McKinsey’s data set: for every 10 percent increase in gender diversity, EBIT rose by 3.5 percent.

> While certain industries perform better on gender diversity and other industries on ethnic and racial diversity, no industry or company is in the top quartile on both dimensions.

> The unequal performance of companies in the same industry and the same country implies that diversity is a competitive differentiator shifting market share toward more diverse companies.

2006

$6K $11K

2015

$11K $21K


The Catalyst Why Diversity Matters Report9 found higher financial performance for companies with higher representation of women board directors in three important measures:

> Return on Equity: On average, companies with the highest percentages of women board directors outperformed those with the least by 53 percent.

> Return on Sales: On average, companies with the highest percentages of women board directors outperformed those with the least by 42 percent.

> Return on Invested Capital: On average, companies with the highest percentages of women board directors outperformed those with the least by 66 percent.

On AMP Capital’s own assessment, there is a positive correlation between a company’s governance quality and the number of women directors. When comparing companies with no women directors against those with two or more, we have found that on average companies with better gender diversity have:

> Far fewer issues relating to related party transactions.

> Half the number of concerns around board composition including better independence.

> Better remuneration in terms of quantum, structure and disclosure.

While improved board diversity does not guarantee better governance or better performance, AMP Capital’s observations certainly support the view that companies promoting gender diversity at board level benefit from the different perspectives women bring to the table. This is particularly important as women are increasingly responsible for many of the household spending decisions.

It appears the degree to which a board embraces diversity also reflects their ability to effectively question and challenge ideas, and hence the likelihood decisions will be more robust and potentially more rewarding. Diversity can indirectly encourage group members to rethink their usual working habits and expectations, and behave with fewer assumptions about the ‘right’ way to address an issue.

Gender diversity signals something about that company’s culture and can tell investors that the board is sufficiently motivated about getting the best people on their boards that they’ll recruit talent from beyond the traditional pool of white males.

As with many of the intangible issues considered by ESG analysts, greater gender diversity signals higher quality management and better governance.

... Diversity can indirectly encourage group members to rethink their usual working habits and expectations,

and behave with fewer assumptions about the ‘right’ way to address an issue.

GENDER-DIVERSE BOARDS OUTPERFORM > Return on Equity: 53 per cent higher

> Return on Sales: 42 per cent higher

> Return on Invested Capital: 66 per cent higher

Plus, companies exhibit:

> Better governance

> Fewer related-party concerns

> Better remuneration structures

Source: Catalyst and AMP Capital

e. New thinking about thinking

Traditionally, discussions about increasing diversity focussed on it being the ‘fair’ and ‘right’ thing to do and hence decisions to improve the gender balance were driven by legal and moral obligations. Unfortunately, by focussing on compliance issue, companies often missed recognising the positive impact diversity could have on business outcomes. Today, that thinking is (slowly) turning around.

Diversity is considered to be less about simply bringing together different people but more about bringing together people who, as a result of their diverse background, education and experience, can bring a different point of view.

... Diversity jolts us into cognitive action in ways that homogeneity simply does not.

The catalyst for this change appears to have come from two directions: firstly, through research on cognitive diversity and secondly, through the attitudes and collaborative-tendencies of Millennials (those born after 1980).

Diversity jolts us into cognitive action in ways that homogeneity simply does not. Better decision making is not only because people with different backgrounds bring new information. Simply interacting with individuals who are different forces group members to prepare better, to anticipate alternative viewpoints and to expect that reaching consensus will take effort.11

Success will depend on an organisation’s ability to innovate, understand stakeholders’ needs, communicate, create and deliver. It is now more widely understood that one person alone, or indeed one team of like-minded colleagues, would have difficulty accomplishing the optimal balance of these tasks.

In his book about global consciousness, academic and author Jeremy Rifkin discusses the impact of Millennials on society:

Their non-hierarchical, networking way of relating to each other and the world, their collaborative nature, their interest in access and inclusion rather than autonomy and exclusion and their greater sensitivity to human diversity, predisposes the Millennial generation to being the most empathic generation in history.12


Given Millennials’ greater exposure to collaborative work, they are not only used to hearing diverse views but they also expect to have their views heard. In the past, successful employees tended to be those that fit the mould, that didn’t rock the boat and didn’t challenge the ‘way we do things around here’.

As Millennials become a larger proportion of the workforce, they will have increasing influence on the debate for diversity. Employers will need to consider how best to relate to Millennials, who value collaboration and feel most productive working with groups that are connected, cognitively diverse and non-hierarchical. Many Millennials struggle to understand gender inequality.

f. Privilege makes us blind

As mentioned in relation to my own career, people who function in a world of privilege tend to think their experience of the world is normal and that privilege has been distributed fairly on the basis of merit.

In 1996, Professor of Law Stephanie M. Wildman published her book Privilege Revealed: How Invisible Preference Undermines America. The book stated that:

While affirmative action remains a hotly contested issue on our political landscape, the institutionalized systems of privilege which uphold the status quo remain unchallenged. Many Americans who advocate a merit-based, race-free worldview do not acknowledge the systems of privilege which benefit them. For example, many Americans rely on a social and sometimes even financial inheritance from previous generations. This inheritance however is unlikely to be forthcoming if one’s ancestors were slaves, privileging instead whiteness, maleness, and heterosexuality. That poor people live in underprivileged areas is considered a consequence of their decision to drop out of school, apply for welfare and be unemployed, and not a consequence of their lack of access to financial means and quality education.

Author Michael Kimmel recently shared that “privilege is invisible to those that have it”. It is a luxury not to have to think about race or class or gender and only those marginalised by some category understand how powerful that category is when deployed against them. Rather than resisting the transformation of our lives that gender equality offers, Kimmel believes we should embrace these changes because they offer us the possibilities of social and economic equality, and because they also offer us the possibilities of richer, fuller, and happier lives with our friends, with our lovers, with our partners and with our children.

... people are often not only oblivious of the advantaged position they find themselves in,

but will also tend to be protective of their privileges

People are often not only oblivious of the advantaged position they find themselves in, but will also tend to be protective of their privileges. This is well described in the following writings of Machiavelli13.

“It ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions and lukewarm defenders in those who may do well under the new. This coolness arises partly from fear of the opponents, who have the laws on their side, and partly from the incredulity of men, who do not readily believe in new things until they have had a long experience of them. Thus it happens that whenever those who are hostile have the opportunity to attack they do it like partisans, whilst the others defend lukewarmly, in such wise that the prince is endangered along with them.”

g. Win-win: the great news for men

Discussions about gender diversity are often phrased negatively: men losing their board seats, women taking men’s jobs, men having to ‘help out’ at home and cook or ‘babysit’ their children.

The emphasis on what men will lose is unhelpful.

Why were these ‘men’s jobs’ anyway? Why do some men use the term ‘babysitting’ in relation to their own children when others see it simply as parenting?

When author Michael Kimmel spoke of flexible work and shared responsibility for housework and childcare, his entertaining speech included the following comments:

Their wives are less likely to see a therapist, less likely to be diagnosed with depression, less likely to be put on medication, more likely to go to the gym, report higher levels of marital satisfaction. So when men share housework and childcare, their wives are happier and healthier, and men certainly want this as well. When men share housework and childcare, the men are healthier. They smoke less, drink less, take recreational drugs less often. They are less likely to go to the ER but more like to go to a doctor for routine screenings. They are less likely to see a therapist, less likely to be diagnosed with depression, less likely to be taking prescription medication. So when men share housework and childcare, the men are happier and healthier. And who wouldn’t want that?

Very slowly men are beginning to realise they will be better off when workplaces become gender equal. As women (wives, daughters, sisters and colleagues) gain access to more options, and receive recognition for their contribution, they tend to be happier. Shared responsibility brings flexibility and the ability to be more engaged with family, friends and the community. It is also anticipated that gender equality will boost consumption and hence economic prosperity.

... men are beginning to realise they will be better off when workplaces become gender equal

FUN FACT:In Australia, women are less likely than men named Peter to be appointed CEO or chairman of a company.

In the Australian companies held in portfolios managed by AMP Capital, there are more CEOs and chairmen named Peter than the total number of women in those roles.

Is your name Peter?

Source: AMP Capital

18

13

15 15

17

14

All women All mennamed Peter

All mennamed Michael

All mennamed John

16

14

12

10

8

6

2

4

0

1312

7

Chairman CEO


WHERE (WHY) DO THE WOMEN GO?In Australia, women comprise 46 per cent of all employees. Yet despite women achieving higher levels of education than men, women hold only 14 per cent of chair positions, 15 per cent of CEO positions and 27 per cent of key management personnel positions. Currently one quarter of companies monitored by the Workplace Gender Equality Agency have no key management personnel who are women.

The big question is where do the women go?

It turns out women leave the leadership path for a variety of reasons:

> Lack of women leaders and role models: Without women role models, it is hard for both men and women to visualise women as successful leaders. Organisations that have appointed women to leadership roles will often attract other women to that organisation as women not only see that opportunities exist but also how they can contribute.

... without women role models it is hard for both men and women to visualise women as successful leaders

> Lack of understanding and appropriate opportunities: When companies haven’t given women the same development opportunities as men, they shouldn’t be surprised when they can’t find women with the right skillset to fill leadership positions. ‘Fixing women’ through leadership courses isn’t the answer. Rather, women need to be afforded real opportunities that help them see themselves as leaders. Their performance must also be evaluated objectively as women who are in the gender minority within a leadership team may struggle to fit in to the network, thus impacting their chances of promotion or development opportunities. Some companies also perceive that ‘mothers’ tend to make poor managers; where motherhood is seen as a handicap, fatherhood is seen as an advantage.

> Lack of support: Rightly or wrongly, women still generally carry out the greater share of household and childcare duties. Help is therefore needed around parental leave and the return to work. Ideally, companies should support and role-model flexible working arrangements by offering both their male and female employees the opportunity to work flexibly. The idea that people lack ambition and commitment because they want, or need, to work flexibly is outdated.

... rightly or wrongly, women still carry out the greater share of household and child-care duties

> Lack of confidence and ability to self-promote: It is widely acknowledged that men have a tendency to show over confidence while women undersell. This tendency, combined with a lack of experience, becomes a circular argument where it can be difficult for women to build experience and confidence without opportunities especially when they have suffered discrimination. Contrary to their

nature, many women feel they must continually prove they are up to the task. Failure is not an option as this would just confirm the bias that women don’t make good leaders. With more at stake for women, it is unsurprising that women may consider leadership as a risky move, not necessarily aligned with their values.

> Lack of testosterone14 15: Studies that consider the effect hormones have on behaviour generally link testosterone to confidence, higher energy and a greater acceptance of risk; all attributes associated with successful leaders. Given women’s contextual and nurturing tendencies, it requires significant energy and commitment for women to mould themselves into that male-centred leadership stereotype. Women tired of this battle and tired of being assessed on their ability to bring specific male-based traits therefore opt out of the race, arguing there is a limit to the price they are happy to pay for leadership success. Ideally women would prefer to bring their real self to their careers and not have to role play something they are not.

> Lack of financial means: Despite major advances for women in both educational attainment and workforce participation, the gender pay gap remains a permanent fixture of the Australian labour market, with the full-time gender pay gap remaining at or around 20 percent for more than two decades16. With women often earning less than their partners it is logical, but unfortunate, that women’s careers often take the back seat when caring responsibilities are allocated, which only serves to further entrench the pay gap.

It is important for organisations to engage their senior female staff given the benefits that diversity brings to the employee and the company more broadly. When staff are fully on board, they can see where the organisation is going. Not only do they understand how they can contribute their skills and talents, they are also passionate, innovative and keen to make the company a success. Organisations need to recognise the workers who are excelling and reward them. This not only is fulfilling to the worker but also sends signals to other employees that excellence is recognised and rewarded.

If staff are disengaged, they may undermine the achievements of their engaged colleagues. This could result in reduced risk taking as team members can’t be sure they’ll be supported in their endeavours.

WHY WOMEN GO: > Lack of women leaders and role models.

> Lack of understanding and appropriate opportunities.

> Lack of support.

> Lack of confidence and ability to self-promote.

> Lack of testosterone.

> Lack of financial means.


THE WOMAN’S WORLDFor at least the last five years, AMP Capital has raised the issue of gender diversity in our meetings with company directors. While directors have no trouble acknowledging that men and women are different, they appear less clear about the cognitive and behavioural differences and how companies could capitalise on them.

What is it about women and their experience that causes/allows them to bring a different perspective? While reluctant to fuel or perpetuate stereotypes about women, looking at a few of the differences may help us better understand a woman’s world. Certainly raising them in our engagement with companies has led to interesting discussions.

... the more diverse the opinions and perspectives represented around the board table,

the longer and more robust the discussions

When observing men and women walking on a footpath, one might notice that women are more likely to move out of the way; where men can be unyielding, women learn to be accommodating and amenable. The same can be observed of men and women sitting on a train; where women make themselves physically smaller by crossing legs, men spread out and occupy a lot of space. Upon discussing women’s tendency to shrink, it was recognised that this may impact boardroom dynamics. Women may also be less likely to ‘come forward’ or ‘speak out’ in meetings, requiring those chairing meetings to be aware of who is speaking, who is interrupting and intentionally draw comments from each participant.

Possibly through automatic politeness, or in a bid to take up less space, time or attention, women will too often start their sentences with an apology; “Sorry, can I …”, or “I’m just …”. Unfortunately, women’s tendency to apologise only confirms the perception of women as weaker or inferior. It is hoped that awareness of this trait reduces judgement.

Women’s tendency to be relational and contextual means women are more likely to take a longer-term view and think about how their actions and the actions of their company will impact broader stakeholders. In contrast, men tend to be more transactional, they take a shorter-term view focussed on shareholders (rather than broader stakeholders). For this reason, women have tended to be early adopters of responsible and ESG-focussed investing.

Many male directors have noted that women directors are more likely to have read the board papers and that with women in the boardroom, men are now also reading the papers in more detail.

Most likely due to their lower risk tolerance, women not only have a tendency to be over prepared but also a tendency to ask more questions. Interestingly, it has been mentioned that meetings go longer when women are present; the more diverse the opinions and perspectives represented around the board table, the longer and more robust the discussions.

It is widely acknowledged that women are more exposed than men to social dangers including harassment, abuse, domestic violence and human trafficking. Boardroom dynamics can be impacted due to the tendency for women to be considered weaker. In some cases, women have been ‘protected’ from board seats at companies operating in dangerous environments. In other cases, men who had previously felt relatively powerful and entitled reacted badly to the prospect of women taking ‘their board seats’.

Until companies and directors gain a better understanding of the woman’s world, we can expect the wide range of excuses to justify the lack of women in leadership and/or board positions to include:

> Women are too sensitive and emotional.

> Women don’t want to be leaders.

> Women are happier in support roles.

> Women are too focussed on their family to succeed in business.

> Women are too risk averse, too conscious of the consequences of loss.

> Women talk too much.

> Women will have babies and will need to go on maternity leave.

> Women aren’t physically able to travel to dangerous locations or do heavy work.

There are many other questions to ponder. Do women judge each other more harshly than men judge each other? Are women their own worst enemies? Why are women hard on themselves? Why do women in public still need to demonstrate they are women and do housework and can do it all? Where is it written that women are responsible for ensuring the house and family can’t fall behind?

OK, I GET IT … BUT HOW MUCH WILL DIVERSITY AND INCLUSIVENESS COST?Asking how much diversity and inclusiveness will cost is the wrong question. Sure, there is a cost to changing the way things have always been done but it’s more important for organisations to ask whether they can afford to continue ignoring diversity and inclusiveness. For companies to begin to reap the rewards of diversity, some hard decisions need to be made, particularly as those who have benefited from the status quo will feel challenged.

... it’s more important for organisations to ask whether they can afford to continue ignoring

diversity and inclusiveness

In the long run, however, organisations will benefit by thinking about how much inequality could be costing in terms of failing to attract and retain the best people and limiting perspectives and the process of making decisions.


PROGRESS ON DIVERSITY: AUSTRALIA LEADS THE CHARGEInterest in improving diversity has come from both the public and private sector and is being aided by the investor push for greater transparency and accountability.

As countries around the world focus on the issue of gender diversity, there is clear evidence of increased representation of women on company boards. Pleasingly in 2015 almost half of all new board appointments in Australia were women.

Norway, which introduced mandatory quotas in 2006, has the greatest representation of women on boards17. Since then other countries have introduced quotas but with less severe sanctions.

While much can be said about each country’s experience, the chart below shows that women’s representation on boards is not only increasing but the rate of increase is also picking up.

Gender diversity: global progress

Source: MSCI

Women on Boards: Australia18

Percentage of female directorships on ASX 200 boards

Source: Statistics for 2008 are drawn from EOWA’s 2008 Australian Census of Women in Leadership. Statistics for all other years are based on the Australian Institute of Company Directors research. Company rankings data provided by Market Index. Quarterly rebalance information provided by S&P

40

2010 2015201420132011

32

24

16

8

0

Australia

CanadaFrance

Germany

JapanNetherlands

Norway*

United KingdomUnited States

0

8

16

24

32

40Australia

Canada

France

Germany

Japan

Netherlands

Norway

United Kingdom

United States

20152014201320112010 Australia

Canada

France

Germany

Japan

Netherlands

Norway

United Kingdom

United States30%

2009 30 June2016

201520142013201220112010

25%

20%

15%

10%

5%

0%

8.3%

23.4%21.7%

15.4%13.4%

10.7%

17.3%19.3%

*Note: Legislation in Norway stipulates that a minimum of 40 percent of each gender must be represented in public limited company boardrooms, else the company could be forcibly dissolved.

SUCCESSFUL INITIATIVES The progress Australian companies have made with regard to improved gender diversity has come about in response to a broad range of initiatives.

a. ASX Corporate Governance Council’s requirements on diversity reporting

In 2002, the Australian Securities Exchange (ASX) convened the ASX Corporate Governance Council comprising 21 business, industry and shareholders’ organisations. The council’s principles and recommendations19 encourages ASX-listed entities to adopt a range of practices on an ‘if not, why not’ basis. In 2010, recommendations in relation to diversity were introduced; these primarily ask entities to:

1. Establish a Diversity Policy.

2. Disclose the Policy.

3. Disclose measurable objectives and progress towards achieving gender diversity.

The relocation of the Diversity Recommendations from Principle 3 (ethical and responsible decision-making) to Principle 1 (lay solid foundations for management and oversight) reflects that diversity is business critical rather than solely an ethical issue. Entities are increasingly calling out the benefits of their diversity policies and recognising the strong business case for increasing the proportion of women in their organisations.20

Since these diversity recommendations were introduced, there has been a noticeable increase in the number of entities establishing a diversity policy. Today, 99 per cent of ASX 200 companies have a diversity policy compared to 88 per cent of ASX 201-500 companies and 75 per cent of ASX 500+ companies. Gender diversity reporting does not differ markedly between industry sectors. It does, however, improve as companies get larger.

The most common reason for not adopting the guidelines was that it was “not considered necessary given the size of the company”.

... since these diversity recommendations were introduced there has been a noticeable increase in the

number of entities establishing a diversity policy

Companies that set measurable diversity objectives focussed on conducting education programs and/or further analysis (e. g. around pay parity and unconscious bias). Initiatives focused on by companies include:

> Participation in Male Champions of Change.

> Programs regarding unconscious bias.

> Recruitment processes that identified candidates from a diverse pool of applicants.

> Education and policies against harassment, bullying and discrimination in the workplace.

> Domestic violence support policies.

> Mentoring, sponsorship and leadership programs.

> Establishment of a Diversity Council including the facilitation of diversity awareness workshops.

b. ‘Two-strikes’ rule

In 2005, Australia introduced non-binding votes on remuneration reports. In 2010, shareholder power in relation to these votes was strengthened significantly with the introduction of the ‘two-strikes’ rule. This legislation gives shareholders the ability to vote on whether to spill an entire board of directors (that is, remove the entire board) over remuneration concerns. Two strikes occur when 25 percent or more of shareholders vote against the adoption of the remuneration report in two consecutive years.


d. 30% Club22

The success of the 30% Club demonstrates the power of clear and measurable objectives. When the 30% Club was launched in the UK in 2010, women’s representation on FTSE-100 boards was 12.5 per cent. This now stands at 26 per cent.

Other factors contributing to the club’s success include its collaborative process, the acknowledgement that change is driven by those in power and the concerted and consistent program and education and advocacy.

In May 2015, the 30% Club Australia was launched with the primary objective of campaigning for 30 per cent women on ASX 200 boards by 2018. AMP Capital has joined the Investors Working Group.

e. Male Champions of Change23

In April 2010, a group of senior men in Australian business met with then Sex Discrimination Commissioner Elizabeth Broderick to explore the idea of a group focused on increasing women’s representation in leadership. The group, made up of eight CEOs and non-executive directors, agreed to form the Male Champions of Change (MCC).

Men stepping up beside women to co-lead on gender equality is at the heart of the Male Champions of Change strategy. The fact this initiative is male-based has proved extremely powerful especially given the group’s strong commitment to understanding the barriers holding women back and their commitment to treating women’s representation as a priority.

... the fact this initiative is male-based has proved extremely powerful

The Male Champions focuss on four interconnected themes:

> Stepping up as leaders: Creating momentum to increase the representation of women in leadership requires stepping up and changing our ways, demonstrating commitment, prioritising the issue and leading with action. This can be done by asking leaders of organisations to reflect on their own leadership and whether they are sending the right signals about gender balance in the organisation.

Gender inequality is both a cause and consequence of domestic and family violence. We realise now we can’t champion gender-balanced leadership without addressing domestic and family violence, whose victims are overwhelmingly women.

Since the introduction of the two-strike rule, companies have shown a greater willingness to listen and respond to the views expressed by shareholders on remuneration issues. However, a real bonus of the two-strikes rule has been the increased engagement shareholders now have with the companies they invest in.

In meetings primarily arranged to discuss remuneration, shareholders now have the opportunity to engage in constructive dialogue on a broad range of other ESG issues. It is important to AMP Capital that the companies we have selected for our clients’ portfolios are well managed on their behalf. We have found that intangibles such as how a company is governed, how it manages its talent, relationships and risks can all have an enormous impact on company value. The issues discussed have included topics such as: succession planning, supply chain risks, cyber and data security, climate concerns, safety and diversity. From our discussions with regard to diversity, it appears the degree to which a board embraces diversity reflects also their openness to new ideas and their ability to effectively question and challenge them, making decisions more robust and potentially more rewarding.

c. Australian Institute of Company Directors’ Mentoring Program

Australia’s pre-eminent organisation for directors, the Australian Institute of Company Directors (AICD), has been actively involved in improving the gender diversity for some years.

The Chair’s Mentoring Program21, which is now in its fourth year, introduces highly experienced and qualified emerging female directors (mentees) to chairs and experienced directors from ASX 200 boards (mentors) for a 12-month mentoring relationship. The program is designed to provide advice, guidance and support to mentees and provide the connections of chairs and experienced directors of ASX 200 listed companies with a pool of experienced and skilled women who may be suitable for director roles. While it is not strictly its role, the program has assisted mentees achieve board appointments.

In addition to the Chair’s Mentoring Program, the AICD has awarded scholarships to women and has adopted a landmark policy for all boards in Australia to meet a target of 30 per cent female directors. The AICD’s interim target is aligned with that of the 30% Club, namely for S&P/ASX 200 companies to meet this target by the end of 2018.


> Creating accountability: Sharpening our focus and bringing our full management system to bear is essential. The objective of gender equality must be integrated across our business processes, with clear targets and accountability. For this to be successful, deeper and more consistent reporting is required. Clear targets must be set and communicated throughout the organisation and the entire supply chain.

> Disrupting the status quo: The status quo on gender equality can lead to low expectations of women’s representation. At times, we assume obstacles to women’s advancement are inevitable or insurmountable. This is not the case but standard approaches are not enough. Organisations are asked to reflect on every incidence where there is gender imbalance and ask themselves why it is not 50/50? Ask how women can get the necessary experience and if job requirements have been set fairly.

> Dismantling barriers for carers: Traditionally, the most common route to senior leadership positions has not included career breaks and visible caring responsibilities. Roles, career paths, policies and processes need to be redesigned with consideration given to people managing this ’double burden’. The MCC has pushed for parenthood to be celebrated and there to be unambiguous encouragement for return to work. Focus is also on building environments where parents and carers can thrive.

f. Being flexible about work

It is clear that companies limit their talent pool when hiring only men who can work full time at the office. As companies consider how to encourage greater participation of female employees, they have begun to focus on offering practical solutions such as flexible working hours.

Companies need to consider whether they wish to accommodate the computer whiz who wants to coach their child’s football team on a Wednesday afternoon or risk losing them, or worse still, have them become a toxic influence on the team as they begrudgingly remain at their desk.

Employees able to work flexibly are likely to be happier, more engaged and more productive. When companies demonstrate this flexibility, employees are more inclined to do likewise when trying to accommodate deadlines.

... flexible work is about thinking laterally about the tasks at hand and how to get the best people engaged in the task

Flexible work is not just ‘part time’ or ‘work from home’. It’s about thinking laterally about the tasks at hand and how to get the best people engaged in the task. It is important to accept that not everyone wants to or can work full time. By introducing and encouraging participation in a gender-neutral flexible work policy, companies can begin to break down the prejudices around part-time workers typically being women who don’t take their career seriously. It also signals a culture that respects employees and values their contribution particularly if leaders also role model positive attitudes and behaviours around flexibility*.

Organisations have to stop thinking that anyone who wants to work part time is too difficult to accommodate, not committed to their career and therefore just not worth the effort.

> What about the person who has caring commitments? This encompasses not just children or disabled family members but, as the population ages, parents who increasingly rely on their adult children for assistance.

> What about the athlete who wants to train and compete but also feels they have a lot to contribute to the business?

> What about the people who have a passion for a cause and are involved in a charitable organisation? Giving them leave without pay, for example, lets them do both.

> What about the Millennials who don’t expect to have a wife at home to take care of things? As Millennials are more likely to share domestic duties, they’d benefit from work-place flexibility.

> What about the person who just wants a break to travel, to learn or to pursue a hobby?

Flexible work arrangements can vary. For example, employees can start early and leave early or work four days in three (to accommodate people who commute long distances) or allow people to buy leave.

Companies need to consider if they want to be an organisation that is family friendly or one that frowns on people taking time off to attend their children’s sports carnival or dance performance. Forcing staff to feel bad when they want to attend events like that helps no one. Employees become resentful and less productive and kids and partners will resent the hours staff put in at the office.

People are also more likely to recommend their place of work if they are given flexibility; where they are trusted to get the work done without being micro-managed about when and how.

... people are more likely to recommend their place of work if they are given flexibility

*Incidentally, when I mentioned the computer whiz on the team that coaches their childs’ football team on a Wednesday afternoon, what was the picture that came to mind? A fit young, dad or was the computer whiz a middle-aged woman? There’s unconscious bias at play.

Some practical initiatives that have been encouraged by the Male Champions of Change include:

> Speaking publicly on the issue of gender diversity.

> Sign up to the United Nations Women’s Empowerment Principles.

> Implement programs and education with regard to domestic and family violence.

> Set specific, measurable targets for levels of diversity.

> Have a portion of executive bonuses linked directly to achieving gender balance.

> Collaborate and share information with regard to what is working and what isn’t.

> Require suppliers to have addressed gender imbalances. Telstra, for example, signed on to the Equitable Briefing Initiative, which is designed to help ensure women barristers are given the full range of opportunities in commercial litigation.

> Focus on gender balance in recruitment; including balanced short-lists and balanced interviewing panels.

> Positive role-modelling and making senior women more visible throughout their organisations

> Sponsorship and mentoring programs.

> Address pay superannuation inequity; consider making payments throughout parental leave.

> Making flexible work practices gender-neutral and accessible to all.

> Introduce more pro-active parental and return to work policies.

> Recognise that advances for women are advances for men too.

> Ask, does our organisation match the demographics of our customer-base?


2010 201620152014201320122011

ASXDISCLOSURE REQUIREMENTS

DAVID MORRISON NAMED AUSTRALIAN OF THE YEAR

ROSIE BATTY NAMED AUSTRALIAN OF THE YEAR

10

13

16

19

22

25

Australia USA

Wom

en D

irec

tors

%

MALE CHAMPIONS OF CHANGE

TWO-STRIKESRULE

WORKPLACE GENDER EQUITY ACT

CHAIR’SMENTORINGPROGRAM

30% CLUB LAUNCHED IN AUSTRALIA

201620152014

20122010

2007ELIZABETH BRODERICK APPOINTED SEX DISCRIMINATION COMMISSIONER> Championed ASX

disclosure guidelines.> Developed Male

Champions of Change.> Led Review of

treatment of women in the Defence Forces.

2010MALE CHAMPIONS OF CHANGE> Involves men of power

and influence forming a high profile coalition to achieve change on gender equality issues in organisations and communities.

TWO-STRIKES RULE> Two-Strikes Rule gives

shareholders ability to spill entire boards over remuneration issues.

2012WORKPLACE GENDER EQUITY ACT> Promote equality for

both women and men in the workplace.

CHAIR’S MENTORING PROGRAM> Australian Institute

Company Directors’ Mentoring program provides advice, guidance and support to aspiring women directors.

2014ASX DISCLOSURE REQUIREMENTS> Recommends

companies establish and disclose a diversity policy with measurable targets and progress towards achieving them.

201530% CLUB LAUNCHED IN AUSTRALIA> Campaigning for 30%

women on ASX 200 boards by 2018.

ROSIE BATTY NAMED AUSTRALIAN OF THE YEAR> Champions efforts to

fight domestic violence.

2016DAVID MORRISON NAMED AUSTRALIAN OF THE YEAR > Former Chief of Army,

now a powerful champion of gender equality, diversity and inclusion.

ON THE RISE: AUSTRALIA’S WOMEN DIRECTORSAustralia’s progress on gender diversity

g. Gender-aware policies and processes

Gender-aware policies and processes will be required for as long as society remains influenced by its deeply entrenched bias, stereotypes and expectations with regard to women and their participation in the workforce.

Awareness of unconscious bias does not in itself change anything or make it go away. In order to tackle unconscious bias, society needs to stop the behaviour that creates and confirms the bias.

Bias can be addressed by brainstorming a wider range of scenarios/hypothesis and being mindful to assess options objectively. It’s important not to rush decisions but rather take the time and energy required to make the decision commensurate with the magnitude of the decision.

We tend to hire people like us as it is safe. Rather than picture the employee we wish to hire, it would be beneficial for employers to think specifically about the task they are hiring for and the skills that are needed whether that is data mining, analysis, decisions, portfolio management, communication, quant skills, team work or creativity.

Policies and process should broaden thinking by encouraging objective consideration of a wider range of scenarios and hypothesis. Ideally, decisions will take the time and energy commensurate with the magnitude of the decision.

... In order to tackle unconscious bias, society needs to stop the behaviour that creates

and confirms the biases.

At a recent series of talks about gender diversity24, it was suggested that maybe things won’t change until men experience a woman’s world (... for a couple of decades). Speakers mused what the world would be like if men were consistently – and in the same way that many women are judged by their gender, sexualised, subjected to domestic violence, were underpaid, given less opportunities and were subjected to the same physical issues, including periods, pregnancy and menopause.

It is clear that a lot of progress is required before women achieve equality in terms of education, career opportunities, pay levels, access to leadership positions and board roles. It is recognised that women often have to jump significantly higher hurdles before being considered for senior roles.

People are most likely to give opportunities to people like them. Workers and managers are equally responsible for dealing with this imbalance.

However, it must be recognised that greater diversity may not lead to better results if either the task does not require it or the team dynamics do not allow the best ideas to surface. When simple, process-oriented and time-critical tasks need to be done, it is unlikely they will benefit from robust discussion about the various possible options. Diversity is also a hindrance when there is a lack of trust within a group or when there is a poor leader who doesn’t draw out the best from the team/board. The fact that a diverse group has been assembled doesn’t necessarily mean decision-making will be ideal; there is always the likelihood unconscious bias will interfere with the ability to objectively assess the situation and agree on the best path of action. Leaders also need to be schooled on inclusion ie., how to get the best out of a diverse group.


INVESTOR ACTION: WHAT SHOULD COMPANIES BE ENCOURAGED TO DO?There is much that companies can do to improve their gender diversity. However, what is likely to be most effective may well depend on each company’s starting point and the particular roadblocks holding them back.

From the work AMP Capital has done with companies on this issue, we have found it helpful to encourage companies to step back and consider the value they place on diversity and where they are in this journey. Without first acknowledging a need for improved diversity, progress is likely to be slow.

Generally, those companies that perform well – really well – are companies that have respect for the values they espouse and respect for the way they treat people whether they be staff, suppliers, customers and/or their community. These companies make us feel good. We want to buy their products or services, we want to work for them and we can’t help but speak highly of them. As we want to see them achieve greatness, we will even go out of our way to play a part in their success. They inspire, unite, they stand for something; and actions match their beliefs. If good companies prosper, we all do.

The business case for improving gender diversity at senior levels of organisations is continually being strengthened. As mentioned previously, AMP Capital has found that companies with two or more women directors tend to exhibit better governance, with fewer issues around board composition, the quantum and structure of remuneration, audit integrity and also related-party transactions.

This can be attributed to the different perspectives that women bring to the table. When issues are approached from different points of view, it is likely discussions will be more robust and decisions more rewarding.

... AMP Capital has found that companies with two or more women directors tend to exhibit better governance

While good progress has been made, there is some way to go before women make up 30 per cent of every Australian board of directors.

AMP Capital therefore encourages the companies we invest in to address roadblocks such as unconscious bias and to cast the net more widely when recruiting. For the pool of talented women to be developed and recognised, there needs to be clear focus on pay parity and the opportunities for women to gain executive experience.

BOARD QUALITYDirector quality and board effectiveness continues to be the most important governance issue for shareholders.

AMP Capital has long been interested in board composition. When assessing boards, we take into account the combination of director skills, the time each director can commit to the role, and their ability to act independently and in the best interests of the company and shareholders. As part of this, we also consider the issue of gender diversity.

Back in the 1990s, when AMP Capital began to more closely evaluate governance issues, we noted the homogeneity of directors on Australian boards and accepted all-male boards as the norm. Today, our thinking has progressed considerably. After accepting poor diversity as ‘normal’, we progressed to see improving gender diversity as the ‘right’ thing to do. Now we firmly believe it is the ‘smart’ and ‘necessary’ thing to do.

In 2010, AMP Capital found that 60 per cent of the Australian companies we invested in on behalf of clients had no women directors and immediately began to raise the issue in our regular engagement with company chairmen. Since that time, we have continued to monitor and report on the gender diversity of boards.

It has been pleasing to witness the steady increase in the number of women now seated on the boards of Australia’s largest companies. Where, in 2010, 60 per cent of companies AMP Capital held had no women directors, in 2016 this number had fallen considerably to 9 per cent.

... In 2010, AMP Capital found that 60 per cent of the Australian companies we invested in on behalf

of clients had no women directors ...

New directors

A review of the profiles of women who have recently been appointed to their first ASX board seat shows these directors bring a broad range of skills, experience and expertise to the table.

For many years, company chairmen argued that the failure to appoint women directors was as a direct result of an insufficient number of women possessing the relevant executive or technical expertise. While metals and mining companies continue to feature prominently in the list of companies with no women directors, it is pleasing to see many of the new women joining boards have come from mining, medical and scientific backgrounds.

Where in the past women directors often possessed specific skills in human relations, the most recent appointees have had diverse backgrounds including:

> Senior executive careers with ASX 100 companies including resources companies.

> Leadership of industry bodies.

> Experience with not-for-profit organisations.

> Experience working for international companies.

> Banking, finance and investment advisory.

> Politics and law.

> Science, technology, engineering and mathematics (including IT and telecommunications).

> Property management.

The message does appear to be getting though, As boards slowly become true meritocracies, the white males who have traditionally occupied the majority of board seats must prove they are the best director for the board at this point in time as they now compete with women for these roles.

*Based on the Australian companies held in portfolios managed by AMP Capital

Fewer companies now have no women directors*.

2010 2011 2012 2013 2014 20162015

70%

60%

50%

40%

30%

20%

10%

0%

Boards with no women Boards with one women Boards with two or more women


WHEN CAN INVESTORS STOP TALKING ABOUT GENDER DIVERSITY?Investors who are focussed on long-term sustainable value gain insights from considering the intangible factors that drive company value. One such driver of value is the quality of a company’s people. As such it is important for companies to attract, motivate and maintain the best team and create an environment where the best ideas can be implemented.

For as long as companies choose to narrow their pool of talent and limit their cognitive diversity and collective intelligence, it will be in investors’ best interest to engage with companies on this issue.

Each of us has some understanding of the need for greater diversity. Yet it appears we also have roadblocks and bias that are so deeply entrenched they make us part of the problem and contribute to the inertia. It’s no longer OK to simply agree that someone needs to do something. As employers, employees, educators, men, women and investors, we can all be part of the solution.

It’s likely we’ll have to keep talking about diversity until we not only understand the importance and complexity of the issue, but when we see that we are also part of the problem and the solution. Only then will we be able to help hurry up history.

TOP THINGS WE CAN DO TO IMPROVE GENDER DIVERSITY

> Acknowledge we are part of the problem.

> Understand our biases and address them.

> Champion benefits of diversity.

> Set measurable targets and report progress.

Specific goals could include:

> Promote an inclusive culture from the CEO down.

> Make diversity a KPI for companies.

> Convince men who are laggards when it comes to gender diversity that they have nothing to lose.

> Level the playing field and make sure each person’s voice is heard regardless of gender.

> Decrease bias in recruitment with gender balanced short-lists and interviewing panels.

> Pay men and women equally.

> Develop and promote all employees equally.

> Give equal access to flexible work.


WOULD DIVERSITY HELP INVESTMENT MANAGEMENT?If cognitive diversity improves decision making, it is logical to conclude that cognitively diverse investment teams will make better investment decisions.

Investment performance has generally been judged in terms of return, risk and costs. In a zero-sum game where not everyone can be above average, managers need to think more broadly about how to generate superior returns. It is likely that by approaching the task from a different angle, risks can be reduced and something of sustainable value can be created.

... it is logical to conclude that cognitively diverse investment teams will make better

investment decisions

Financial markets are facing growing challenges. A lack of trust has created unease with respect to the gap between outcomes versus expectations. Since investing began, trading rooms have tended to be full of competitive men, testosterone and risk taking. While women are yet to have a significant presence, it is anticipated that when their numbers grow the culture will become a more socially perceptive one, with less risk-taking and more collaboration and inclusiveness. Interestingly, the pay gap between men and women is highest in the financial and insurance services sector at 30 per cent. This compares to the general pay gap of 17.3 per cent.

Many fund managers have noted that their client base is also changing. With an increasing number of financial decisions being made by women, it is particularly important for the investment industry to embrace diversity. Where men tend to focus on how they can earn the biggest return, women tend to think more about financial security and what the money can do for them.

Wall Street, the epicentre of the 2007-2008 Global Financial Crisis (GFC), is well known for its racial homogeneity. In her book Which Two Heads Are Better than One?25, Juliet Bourke poses the question: ‘Could the GFC have been prevented, or at least curtailed, if traders had been more ethnically diverse?’

A 2014 Columbia University26 study gives an interesting answer to this question: racially diverse groups of traders scrutinise others’ actions more closely and homogenous groups tended to trust each other, see others’ behaviour as reasonable and copy the buying and selling activity. Hence, homogenous groups were more likely to fuel price bubbles. Homogenous markets tended to err collectively.

The investment industry, which is often criticised for being too short term in its thinking, would benefit from the different perspective brought by women.

RISK: ENRON, LEHMAN BROTHERS, THE GFC AND WHISTLE-BLOWERSMale dominance in the financial sector gave rise to the claim that masculine behaviour was a major contributor to the 2007-2008 financial crisis. For proof of this hypothesis, it’s interesting to look at events at the high-profile corporate collapses of Enron and Lehmann Brothers.

Looking at the events at Enron, it is clear the board succumbed to groupthink, with the desire for harmony and quick decision making winning out over robust analysis and risk management. Enron did have one woman director. However, due to her close connections with the Commodity Futures Trading where she had been directly involved in regulating the activities of Enron and Enron having been the largest donor to her husband’s, Texan Senator Phil Gramm, campaign, she was not considered to be independent of the group. However, when the whistle was blown on Enron’s use of loopholes to manage the balance sheet in a way that would make investors think it was performing better than it was, this was done by a woman.

In 2002, the cover of Time Magazine27 had a photo of three women. The headline read “Persons of the Year: The Whistle-blowers”. The three women were Sherron Watkins, the former vice president of Enron who alerted then-CEO Ken Lay in August 2001 to the accounting irregularities, Coleen Rowley of the FBI and Cynthia Cooper of WorldCom. They were honoured for being “people who did right just by doing their jobs rightly”. Other high-profile women

whistleblowers include Carmen Segarra, (about the too-cozy relationship between the New York Federal Reserve and Goldman Sachs) and Karen Silkwood (the Kerr-McGee plutonium processing plant worker).

... while not all whistleblowers were women, women did have ‘certain attributes beneficial to the trade’

A 2014 article in Fortune Magazine28 stated that while not all whistleblowers were women, women did have “certain attributes beneficial to the trade”. The traits which these magazines identified as differentiating female whistle blowers from their male counterparts include:

> Women’s preference for operating below the radar.

> Women’s tendency to recognise downside risk, rather than upside risk, and thus having less tolerance for corporate shenanigans and ethical grey areas.

> Women’s motherhood gene, which causes women to rise up and defend those in weak positions including mistreated employees and cheated customers. Executive women are tough on bad-boy behaviour.

> Women still being outsiders; being outside the boys’ club they feel less inclined to protect it.

> When the Cambridge Journal of Economics published the “Lehman Sisters Hypothesis” it noted that empirical literature backs the claim that “more gender diversity in finance, and particularly at the top, would help to reduce some of the behavioural drivers behind the (global financial) crisis”. See following case study.


WHAT IF LEHMAN BROTHERS HAD BEEN LEHMAN SISTERS?29

In “The Lehman Sisters Hypothesis”, a study published in the Cambridge Journal of Economics in 2014, Irene van Staveren of Erasmus University Rotterdam assesses the empirical grounds for the claim that gender differences account for the behavioural drivers behind the financial crisis.

In reviewing existing empirical literature on gender-specific behaviour, the author focuses on three dimensions that are relevant in the financial sector: risk aversion and response to uncertainty; ethics and moral attitudes; and leadership. (“Lehman” refers to the Wall Street firm that went bankrupt during the crisis; it was one of many American financial firms to have few women in leadership at that time.)

The study’s findings include:

> Several empirical studies suggest that women are on average more risk and loss averse than men (Beckmann and Menkhoff, 2008; Croson and Gneezy, 2009).

> As a consequence, women faced with increasing levels of risk in expanding financial markets “tend to perform better than men because they take lower risks or take more time to respond to increasing uncertainty than men do; whereas under conditions of relative stability of financial markets, men would perform better than women.”

> A 2011 report by the bank Barclays found that “women use partly different strategies of financial discipline than men.” Women more often use cooling-off periods and “more often avoid information about markets that may lead them to deviate from their long-term strategies. Hence, women seem to be less overconfident than men in their investment behaviour.”

> A 2012 study by Booth and Nolen suggests that the difference in risk and loss aversion between men and women may mainly be due to gender-role beliefs. Their study “found that girls in single-sex schools exhibit the same levels of risk in games as boys, whereas girls in co-educational schools take lower risk levels.” The authors of that study concluded that culturally driven norms about appropriate female behaviour in co-educational schools influenced the behaviour of those girls who had the propensity to make riskier choices and prompted them to make less-risky choices.

CASE STUDY:

> Regarding the ethics and moral dimension of gender differences, van Staveren finds that experimental game theory “has consistently shown that women are more cooperative than men.” Moreover, women’s strategies are more dependent on the context they find themselves in than men’s strategies: “This suggests that women’s reasoning in complex situations is more contextual than men’s.”

> A 2011 study by Kray and Haselhuhn finds that men “more often identify with the interest of an individual agent, changing their attitude towards the sharing of asymmetric information” depending on the roles they were assigned. Women “more often identify with what they consider to be a fair relationship […] irrespective” of the role they are assigned. These findings may reveal that “women’s ethical attitude in a market relationship is more cooperative and oriented towards fair play, whereas men’s ethical attitude is more competitive.”

> Considering the leadership dimension of gender differences, van Staveren reviews a 2012 study by Bigelow et al. that found that a female CEO’s abilities were evaluated more negatively than a male CEO’s in spite of being identical.

> The author also notes: “It seems that among business administration students and professionals in the financial sector, gender stereotypes about female managers’ capacities are stronger than the actual ratings of female managers’ characteristics and performance. This legacy of our societies’ gender stereotyping and gender identities helps to explain the strength of the glass ceiling in finance, as well as the phenomenon of the glass cliff during financial crises.”

> Empirical literature backs the claim that “more gender diversity in finance, and particularly at the top, would help to reduce some of the behavioural drivers behind the (global financial) crisis”.

The author concludes that the empirical literature backs the claim that “more gender diversity in finance, and particularly at the top, would help to reduce some of the behavioural drivers behind the crisis.” She notes, however, that “further empirical research is necessary in order to fill in remaining gaps. In particular in the ethical dimensions, the interaction effects between males and females, and the persistence of constraints for women leaders in banking.”

REFERENCES:

1. Wildman, SM (1996); Privilege Revealed: How Invisible Preference Undermines America

2. Anchor s (2012) Harvard Business Review: https://hbr.org/2012/01/positive-intelligence

3. Torres, Nicole (2014) Harvard Business Review: https://hbr.org/2014/12/mindfulness-mitigates-biases-you-may-not-know-you-have

4. Ned Herrmann. AZQuotes.com. Retrieved June 01, 2016, from AZQuotes.com Web site: http://www.azquotes.com/author/40598-Ned_Herrmann

5. Bankwest Curtin Economics Centre and Workplace Gender Equality Agency: Gender Equity Insights 2016: Inside Australia’s Gender Pay Gap https://www.wgea.gov.au/sites/ default/files/BCEC_WGEA_Gender_Pay_Equity_Insights_2016_Report.pdf

6. Global Gender Gap Report (2015) https://www.weforum.org/reports/global-gender-gap-report-2015/

7. Vafaei, Ahmed & Mather (2015) Board Diversity and Financial Performance in the Top 500 Australian Firms La Trobe University (Published: Australian Accounting Review)

8. Julia Dawson, Richard Kersley and Stefano Natella (2014); The Credit Suisse Gender 3000

9. Catalyst (2013) Why Diversity Matters

10. Hunt V, Layton D, Prince S, (2014) McKinsey’s Diversity Matters http://www.business-diversity.de/content/downloads/Diversity%20Matters.pdf

11. Phillips, KW (2014): How Diversity Makes Us Smarter http://www.scientificamerican.com/article/how-diversity-makes-us-smarter/

12. Rifkin J (2010) The Empathic Civilization: The Race to Global Consciousness in a World in Crisis

13. The Prince by Nicolo Machiavelli CHAPTER VI: Concerning New Principalities Which Are Acquired By One’s Own Arms And Ability

14. Wallen, K. Editor; Hormones and Behavior: Official Journal of the Society for Behavioral Neuroendocrinology http://www.journals.elsevier.com/hormones-and-behavior/

15. McDonald, S (2015) Entrepreneurs and testosterone: http://leadershiphq.com.au/entrepreneurs-and-testosterone/

16. Bankwest Curtin Economics Centre and Workplace Gender Equality Agency: Gender Equity Insights 2016: Inside Australia’s Gender Pay Gap https://www.wgea.gov.au/sites/ default/files/BCEC_WGEA_Gender_Pay_Equity_Insights_2016_Report.pdf

17. Linda-Eling Lee (2015) MSCI: WOMEN ON BOARDS: GLOBAL TRENDS IN GENDER DIVERSITY MSCI https://www.msci.com/www/blog-posts/women-on-boards-global-trends/0263383649

18. Statistics for 2008 are drawn from EOWA’s 2008 Australian Census of Women in Leadership. Statistics for all other years are based on the Australian Institute of Company Directors research. Company rankings data provided by Market Index. Quarterly rebalance information provided by S&P

19. The current version of the Council’s Corporate Governance Principles and Recommendations (the Third Edition) was released on 27 March 2014 and took effect for a listed entity’s first full financial year commencing on or after 1 July 2014.

20. KPMG Report (2016): ASX Corporate Governance Council Principles and Recommendations on Diversity

21. Chair’s Mentoring Program. http://www.companydirectors.com.au/director-resource-centre/governance-and-director-issues/board-diversity/mentoring-programs

22. The 30% Club: http://30percentclub.org/about/chapters/australia

23. Male Champions of Change: http://malechampionsofchange.com/

24. All About Women (2016) http://aaw.sydneyoperahouse.com/about/

25. Bourke J, (2016) Which Two Heads Are Better Than One? Published by the Australian Institute of Company Directors.

26. Start, D and Levine, S (2014) How Diversity Deflates Price Bubbles Columbia University Faculty of Arts and Sciences

27. Ripley, A and Lacayo, R (2002) Persons of The Year 2002: The Whistle-blowers Time Magazine Dec. 30, 2002

28. Sellers P (2014) Fortune Sept 30 ttp://fortune.com/2014/09/30/women-whistleblowers

29. van Staveren, I.P. (2014). The Lehman Sisters Hypothesis. Cambridge Journal of Economics.

Important note: This document is provided for Australian residents and residents of countries where it would not be prohibited or against local laws to provide the information in this document (“Permitted Jurisdictions”). This document is not provided to any person who is a resident of any other country. The information in this document is only available to persons accessing the document from within Australia or another Permitted Jurisdiction. While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) makes no representation or warranty as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital. © Copyright 2016 AMP Capital Investors Limited. All rights reserved.

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