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Targets and quotas: a two-pronged approach to increase board diversity

Onwards and upwards: using quotas and targets could pave a leadership path for more women.

Despite great aspirations and considerable effort towards attaining more women in leadership, progress over the last 10 years has at best been slow, as a recent report from the Australian Bureau of Statistics reveals. Men continue to greatly outnumber women across all leadership positions in the public and private sector, for essentially the same reasons as before, with little change to utilise the talent of women or acknowledge their potential.

Advancing diversity in boards in Australia: which way is up?

Debate continues over the best way to increase the participation of women in leadership positions in business. The number of countries opting for mandatory quotas of women for boards of directors is increasing, though the consensus in Australia is to go for voluntary targets.

The Business Council of Australia and the Australian Industry Group have argued against quotas, insisting that simply achieving a change in board membership did not lead to other necessary changes in female participation in executive ranks in the countries that adopted quotas. They argue for “merit-based appointments”, though the question persists: how is merit defined, nurtured and developed?

But some business leaders in Australia are breaking ranks and calling for quotas. The first to put her head above the parapet was the Governor-General of Australia, Quentin Bryce, who said in 2011: “I believe the old boys’ network is a powerful one. No one gives up power and privilege willingly, do they?” She also received emphatic support from shadow treasurer Joe Hockey, who demanded “punitive measures” to enforce change with a quota of 30% women for boards.

Early this year, veteran banker Peter Hunt of Greenhill & Co insisted incremental change was not working. What we need, he argued, is a paradigm shift. He called for a change in the Corporations Act to include a quota of at least 25% female directors. Federal Sex Discrimination Commissioner Liz Broderick backed him up, saying that “if it’s necessary to give a jolt to a misaligned system we should do it”. The chairman of Qantas Superannuation and Colonial First State Investments, Anne Ward, argued that quotas for female board directors was the most viable way forward.

Meanwhile, seven European countries — Norway, France, Belgium, Iceland, Italy, the Netherlands, and Spain — have now applied quotas. Each of them has experienced a rapid advance in the participation of women on boards. As a result of quotas, France has now reached 25% women directors in the top 17 companies, an increase from 7.2% in 2004, while in the US where targets have long been established the improvement has been sustained but slower in female participation in boards.

Thomas Clarke

Do targets work?

Currently, 114 companies in the ASX 200 and 232 companies in the ASX 500 have adopted a diversity policy. In the ASX 200, just over half of all companies are setting measurable objectives. The standout performers in setting numerical targets include Mirvac with 35% women board membership by 2015; Woolworths with 25% by 2015; Coca Cola, Brambles, Telstra, and NAB with 30% by 2015; and BHP Billiton, Envestra and Virgin with 25% by 2014.

This change in women in board membership is accompanied by even more ambitious numerical targets for women in senior executive positions. ANZ aimed for 40% in 2012; Westpac has targeted 40% by 2014; GPT has aimed for 40% by 2015; and Leighton Holdings has aimed for 40% by 2016.

A remarkable transformation is projected in the boardrooms and executive ranks of corporate Australia. It will be fascinating to examine this unfolding, and to consider the consequences.

Targets and quotas?

It is clear that the introduction of quotas in Norway had a dramatic impact on the debate surrounding quotas. The possibility that quotas might well be introduced in other jurisdictions was a sharp spur to action that did not exist before. It is unlikely that the commitment to significant targets would have been as considerable if a move towards firmer regulatory action was not clearly visible. It was the introduction of quotas in Norway that made it feasible to commit to ambitious targets in Australia and elsewhere.

If countries that have adopted quotas sustain more rapid progress in gender diversity on boards, then there will be insistent calls for the adoption of quotas in all jurisdictions. Quotas establish precedents, which targets strive to achieve by voluntary means. Targets stimulate corporate initiatives to facilitate the progress of women to board positions, which quota systems may learn from. Rather than viewing quotas and targets as entirely different approaches, they can be seen to be mutually reinforcing.

UTS Centre for Corporate Governance is organising two events on 6 March 2013 as part of the UN International Women’s Day celebrations: A one-day symposium on diversity on boards and a free, evening public lecture and Q &A with an expert panel of senior business women.

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