CULTURAL DIVERSITY ON BOARDS NEEDS ADVOCATES AND ACTIONS
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Advocates and action can drive a more culturally diverse boardroom.
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Boards at an individual and collective level are astutely aware that they perform best when diverse perspectives, diverse thinking and diverse sources of knowledge and experience exist around the board table.
Successful boards also understand that the real world of their organisations is one of a wide-range of customers, talent, stakeholders, shareholders and communities. This means nominations committees should be developing broader views of the ideal board candidate and advocate for action.
Yet, the move toward culturally diverse boards continues to be slow mainly due to systemic barriers.
Governance Institute of Australia and Watermark Search International found in their Board Diversity Index that while many Asian-Australians have aspirations to join a board and pursue a board career as part of their professional portfolio, only a select few have broken through.
The commentary on the survey states: βThe representation of directors with an Asian cultural background has reduced this year and their place seems to have been taken by directors from the USA, Canada and New Zealand. The numbers are not that large, but it is a disappointing shift from a board diversity perspective.β
Recently Russell Reynolds Associates in Lack of Asia Expertise on Australian Boards: A Call for Action made these points:
βTo build this Asia capability, it is essential that boards appoint directors who have relevant and contemporary experience. They are ideally of Asian descent, have lived and worked in Asia, speak relevant languages and understand cultural nuances, and of course have current strong ties to relevant Asian markets. Only these directors will have a sufficiently deep understanding of the complex cultural nuances, along with the rapid technological advancement and geopolitical tensions that have emerged in recent years. To win in Asia in the future, the traditional approach of appointing Westerners who have worked in Asia in the past will no longer be adequate, as their knowledge of the Asian market quickly becomes outdated.β
βCurrently, however, ASX100 boards do not adequately reflect the international markets in which they operate, and are exposed either from a consumer or supply perspective. Only 18 ASX100 board directors (3 percent) are of Asian descent and have lived and worked in Asia for a reasonable enough period to have a level of material understanding. More than half (58 percent) of those Asian board directors have Chinese heritage, and a third (32 percent) come from Singapore or Malaysia. Almost none come from other major markets in Asia, such as India or Japan.β
βOf the 11 ASX100 companies that have Asian directors on their boards, the majorityβeightβare in the industrial and natural resources sector, while the balance has a consumer base largely located in China.β
Challenges
A report titled Beyond the Pale: Cultural Diversity on ASX 100 Boards ( University of Sydney), which was based on interviews with non-executive board members and executive recruitment firms, noted:
There is a serious under-representation of culturally diverse individuals in the senior level of Australian business which impacts available supply of board members.
Pathways to board membership remain difficult to navigate without the right information, networks, mentors and know-how.
Cultural diversity on boards has become framed as an impediment to type of leadership.
There is a tendency to discuss a βglobal mindsetβ, βcultural awarenessβ and βcultural diversityβ as being the same thing and use these terms interchangeably as evidence of cultural diversity on boards.
Pre-existing networks can mean invitations are extended to a known group rather than a varied and broader range of potential participants. This also impacts the ability to form new connections.
Lack of measures, targets and reporting on cultural diversity on Australian boards, in order to drive change.
Casting a wider net in director nominations is critical
The ten factors I suggested in How To Improve Board Composition (AICD Company Director magazine) are applicable when thinking about the cultural diversity of board composition:
Is experience from the same industry mandatory or is greater value gained from someone who has capabilities with relevant types of customers, supply chain management issues, business models, competitor challenges, geographic reach, regulatory demands, transformation programs, market disruption or understands the βbusiness of business.β
What strategic work has to be addressed? Do we need a background in dealing with the systemic issues or strategic choices of an organisation at the same life cycle stage and can the new director help steer the organisation around the next few corners as the business keeps developing, diversifying, prioritising or refocusing?
Competing for attention is a range of internal and external stakeholders. How useful is a skill-set in managing or influencing these different interests and the opportunities or risks they present?
How can we ensure robust decision-making? In the context of the boardβs pressure points, what types of critical thinking, judgment and insight enable the organisation to continually improve or seek best practice?
Boards deal with ambiguity, dichotomies and complexity. Directors often balance opposites: the short-term versus the long-term, increasing shareholder value versus acceptable returns on capital invested, organic growth versus growth by acquisition; commercial impact versus social impact; values versus profit. Who can help us deal with the uncertainty or think beyond the linear or clarify alternative scenarios?
Customer motivations to buy a product or service are not uniform and there are many channels to interact with or form an impression of an organisation. Who can help us get closer to our current and emerging customers or better know the marketplace or competing interests?
The workscape is changing considerably. Human capital trends as highlighted in the AICD report Directorsβ Playbook: The Future of Worksets out new issues for board agendas. How useful is a skill-set in resolving tensions across systems, organisation silos or groups? What transformation or organisational change work is planned? Will success be improved with an understanding of people and culture or managing transitional impacts?
Boards are expected to have intellectual rigour drawing on a mix of functional expertise, industry experiences, qualifications and demographics for good governance on wide-ranging, complex issues. Can we strengthen our boardβs cognitive, cultural and demographic diversity?
Will a wider generational mix on the board add needed perspectives on changing business models, the new way of work, consumer trends, digital user experience and digital communication?
How will we onboard, orientate and support the new board member, particularly a first-time director, to avoid a false start and maximise their early contribution.
In another of my published pieces I made the point that ββ¦ diversity tests leadership. Some lead the way with purposeful intent while others follow. Companies that manage diversity well, manage their companies well, excelling at execution. Chairs and CEOs with a genuine commitment to make diversity a core competency challenge the underlying thinking β¦β
That view remains.
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