In the lead up to Harmony Day (Saturday 21 March), Diversity Council Australia has partnered with Deakin University on Australian first research to investigate cultural diversity in ASX Boards over the past decade. The findings reveal that while cultural diversity on ASX boards has increased, boardrooms don’t yet reflect the cultural diversity in the Australian community and are failing to realise the potential benefits.
In each of ASX 100, ASX 200 and ASX 500 listed companies, only a quarter of directors are from culturally diverse backgrounds compared with a third in the wider Australian community, and only 5% are from Asian backgrounds versus 8.5% of the Australian community. But on the positive side, there has been significant growth in cultural diversity on boards in the last decade – by as much as 74% and 61% when it comes to chairs and directors from Asian backgrounds, and 16% and 22% for chairs and directors from culturally diverse backgrounds.
In our examination of the cultural origins of ASX-listed company board directors at three key time points – 2004, 2009 and 2013 – we found:
- Boards are getting more culturally diverse: 22% increase in directors from culturally diverse (non-Anglo-Celtic) backgrounds; 16% increase in Chairs from culturally diverse backgrounds; 28% increase in the number of ASX companies that have achieved a critical mass of directors from culturally diverse backgrounds
- The percentage of directors from Asian backgrounds is increasing: 74% increase in Chairs from Asian backgrounds (3.5% to 6.1%); 61% increase in directors from Asian backgrounds (5.9% to 9.5%); and 14% increase in CEOs from Asian backgrounds (4.4% to 5.0%)
- The percentage of directors from Southern, Eastern & Central European backgrounds is increasing: 20% increase in ASX directors and 63% increase in ASX 200 directors from Southern, Eastern & Central European backgrounds
- But there is slower progress in larger companies and among CEOs: 10% increase in ASX 100 directors from culturally diverse backgrounds v 22% increase among all ASX directors; 5% increase in ASX 100 directors from Asian backgrounds v 61% increase among all ASX directors; and 4% increase in CEOs from culturally diverse backgrounds v 22% increase in directors from culturally diverse backgrounds
- The top 5 Anglo-Celtic names dominate CEOs positions: 21% of ASX CEOs in 2013 were called only 1 of 5 Anglo Celtic names (in order of frequency): David (68), Peter (53), John (48), Andrew (47), Michael (46)
- Boardrooms don’t yet reflect the cultural diversity in the wider community: In ASX 100-500 24% of directors are from culturally diverse backgrounds compared to 33% of the Australian community; and 5% of directors are from Asian backgrounds compared to 8.5% of the Australian community.
DCA’s CEO, Lisa Annese, said the findings show that while business is making some good progress, there is still some way to go.
“The good news is that cultural diversity on boards is on the rise, especially when it comes to increasing directors from Asian cultural backgrounds. This is encouraging, given the economic importance of Asia to Australia.
“But the bad news is that people from Anglo Celtic and North-West European origins are still overrepresented on boards, and other cultural origins are underrepresented when compared to the general population. Moreover, board diversity amongst our largest companies and amongst CEOs, has been the slowest to change.
“This failure to take advantage of culturally diverse talent in some ways reflects our history, the waves of migration to Australia and perhaps our geographic isolation. And it is perpetuated by a leadership that continues to hire in its own image. Like gender diversity, however, cultural diversity on boards isn’t just a nice to have. Research clearly shows that board-level and workforce cultural diversity are linked to enhanced organisational performance and firm profitability [i] – particularly when organisations are pursuing innovation and growth strategies. The question needs to be asked, is the profit and performance of Australian companies being compromised by this lack of diversity?” said Lisa.
About the survey
The cultural origins of ASX board directors were investigated at three key time points – 2004, 2009 and 2013 – using an innovative methodology, OriginsInfo’s name analysis. This approach has been demonstrated to have high levels of accuracy and is a simple, quick and cost-effective way of gaining an understanding of the cultural mix of a workforce, labour market catchment, customer base or other population.
Cultural origins analyses were conducted for board directors overall, as well as board chairs and CEOs. We also considered the issue of ‘critical mass’ – that is, to what extent ASX companies had met a critical mass defined by research as 28% or more directors with culturally diverse backgrounds. We thought this constituted a sufficiently rigorous threshold – a midway point between 33% (i.e. proportion of Australian adults who are culturally diverse using a broad definition), 25% (i.e. proportion of Australian adults who are culturally diverse using a narrow definition) and 22% (i.e. the point above which organisations begin to realise the financial gains of cultural diversity [ii].
ASX 100, 200 and 500 were based on market capitalisation for the corresponding year. ‘Asian’ includes North East Asian, South East Asian and South Asian.
[i] T. Barta, M. Kleiner and T. Neumann, ‘Is There a Payoff From Top Team Diversity?’, McKinsey Quarterly, 2012. http://www.mckinsey.com/insights/organization/is_there_a_payoff_from_top-team_diversity
R . Labelle et al., ‘Ethics, Diversity Management, and Financial Reporting Quality’.
Q.M. Roberson and Q.M. & H-j. Park, ‘Examining the Link Between Diversity and Firm Performance: The Effects of Diversity Reputation and Leader Racial Diversity’, Group & Organizational Management, vol. 32, 2007, pp. 548-560.
UK Government Department For Business, Innovation & Skills, BIS Occasional Paper No. 4, The Business Case For Equality And Diversity: A Survey Of The Academic Literature, 2013. Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/49638/the_business_case_for_equality_and_diversity.pdf
O. Richard, A. McMillan, K. Chadwick and S. Dwyer, ‘Employing an Innovation Strategy in Racially Diverse Workforces,’ Group and Organization Management, vol. 28, no. 1, 2003, pp. 107-126. As cited in, UK Government Equalities Office, The Case for Equality – Draft Report for Phases 1 & 2, April 2010.
Asialink, Developing An Asia Capable Workforce.
[ii] Q.M. Roberson and Q.M. & H-j. Park, ‘Examining the Link Between Diversity and Firm Performance: The Effects of Diversity Reputation and Leader Racial Diversity’, Group & Organizational Management, vol. 32, 2007, pp. 548-560.