Beyond gender: a new conversation for corporate diversity in 2020

The greatest drivers of company value are not things that are easily seen, but instead those that lie beneath the surface. Diversity is one of them, and it’s time for the conversation to become more sophisticated globally.

These intangible drivers of value include factors such as the way in which companies mitigate and manage their exposure to climate change risks, or how they structure executive pay and what behaviour they seek to reward. It can also be seen in the diversity of their board, executive leadership team and broader workforce.

People are a company’s greatest asset, and value is largely driven by the actions of a company’s workforce. It logically follows, then, that the teams best able to generate strong returns for shareholders are those which are happy, engaged, collectively intelligent and cognitively diverse.

Gender diversity has been the focus of our discussions with companies for many years. Whilst we all know that true diversity goes much further, from a basic level if companies aren’t able to represent the 51% of Australians who are female they are likely to have problems meeting other criteria¹. Gender is therefore a natural starting point on a journey to more widespread change.

Gender balance is also important for company performance: research shows that when women are added to decision-making groups, those groups are likely to have an increased focus on ethics, risk management, reputation and cooperation, as well as on the context of the problem and the broader impact of decisions².

Women think differently and make different ethical choices to men: where women tend to be more contextual, collegiate and focussed on relationships, men tend to be more factual, tactical and focussed on winning³.

Importantly for investors, statistics show that companies perform better when they have more women in leadership roles⁴.

Nearly ten years ago, 60 per cent of the Australian companies we invested in had all-male boards. The remaining 40 per cent had only one or two female directors. Even today, many corporate boards and management teams are still predominantly male – yet women make up more than half the population and half of university graduates. Granted, the Australian business community is making inroads in this regard, and around 30 per cent of all company directors are women. However, progress has been slow and has failed to permeate throughout the entire corporate sector.

Organisations such as the Workplace Gender Equality Agency (WGEA) and the Male Champions of Change (MCC) Institute have been successful calling on businesses to make a focussed effort to create gender equality in the workforce. Major Australian businesses, accredited by WGEA and participating in the MCC program, are leading the way for others and demonstrating what can be achieved.

But now that companies are on the right track, progress is stalling on a number of fronts. We’ve found people are tuning out and the executives we meet have well-rehearsed responses to the question of gender equity that meaningful engagement on the subject can become difficult. Gender itself is also becoming less rigidly defined, with more and more people not identifying with a binary gender.

Partly as a result, AMP Capital has moved our diversity focus beyond the simplistic male-female divide.
In order to tap into the broadest pool of talent in leadership teams and across the workforce, companies should be considering people of different ethnicities, culture, age, physical abilities, socioeconomic background, education, life experiences, religion, political views, sexual orientation, and personalities.

As an example, today’s leadership roles are currently dominated by Baby Boomers. As younger generations move into senior roles, not only may corporate priorities change but previous stances on issues such as climate change may come under increasing criticism. The sooner boards and leadership teams can encompass a broader range of age demographics, the less disruptive this transition will be.

Companies achieving – or at least consciously moving towards – broad diversity will deliver several positive outcomes for investors.

In most countries it is unlawful to discriminate of the basis of age, race, sex, gender reassignment, disability, religion or pregnancy and maternity. Breaching such laws can not only incur fines but also damage a company’s social licence to operate.

Beyond legal requirements, diversity has been shown to be good for business across a range of industries. Diverse workforces tend to be more engaged and more productive; decision making is more robust; and reputations are enhanced.

We urge companies we deal with to embrace diversity, and to show evidence that they have set clear targets, are demonstrating progress, and that they truly understand the value it brings.
Ultimately, improving diversity beyond gender will provide a better pool of companies in which to invest, delivering results for our clients, and benefits to the Australian workforce and wider economy.

^{1, 2, 3, 4} Gender Diversity: The real reason we are still talking about it. Karin Halliday, AMP Capital, 2016