Yesterday the New Zealand Stock Exchange (NZX) released their new corporate governance code.
The new code brings NZX-listed companies in line with overseas models that are successfully addressing the board-level gender gap—and New Zealand one step closer to realising the social and economic gains of a more diverse workforce.
The new reporting measures
The changes mean that every NZX-listed company is now expected to establish a diversity policy with measurable objectives and assess their progress against these objectives each year.
Recommendation 2.5 recommends that companies make their diversity policy and objectives public, and that they publicly report on the numbers of women and men at board level, senior management level, and across the entire organisation.
Most importantly, if an organisation doesn’t have a diversity policy the new corporate governance code requires them to explain why. This is a big change from previous guidelines, where listed companies were only expected to report only on the breakdown of men and women on their board.
The value of measurement
“Measurable objectives lead to greater diversity; greater diversity leads to better business outcomes – delivering to the bottom line through improved productivity, profitability and performance, better growth, innovation and customer service; and an enviable ‘employer of choice’ reputational standing”—Joan Withers, Global Women Vice Chair
As the old adage has it, “What gets measured gets done.” And what needs to be done in this case is to realise the societal and economic advantages of diversity by actively working towards more diverse boards, leadership and work forces.
Measurement can help an organisation achieve greater diversity in a number of ways:
- Organisations are better able to understand the diverse spread of their organisation and leadership team and address disparities from a point of understanding.
- Organisations can see what’s possible through benchmarking.
- Transparency over diversity figures gives stakeholders—investors, customers and employees—the opportunity to make informed decisions about where they invest, spend and work.
Real world examples
The true value of measurement in driving greater diversity is held out in the UK and Australian experiences. As we’ve discussed before, a combination of reporting and voluntary target-setting saw the number of women on the UK’s FTSE100 boards increase by 52% over just four years—from 12.5% to 26% between 2011 and 2015.
In Australia, the introduction of guidelines very similar to those released today by the NZX saw the number of women on boards increase by 47% (from 15% in 2012 to 22% in 2015) and the number of women in senior management positions increase by 30% (from 20% in 2012 to 26% in 2015).
Steps for the future
The introduction of these new diversity reporting guidelines are an encouraging step in the right direction, reflecting many of the recommendations that we made in our 2016 submission (118KB PDF) on the review of the NZX Corporate Governance Code.
As indicated in this submission, we’d also like to see the introduction of a 30% target of women on boards. For many organisations this wouldn’t be much of a stretch, as 40% of NZX-listed companies already have 25% or more female representation at board level—and state-sector boards this year reached an all-time high of 45.3% of women’s participation.
To echo Global Women Vice Chair Joan Withers, we’d like to congratulate the NXZ for their leadership in driving positive change and encouraging diversity and inclusion in Aotearoa—which will lead to a more prosperous future for everyone.