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Finance and Public Administration Legislation Committee

MULLINS, Ms Amy, Executive Director, Women's Leadership Institute Australia

SCHWARTZ, Ms Carol, Founding Chair, Women's Leadership Institute Australia

Committee met at 9:01

Evidence from Ms Schwartz was taken via teleconference—

CHAIR ( Senator Bernardi ): Good morning everybody. I declare open the public hearing of the Finance and Public Administration Legislation Committee's inquiry into the Australian Government Boards (Gender Balanced Representation) Bill 2015. I welcome you all here today. This is a public hearing and a Hansard transcript of the proceedings is being made. Before the committee starts taking evidence, I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee, and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to a committee. The committee prefers all evidence to be given in public, but, under the Senate's resolutions, witnesses have the right to request to be heard in private session. It is important that witnesses give the committee notice if they intend to ask to give evidence in camera. On behalf of the committee, I would like to thank all witnesses appearing today for their cooperation with this inquiry.

I now welcome Ms Amy Mullins and Ms Carol Schwartz from the Women's Leadership Institute Australia. Information on parliamentary privilege and the protection of witnesses in giving evidence to Senate committees has been provided to you both. You have provided the committee with submission No. 5. Do you wish to make any alterations or amendments to that submission?

Ms Mullins : No, we do not.

Ms Schwartz : No.

CHAIR: I now invite either of you, or both of you, to make a brief opening statement. At the conclusion of your remarks I will invite members of the committee to ask questions.

Ms Schwartz : Thank you very much for the invitation to appear today to discuss the Australian Government Boards (Gender Balanced Representation) Bill 2015. I am here in my capacity as the Founding Chair of the Women's Leadership Institute Australia but I also wanted to mention that I am in fact one of Minister Michaelia Cash's BoardLinks Champions. I am also a member of Chief Executive Women and a fellow of the AICD. I mention that because I think you have had submissions from all of those organisations.

Senator Xenophon introduced a bill that seeks to enshrine what I believe, and what our institute believes, is a fantastic bipartisan policy—what we call the 40-40-20 target. Of those appointed to government boards and committees, 40 per cent would be men, 40 per cent would be women and 20 per cent would be unallocated places. The bill is co-sponsored by Senator Jacqui Lambie, Senator Glenn Lazarus and Senator Larissa Waters. We support and commend the senators on this bill and this terrific initiative.

Crucially, the 40-40-20 target is one for both men and women on government boards. Gender balance around the decision making table gets the best outcome. In the private sector, the presence of gender diversity leads to better outcomes on performance metrics like financial returns, innovation, corporate governance and risk. In fact, in a 2014 Credit Suisse study of 2,360 companies worldwide the average return on equity for companies with men and women on the board over six years was four percentage points higher than those companies with no women on their board. Another interesting study from the University of Michigan found that diverse groups of intelligent problem solvers outperform homogenous groups of the best problem solvers. There are many reasons as to why gender balance is critical to achieving higher performance on government boards, and the above are just a couple.

As our submission indicates, the Women's Leadership Institute Australia supports this bill because it ensures the sustainability and longevity of the bipartisan 40-40-20 target and its accompanying reporting arrangements. It creates a positive obligation for government appointers currently not meeting the target. It encourages those achieving gender balance to maintain it. Those who do not meet the target with a particular appointment can claim the broad exceptions available to them as proposed in the bill. As you will see in the explanatory memorandum, government appointers are encouraged to take five simple steps to ensure a transparent and consistent recruitment process is carried out. The bill also sets out reporting requirements to reflect the current practice—and I want to emphasise the current practice—of government departments in tracking appointments and reporting against the target. This ensures that reporting will be consistent and ongoing under successive governments.

We welcome Senator Xenophon's pragmatic and common-sense approach to reporting which ensures that—and this is really important—there is no additional reporting burden or red tape on the government or the public service to report on these targets. It is our view, and the view of many others, that the government can and must make women in leadership a national priority. In fact, this was the very strong view expressed by our Minister for Women, Senator Michaelia Cash, at a roundtable co-hosted by Chief Executive Women in Melbourne just last week. If we are to get the best performance outcomes from our top decision making bodies, we need gender balance. This is even more critical at a time when economic growth and productivity is slowing.

It is clear that there is no shortage of talented and experienced women in the pipeline. However, it is important to note that experience on a government board can be a valuable stepping stone for men and women seeking to become professional company directors in the corporate sector. With women making up 20.6 per cent of directors on ASX 200 company boards and men at 79.4 per cent, the corporate sector has a very long way to go to reach gender balance. We believe that government can play, and does play, a very strong role in influencing change by establishing an even stronger pipeline of potential company directors and by setting an example for the corporate sector. The Australian Government Boards (Gender Balanced Representation) Bill 2015 would move the dial on government boards and have significant flow-on effects for listed company boards.

As you may know, this 40-40-20 target has been in place since 2010. The Gender balance on Australian government boards report 2014-15, which recently came out, shows the sustained downward trend in the number of women on government boards. From 41.3 per cent in in 2013, it is now at 39 .1 per cent. While it is fantastic to see progress being made in some portfolios like Prime Minister and Cabinet, Immigration, Defence and Social Services, other portfolios like Education, Infrastructure and Environment, have seen significant declines over the last year. Nine out of 18 portfolios are not meeting the target. Two portfolios still remain under 30 per cent for female representation—those of Employment and Veterans' Affairs. There still exists, actually, an underrepresentation of men in Human Services, where the percentage sits at 33.3 per cent.

We welcome this discussion and focus on the target because, as you can see, absolute vigilance is required on the issue. However, vigilance alone will not lead to the achievement of gender balance on government boards. Nor is vigilance likely to maintain our successes. That is why we support and commend Senators Xenophon, Lambie, Lazarus and Waters on this bill.

We encourage the government and the opposition to support the bill. It reflects their own policy for achieving gender balance on government boards. It would demonstrate parliament's capacity for continued and strengthened long-term bipartisanship on the issue. Lastly, and importantly, it imposes no more of a reporting regime than is already in place, and that means no more red tape. Thank you.

CHAIR: Thank you very much, Ms Schwartz. Ms Mullins, did you have anything to add before I go to questions?

Ms Mullins : I just had a brief statement to add to Carol's. I would like to echo her thoughts and make a few more of my own. Thank you for inviting us here today. Thank you also to Senators Xenophon, Waters, Lambie and Lazarus for putting forward this bill. I know that there are many others in the community who have taken an interest in this bill—which is wonderful to see—and that there has been a great debate around it.

In my time as Executive Director of the Women's Leadership Institute Australia, I have seen the momentum around women in leadership and the benefits of gender diversity grow significantly. I was fortunate to take part in the federal government's round table on women in leadership last week with Minister Cash. This, in particular, made it clear to me that the government is setting this as a key priority and sees it as an opportunity for collaboration with other sectors.

Both male and female leaders are recognising the strong performance benefits that flow from diverse decision-making groups. In the corporate sector in particular, although the number of women on ASX boards remains low—which Carol has referenced—we have seen a growing number of men step up on this issue and hold themselves accountable for improving the diversity of their leadership teams. They do this by recruiting from the full talent pool that is available to them. They do this by setting targets with teeth, measuring their progress and reporting on it. They do this by making gender diversity a business priority like any other.

There is movement on this across all sectors, and government, I believe, has sought to lead by example with its 40-40-20 target was were set, as Carol mentioned, in 2010 and has been reaffirmed by successive governments since—and I congratulate the Liberal government already for reaffirming their commitment to it.

We have seen this bipartisan target in place for five years, and there has been progress, which Carol has mentioned—a gain of four per cent for women's representation on government boards between 2011 and 2015. This year's figures show that women's representation on government boards, however, has been in incremental decline over the last two years, totalling 2.4 per cent. As Carol also mentions, at the portfolio level, half of portfolios have not met the 40-40-20 target—eight portfolios are under 40 per cent for women's representation; and one portfolio, Human Services, is under 40 per cent for men's representation. The principle of gender balance underpins this bipartisan policy and the current bill which is before you.

This bill is needed, we believe, because change at the portfolio and board level is only halfway there. It is needed because it provides a positive obligation for government appointers who are currently not meeting the target to do so. It will also encourage government appointers to recruit from the widest talent pool available to them. And, as Carol mentioned, it does not add to the workload currently undertaken to collect data for the annual report.

This bill is forward-looking and, most importantly, it would enshrine a longstanding bipartisan policy, providing further strength to its own departments but, importantly as well, to the corporate sector and others to take action. It would accelerate the momentum we have seen not only to achieve and maintain gender balance on government boards but it would reinforce the principles of gender balance and equal opportunity for the wider society. Thanks.

CHAIR: Thank you, Ms Mullins. We will now go to some questions.

Senator XENOPHON: Thank you Chair. Ms Mullins and Ms Schwartz, thank you very much for your submission and your evidence today. The Australian Institute of Company Directors appears to have shifted their position somewhat in respect of this bill. Can either of you comment on their proposed changes? There appears to be two schools of thought as to whether it actually is in keeping with the spirit of the bill in terms of its effect or whether it waters it down unnecessarily. I am happy for either Ms Schwartz or Ms Mullins to comment on that.

Ms Schwartz : Amy, I will let you take that one.

Ms Mullins : We did see the supplementary submission the AICD put forward. We believe that the suggested amendment importantly removed the 40-40-20 target. It removes the reference to the target and how the target should operate. The only reference that I could see to the target in the suggested amendments was in the definitions section. So what you have left is a reporting bill that references a target that actually is not in the legislation. So it is almost like a reporting bill that is reporting on a target that does not exist. It is the elephant in the room in the bill in that particular version. We would not support that, because it undermines the whole intent of the 40-40-20 target. The target importantly needs to be in place in the bill, and reporting is an important way to keep the operation of that in check.

Senator XENOPHON: To just make it clear: your understanding is that the bill does not enforce a penalty but it does allow for some exceptions in extraordinary or exceptional circumstances. It just requires an explanation as to why the target could not be met, which is not the case now in the current framework.

Ms Mullins : Yes. There are very broad areas of exception and that has deliberately been put in place, it is my understanding, to allow for the flexibility required to ensure that the best person for the job ends up getting that position. So if the government appointer cannot meet the target for a specific appointment because they deem that a candidate of the other gender is better qualified then they can claim those extraordinary circumstances. They just need to make note of the reason why that was the case, and that will be reported on in the annual report.

Senator XENOPHON: Sure. I just have one further question because I am sure my colleagues have a number of questions. Looking at the Gender balance on Australian government boards report 2014-15 at page 3, it looks at portfolio results. The one outlier, if you like, is the Department of Human Services where 66.7 per cent of board members are women. But if you look more closely there is only one board with only six positions. But if you look at, for instance, the Employment portfolio—seven boards, 58 positions, only 24.1 per cent women; Agriculture—18 boards, 119 positions, 33.6 per cent women; and Veterans' Affairs—eight boards, 76 positions, 23.7 per cent women. What is your understanding as to why those particular portfolios, particularly with the number of positions—119 in Agriculture, 76 in Veterans' Affairs and 58 board positions in employment—are so way below the 40 per cent target? Can you illuminate us on that? If you do not know that is fine, but they seem to be examples where there is an incredibly low percentage of women on those boards.

Ms Schwartz : I have no idea why that could be the case. It would interesting to ask the minister involved as to why that is the case, particularly, when you look at something like employment, there seems to be no reason why you would not find very well-qualified candidates of both genders to be represented on government boards.

Ms Mullins : No, I cannot give a confident reason as to why. My guess would be that perhaps the target has not been front of mind when appointments came up.

Senator XENOPHON: Or even back of mind.

Ms Mullins : Yes, exactly. The one thing I would bring up, which I think the bill starts to have a conversation about, is having guidelines that suggest to appointers what might be the best process to take when recruiting and to increase the transparency around appointments. I think that is particularly critical. The Victorian government has a very clear set of guidelines for appointers which allows for that transparency of process and, obviously, they are doing extremely well with their aim to have 50 per cent of all new appointments to be women and 50 per cent men.

CHAIR: Senator Xenophon, I am sorry to interrupt you but Senator Waters has asked for the call.

Senator XENOPHON: I do not have any other questions other than to say there is a beautiful thing called Senate estimates coming up next week where we can ask the departments as to why they have failed in that target.

CHAIR: Thank you. Senator Waters.

Senator WATERS: Thank you so much for being here today and your submission and evidence this morning. Just a few follow-up questions; why do you think that—even though we have had a commitment to this non-legislative target to date, which this bill seeks to legislate—in the last two years, under the figures just most recently released, have we gone backwards on the overall number of woman on boards and, in particular, the number of female chairs or deputy chairs?

Ms Mullins : I believe, and it has been our experience watching other sectors, that you need to be vigilant about maintaining successes that happen. I do not believe that has happened, specifically, under this government. Although, I believe there is great intention behind it; however, I think the main problem is that it is aspirational and, where things have worked and where momentum has been maintained was when targets were instituted and they had teeth. Some would call that a hard target, and that meant it would create further impetus for someone to achieve a target—and I am sure all of you would know how targets might work in business. There might be bonuses attached to that, or remuneration, and that is one way targets have been achieved.

I believe the ASX has implemented, what they could call 'targets with teeth' quite successfully recently in terms of their executive management team. I think the bill is important because it actually follows that next step to say: 'We've had it in for five years. We've made some progress, but not enough has changed. What is the corporate sector doing? What is the next logical step for us to take that still maintains the flexibility and ease of implementation of the policy itself.'

Ms Schwartz : I will just echo Amy's comments. The fact is, in the corporate sector, we have been through cycles where we have achieved objectives or targets and where we have not. I think we have gotten to a point now in the corporate sector—as Amy has pointed out—where really very hard targets are being put in place by a lot of the male industry leaders who understand the benefits of diversity and who really want to reap those benefits and create high-performing environments for their organisations. The fact is we are all losing when we are only recruiting from 50 per cent of the population, particularly now when you think that more than 50 per cent of the graduates out of university are women. If we are not getting the advantage of recruiting from that talent pool, we are losing out as a society and as a nation.

Senator WATERS: Can I just ask a follow-up question on that point and also a point that you made in your submission, where you said legislating the targets would:

… motivate action and catalyse innovative approaches to recruitment, making certain that the full talent pool is surfaced and available to government appointers …

Can you elaborate on some of the ways in which you think the recruitment processes could be improved? On a related point, can you talk about what more government can do to ensure that we have a pipeline for women to get the skills that they need in order to fulfil the criteria for appointments?

Ms Schwartz : It is interesting, because I think the BoardLinks initiative is the type of initiative that ensures that we have access to the talent pool of women out there. For example, the Women's Leadership Institute has put together its own database, which we call Women for Media. It is a database of very talented female business leaders who are available for the media and for conference organisers. Whenever we would see a conference organised that had no women on panels or as speakers, we would call the organisers and they would say, 'We don't know any women who could speak on these topics,' and we would say, 'We have a database of over 150 women, close to 200, who would be more than capable of speaking at any of those conferences.'

So it is about creating a database and creating that accessibility, absolutely. CEW, Chief Executive Women, has a fantastic database of women. Women on Boards has a fantastic database of women. So the databases are definitely out there.

In terms of training, there are many, many courses that are being run by organisations like Women on Boards. There is the Institute of Community Directors Australia. There is the AICD. There are a lot of training grounds for women as well as men to learn the skills that they need to sit on boards. But, as Amy and I have both pointed out, one learns very much from practical experience and learning on the job. So I think that appointing people to government boards, where they can learn on the job, is also very important.

Senator WATERS: Can I intercede and give my apologies—I have a party room meeting for the next half an hour. I will come back as soon as I can.

Ms Schwartz : No problem.

Ms Mullins : I would just mention a couple of things that I have found particularly useful and that have been successful for others—in particular, making sure that long lists and short lists are gender balanced. Often the long list will have female candidates and when you get to the short list there might be one left. Making sure that quality candidates of both genders start in the long list and then make it through to the short list—on merit, obviously—would be really important and a way of shifting people's thinking, forcing them to really consider the job criteria, whether they are actually getting the best people and whether those people might fit the criteria and skill set that they are looking for.

The other one would be making sure that males and females are government appointers, because when you have more men and women in the room equally that means more men and women are going to get through when appointments are made. They would be some of the things that I have seen work.

Senator XENOPHON: Can I ask a supplementary question on the appointers. Is it perceived to be a problem by the institute that the selection panels are skewed in any particular way?

Ms Mullins : Generally speaking, most selection panels are, from the anecdotal evidence I have had across all sectors. I only have anecdotal evidence, so I really could not speak with absolute confidence about government boards, but in people's conversations with me they talk about the transparency of the process. Obviously more than one person is involved in an appointment process. There will be the people at the beginning and then the Office for Women might be consulted, but then obviously the minister will finalise and approve. So there may be a range of people involved in that process, but I believe from other people's experience it might be skewed towards males.

Senator SMITH: I was not invited to the roundtable discussion that was held recently but, just for the record, could you identify what the barriers are to greater female participation on boards.

Ms Mullins : There are highly qualified and talented woman available, and I believe they would be in close to equal numbers. The difference comes with networks: with men's networks and women's networks, sometimes women are not in the male networks that exist, particularly in government, or around government. Obviously, in the corporate sector that is the same thing; it holds true as well.

Unconscious bias tends to be one of the most significant and often the hardest to quantify factors involved because, obviously, as humans we all have an unconscious bias about a whole range of things, and that is how we operate effectively in our day-to-day lives and make decisions very quickly. However, that can tend to also mean that we do not realise when we are biasing one person over the other for different reasons. That is why some of those examples of gender balanced long lists and short lists and making sure both men and women are in the room when appointments are made are important, because it challenges our biases and keeps a check on them. There have been quite a lot of different initiatives and ideas that people have come up with to make sure that we are constantly evaluating whether our biases are at play. One of those is to make sure you review the job description to ensure you are not hampering one particular gender, because you are specifying something that is not possible they could ever have had and it is not critical to the job. They are the major reason why, but there is a whole range of reasons. I am sure Carol has some other suggestions.

Ms Schwartz : I think you have covered them well. It does have to do with networks and unconscious bias. It has to do with exposure and opportunities. It is exactly in the corporate world as it is throughout government, I am sure.

Senator SMITH: Networks, unconscious bias and exposure and opportunity for women are the top three barriers for greater female participation or greater gender diversity?

Ms Mullins : Yes, I believe so, off the top of my head—I could think of more if I had more time.

Senator SMITH: I am just curious to know: what is the relationship between women who lead organisations and the numbers of women on committees whether they be chairs, deputy chairs, committee members or in senior executive positions? We often hear about men leading organisations and therefore there are fewer women represented. Does it flow that, if there are women leading organisations, there are more women represented?

Ms Schwartz : Yes, that is a really interesting question. I have read a number of studies that indicate that, where you have women as CEOs, you tend to have more women in key executive roles and you also tend to have more women on the board of those organisations. I think a home-grown example of that is probably Mirvac, which is in the area that I work. I am not on the board of Mirvac, but it has a female CEO. It is a property business and there is close to fifty-fifty men and women on the board. It also has a very good gender balance in senior executive roles.

Senator SMITH: When we look at prominent women in Australian corporate life, do all of them have a perfect record when it comes to female participation at senior levels of those organisations or on boards?

Ms Schwartz : Absolutely not. The thing that one has to realise is that both men and women in the corporate world operate within given paradigms. We all know that change is very difficult and often very slow to introduce. I think that both men and women find those barriers to change quite difficult because there are entrenched practices. When you are working in a very large corporate, it is like moving an ocean liner. It does not turn very quickly; it turns very slowly. I think it is about introducing change in a sustainable way, which in fact takes time.

Senator SMITH: If I have understood what you have said, Ms Schwartz, the barriers to that change can come from men and women.

Ms Schwartz : Absolutely. As my colleague Ms Mullins said, we are all subject to unconscious bias, as men and women. Not only that, we are all subject to existing constraints that are apparent in the infrastructure within which we operate. Moving those barriers and those infrastructures is very challenging at times.

Senator SMITH: I am personally fascinated by this gender diversity issue because of course gender is just one element of diversity. It is actually not an end in itself. When we talk about suitable women, are we talking about a particular type of woman? When we talk about suitable men, are we talking about a particular type of man? We hear a lot about gender and we hear much less about diversity. People have different sexualities. They might have different cultural backgrounds. I am just wondering: what does the future look like? Is this the first of many steps towards getting true diversity?

Ms Schwartz : I could not agree with you more. But the fact is women are not a minority in our society, whereas a lot of other groups that should be included are in fact minorities. So my view is, if we fix gender diversity as our first port of call, we will then be able to embrace broader diversity much more easily and much more effectively.

Ms Mullins : I think it came up recently for me that gender is the thin end of the wedge. Once you open up the opportunities and make sure that there is equality of opportunity for men and women, the culture of inclusivity that naturally arises from changing that culture then enables people from a range of other backgrounds to be included. I think the corporate sector, for example, definitely has front of mind marriage equality and making sure that the workplace is inclusive of people of different sexual identities as well. So these changes are happening at the same time, but I think the gender diversity issue tends to open the door very strongly to enable 51 per cent of the population to have the same opportunities as the men. That will then change the culture and shift the paradigm towards inclusion, and that is really important.

Senator SMITH: I think the challenge is not so much gender diversity or even diversity but it is what you identified in your first point when we talked about barriers, and that is these networks that exist. They have various names: boys clubs, men's clubs, girls clubs et cetera. Some of them have disparaging types of names. It is these closed networks that exist. They can be closed networks of men and women or they can be networks of just men or networks of just women. I think that is the real barrier, but that is probably a debate for another time. Thanks, Ms Schwartz and Ms Mullins.

Senator GALLAGHER: I would be interested in your views, either Ms Schwartz or Ms Mullins, on the argument that is proffered that, if legislated quotas or firm, fixed quotas were put in place, that could potentially subvert the merit process. What is your response to that argument, which will probably be put forward later today?

Ms Schwartz : Thank you for that question. There has been a very large debate around what has been called the myth of merit and that merit is, in fact, just a set of criteria that is put together by a dominant group as opposed to any sort of objective gold standard that exists. We have done quite a lot of work with an academic called Jennifer Whelan and I would really like to quote one of her statements which is:

There are two immediate problems with the merit argument. Firstly, everyone must have equal access to acquiring whatever quality is defined as “merit” - the so-called level playing field. Secondly, people must be assessed only on criteria that predict performance. Can we say that either of these conditions is ever truly met, particularly in organisational decision-making processes?

There is a real issue around merit and what constitutes merit because my view of merit could, in fact, be completely different to what your view of merit is for a particular job. Talking about merit as an objective standard is, I think, a very flawed argument.

Ms Mullins : I would agree with Carolyn on that one and say that it is quite an empty term really in the way that it operates currently. There are a lot of other healthier, more productive ways to refer to appointments such as saying that people are eminently qualified for the position and I think that is what the standard should be.

CHAIR: Ms Mullins, Ms Schwartz, thank you for your attendance today.