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Finance and Public Administration Legislation Committee
12/10/2015

HEWSON, Carolyn Judith, Private capacity

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

[09.42]

Evidence was taken via teleconference—

CHAIR: Are you on the line there, Ms Hewson?

Ms Hewson : Yes.

CHAIR: Ms Hewson, you have asked that Ms Amy Mullins from the Women's Leadership Institute Australia be available for you to call on or refer to.

Ms Hewson : That is correct.

CHAIR: She is with us.

Ms Hewson : Thank you.

CHAIR: You have been provided information on parliamentary privilege and protection of witnesses in giving evidence to Senate committees. I now invite you to make a short opening statement. At the conclusion of your remarks, I will invite the members of the committee to ask any relevant questions. Do you have any additional information about the capacity in which you appear?

Ms Hewson : Thank you all for the invitation to contribute to your consideration of the Australian Government Boards (Gender Balanced Representation) Bill 2015. I am sorry I cannot be with you in person. I am committed to supporting the bill introduced by Senator Xenophon and co-sponsored by Senator Lambie, Senator Lazarus and Senator Waters. I commend the senators on this important work. I come to you as a private individual, an economist and a company director.

It was in 1973 that I first entered the Australian workforce as a part-time worker while I was a student. I have now worked in a full-time or near full-time capacity for over 35 years. I first worked as a researcher and economist at Adelaide University, later as an investment banker for 15 years in Sydney and for the past 20 years as a non-executive director on the boards of Australian companies including AGL Energy Limited, AMP Limited, CSR Limited and Westpac Banking Corporation as well as government boards including South Australian Water and the Economic Development Board of South Australia. I currently sit on the boards of BHP Billiton Limited and Stockland Group and I have had a near-lifetime involvement in, and continue on, many not-for-profit boards. In most of those roles, including investment banking and corporate boards, my work has been in male dominated areas. Especially in the early days, it was almost exclusively with men and with very few women.

While that was the norm in the 80s, I have kept thinking as more women stayed at school and then graduated from university in greater and greater numbers that things would change. Women now graduate in higher numbers from university than men and have done so for quite some time, Yet the numbers of women in senior executive and non-executive positions has not significantly changed and do not reflect those greater numbers of educated women.

As a result of my professional experiences, I want to emphasise the positive influence of diversity in decision making. The essence of diversity is gaining information and input from a wide range of sources and the best decision making is achieved when people from diverse backgrounds, experiences and, indeed importantly, gender are brought together to solve problems in groups. They bring different perspectives, views and information to the table such that it is diversity that avoids the risk of groupthink. In my experience, and supported by a number of domestic and global studies, it is clear that decision making made by gender balanced and diverse boards yields superior results in terms of return, risk management, governance, creativity, innovation and decision making in general.

For such a long time, as I reflect, I have made excuses about the lack of balance in our corporate boards, our government boards and many of our civil society boards—thinking change was just a matter of time. Yet after over 30 years of expecting the trend towards diverse representation to accelerate, we see only slow progress in so many of these areas.

I want to recognise and congratulate this government, past federal governments as well as state governments in making greater progress than the private sector. But this is why we now look to government to lead and influence. There are no longer any valid excuses. There are so many capable, experienced and well qualified women to comprise at least 40 per cent of our decision making capacity in Australia. Do not underestimate the important message that this legislation for balanced representation will send to corporate Australia, the civil society sector and the wider Australian community. You are all well aware of the government's current bipartisan policy of the 40-40-20 target—which I recognise is a great policy position. It has been in place since 2010 and, indeed, reaffirmed by each government since then. However, in the last two years it appears the policy has been easy to neglect and the downward trend in proportion of women on government boards from a high of 41.3 per cent in 2013 to 39.1 per cent now is disappointing. At present, the bipartisan policy of 40-40-20 and its accompanying reporting arrangements do not appear to have the support of, nor be taken seriously by, a number of government ministers. Even after five years, there are still nine of the 18 portfolios currently not meeting the targets and two portfolios remain under 30 per cent for female representation. Surprisingly, they include employment, particularly, and veterans' affairs. This sends the wrong message to Australians who look to our government to recognise the importance of diversity and the drive for gender balanced representation in decision making. Governments play a very important part in influencing change in this country and the preparedness of the Australian government to enshrine this policy in legislation can go a long way in setting an example for best practice decision making for corporate and civil society sectors, as well as ensuring the longevity and sustainability of this bipartisan policy position.

I would like to make just two points of clarification. I want to clarify this bill does not have penalties for noncompliance. Rather, this is about targets that create a certain and positive obligation to achieve gender balance in the appointments to government boards. This is about getting the very best decision making outcomes without penalty. Secondly, I want to clarify that the bill allows government appointers the flexibility to claim extraordinary circumstances, where it is not reasonably practical to appoint someone of the requisite gender to meet the target. The five steps that are to be taken in the recruitment and appointment process are not onerous—in fact, they are just good practice and they will protect the transition to a transparent and fair process of appointments and allow for extraordinary circumstances when that is needed.

It is important to understand there is no additional work required for data collection, and to oppose this bill on the basis of additional red tape would be unequivocally wrong. I want to encourage government and opposition members to support the bill. Not only does it recognise the current bipartisan policy; it recognises the importance of legislation in protecting the longevity and sustainability of this policy and, in addition, it will provide valuable leadership for the structures of decision making in broader Australian society. Thank you very much.

Senator XENOPHON: Thank you, Ms Hewson, for your evidence and your opening statement. Senator Dean Smith is not here at the moment—hopefully he will be back later—but he did ask an interesting question of Ms Mullins and Ms Schwartz earlier. I am sure Senator Bernardi will defend Senator Smith if I misrepresent his question, but essentially he said that diversity is not just about gender, that even if it was 50/50 women and men on a board it still may not be particularly diverse; they might come from a particular stratum of society, or whatever. In other words, trying to get diversity is not just about gender balance. I think that is a fair summary—Senator Bernardi, how am I going?

CHAIR: You are doing okay, Senator Xenophon—just okay!

Senator XENOPHON: That is a very high compliment from Senator Bernardi to me. I think I have put the view that it is not just about the number of women on boards, it is about a whole range of other factors. Just because you have a woman on a board does not mean you get that diversity of views, thoughts or experience that this bill is trying to achieve.

Ms Hewson : I absolutely agree with that and I will restate what I said in my opening statement and then I will go back and add a little more. The essence of diversity is gaining information and input from a wide range of sources and the best decision making is from people of diverse backgrounds, experiences and, importantly, gender. I absolutely agree that diversity comprises gender, experience, ethnicity and disability. All of those things are very important. The nature of this bill is to go to one of the areas that is reachable and I think achievable in the parliament. If we were to add to this bill ethnicity and disability and other areas that I think are becoming increasingly important in corporate Australia, that would not be inappropriate, and I think that is something we should aspire to. Perhaps I should finish there.

CHAIR: Ms Hewson, do you see this bill as a first step, if you will, into mandating a diversity quotient on boards, outside of gender?

Ms Hewson : I see this as a very important step in increasing diversity as part of a wider move to recognising the importance of diversity in decision-making. I see this as something where we have quite a lot of external, formal evidence that gender makes a significant difference. In addition to that, there are other areas that have not been as formally assessed, if you like, that I am sure would make a difference. Perhaps I could call on Amy, who maybe has given you the benefit of her view in an earlier answer, to make sure we have covered all the important parts.

Ms Mullins : Carolyn, I think you have covered all of the important parts. My statement before was similar to yours: that diversity of all types is important. For example, the approach of Jennifer Whelan is that you will not necessarily get the same amount of diverse thinking just by having women there because men and women can think in similar ways, they can also problem-solve in similar ways; it also depends on the person themselves. Gender diversity, as you mentioned, opens up the opportunity to increase diversity and then enables us to look at those other aspects which I would agree are absolutely critical.

Senator XENOPHON: Ms Hewson, we will be hearing from the Institute of Public Affairs later on this morning: Dr Mikayla Novak is a senior fellow with them. I have not seen their submission, but my understanding is that they are arguing about red tape and the lack of necessity for this bill. What do you say about that red tape argument—that it is an onerous requirement on government boards to comply with the mechanisms set out in this bill?

Ms Hewson : I would emphasise that this bill imposes absolutely no more of a reporting regime than currently exists. The data is already collected, and it is already compiled by the Department of the Prime Minister and Cabinet. So I would argue that this is data readily available, already collected, and compiled by PM&C. It does not require any additional red tape.

Senator XENOPHON: Thank you. My final question for now relates to the private sector. You know a thing or two about being on public company boards: I just wonder what you think the impact of this bill, should it pass, would be on that cultural shift? Perhaps it would encourage a cultural shift to have more women on boards. In that light, I have been reading the Credit Suisse Research Institute report of last year, The CS Gender 3000: women in senior management, which gives a pretty bleak picture. I think here in Australia our level of women in senior management positions or on boards is much lower than that of, say, Indonesia or even Malaysia.

Ms Hewson : Despite a lot of talk over a long period of time, Australia is not doing well in increasing the number of females in executive positions in corporate Australia. I think passing this bill would send a very positive message. And I want to emphasise what I have already said in my opening statement: that corporate Australia does look to the government to guide and influence in this area—and the governments have performed better than corporate Australia. In corporate Australia we spend a lot of time talking about the business case that underpins diverse decision-making and, particularly, gender diverse decision-making. There are a number of studies, including the 2014 Credit Suisse study of, I think, 2,360 companies worldwide, where the average return on equity for companies with men and women on the board, over six years, was a four-percentage-point increase. So, while we talk a lot about the business case underpinning appointments to corporate Australia, we look to government for a number of reasons: one, as the leader in this area; two, to allow women to gain experience of government boards before or along with the time moving to corporate boards. One of my first four boards, going back to the mid-1990s, was SA Water. That was a board that allowed me to roll up my sleeves and become very, very involved in strategy, at the same time as being on corporate boards. But it was an excellent board to have in a portfolio and certainly one that I look back on as a great training ground.

Senator XENOPHON: Thank you.

Senator GALLAGHER: Ms Hewson, I asked this of the previous witness as well: I am wondering if you could respond to the argument that is constantly put in relation to legislated quotas—that is, around the potential that quotas have to undermine merit-based appointments?

Ms Hewson : Okay, I have a couple of things I would like to say on that. Can we just talk about this bill and the nature of the bill: what we understand that the Senate has proposed here is not a quota. Certainly, it is a hard target, but in this bill there are no penalties for non-compliance and there is a very broad exception clause—at paragraph 7(2)(e)—that the government appointers can claim.

Then I will come to the issue around quotas. I look back to my early days and I think: would I have wanted to be appointed because there was a quota? No; nobody wants to be appointed because there is a quota. You want to know that you have got there because of your value and your experience and your merit. But, increasingly, I am aware that the system of meritocracy is a system that has largely been designed by men for men. I have had the most stunning career—a fabulous career—and I could happily sit back and not worry, but I am concerned when company directors, when heads of government, when government ministers say, 'we will only appoint on merit'. Well, which merit system, designed by whom, for whom? So as long as we are asking those questions, and we make sure merit is not defined in the likeness of the man making the appointment, I am fine with merit—as long as it is a definition which very, very broadly encompasses all of the facets of leadership and the merit that goes into leadership—rather than a very, very narrow definition of leadership as defined by the man making the appointment.

Senator GALLAGHER: Thank you.

Ms Hewson : Would Amy like to add anything to that statement?

Ms Mullins : No, Carolyn, I think that was a fantastic answer—very nuanced, and great.

CHAIR: Are there any further questions? There being none, Ms Hewson, may I thank you for your attendance today. Ms Mullins, thank you for your attendance as well. Senator Xenophon?

Senator XENOPHON: Sorry, there is just one issue: Ms Hewson referred to the Credit Suisse report on women in senior management, I am just wondering if that forms part of the material that the committee has to consider. It is a public document. I just ask that the committee consider that in the course of preparing its report on this.

CHAIR: Thank you, Senator Xenophon.

Senator XENOPHON: I am just wondering whether Ms Hewson seeks to tender it or—

CHAIR: I am sure it can be considered by the committee. The secretary will note that. Thank you, Ms Hewson and Ms Mullins.

Ms Hewson : Thank you all.

Ms Mullins : Thank you.

Proceedings suspended from 10 : 04 to 10:23