Modern Australian

Diversity quotas will only lead to token appointments, doing more harm than good

  • Written by Akshaya Kamalnath, Lecturer (Corporate law), Auckland University of Technology
Diversity quotas will only lead to token appointments, doing more harm than good

Global investment company Goldman Sachs recently announced it would only take startups public if they had at least one diverse board member.

In New Zealand, a new KiwiSaver fund, CareSaver, announced it would only invest in listed companies that had women on boards.

Corporate diversity is an international trend for big market players, but without proper policies such informal quotas will lead to token appointments of diverse candidates. Companies need to do better if they are serious about diversity and its benefits.

Read more: Reality check: more women on boards doesn't guarantee diversity

Diversity regulations

Diversity, or rather the lack of it, on corporate boards has been in the spotlight in almost all jurisdictions for a few years now.

The workforce of large companies invariably includes a mix of genders, races and other types of diverse candidates, but it becomes increasingly homogeneous further up the corporate ladder. Many European countries have imposed gender quotas requiring that at least 40% of a company’s board should be women. In the US, California requires any corporation with shares listed on a major stock exchange to have at least one woman on its board.

New Zealand and Australia have imposed disclosure requirements for gender diversity on company boards, but some are calling for stronger obligations in the form of quotas.

In this context, the Goldman Sachs diversity initiative looks like a welcome move. But the problem is that companies will most likely treat this as a box-ticking exercise.

This is already the case with many tech companies, which add a woman director to the board before going public. The Goldman Sachs announcement only reinforces a box-ticking mechanism already in practice.

Token appointments cause more harm than good

An example of such formalistic compliance can be found in India where the law mandates that all listed companies should have at least one woman director. Although this has increased the overall percentage of female board directors, most new appointees were either family members of company directors or young women with no suitable education or experience. The women directors were mere tokens and not expected to contribute in substance.

Token appointments are harmful for two reasons. First, they undermine the idea of bringing equality to corporate boards if unsuitable or unqualified women are appointed as directors.

The equality argument is based on the idea that well-qualified diverse candidates are not being appointed because of the old boys’ club. Tokenistic appointments of under-qualified women reinforce the notion that there are not enough qualified women for the job.

The second reason is that token appointments to corporate boards undermine the benefits of diversity for governance. Gender, race, age, experience and other forms of diversity bring different perspectives to the table, allowing for better-informed board decisions. This diversity of perspectives also allows boards to better assess associated risks.

How to do better

Quotas, whether imposed by governments or market players, tend to result in companies appointing diverse people from within their own networks.

Read more: Company boards are stacked with friends of friends so how can we expect change?

Instead, boards need to identify skills and perspectives required for the company or industry sector and hire accordingly. Companies should work to create an inclusive environment for a diverse workforce at various levels.

A two-pronged approach to corporate diversity that includes diversity at both the board level and at various levels of the workforce would make a company’s commitment to diversity real and beneficial.

Investment banks and large investors could work with companies to ensure their boards have a tailored diversity policy that aims to attract and retain diverse talent at all levels, including the board.

Specifically for the board, they could insist that companies work with executive search firms to look for individuals of diverse backgrounds who would benefit the company. For other levels of the workforce, inclusive promotion metrics and channels for solicited employee feedback and complaints would be helpful.

Authors: Akshaya Kamalnath, Lecturer (Corporate law), Auckland University of Technology

Read more https://theconversation.com/diversity-quotas-will-only-lead-to-token-appointments-doing-more-harm-than-good-132244

NEWS

Delivery workers are now essential. They deserve the rights of other employees

Along with home delivery of groceries, pharmaceuticals and alcohol, demand for food delivery is booming. Services such as Uber Eats and Deliveroo have become essential to cafes and restaurants that...

For public transport to keep running, operators must find ways to outlast coronavirus

Minimising health risks has rightly been the focus of discussion during the coronavirus outbreak. This includes efforts to protect both frontline public transport employees and the travelling public. But we...

A major scorecard gives the health of Australia's environment less than 1 out of 10

Dave Hunt/AAP2019 was the year Australians confronted the fact that a healthy environment is more than just a pretty waterfall in a national park; a nice extra we can do...

Thinking like a Buddhist about coronavirus can calm the mind and help us focus

Sabine Schulte/Unsplash, CC BYThe coronavirus pandemic is challenging our health, work, family, food and fun. It’s also disturbing our peace of mind and forcing us to question our own existence...

Public gatherings restricted to two people and all foreign investment proposals scrutinised, in new coronavirus measures

No more than two people are to gather together in public spaces, and playgrounds will be closed in the latest restrictions in the coronavirus crisis.Meanwhile the government will now scrutinise...

Give people and businesses money now they can pay back later (if and when they can)

ShutterstockThe novel coronavirus sees Australia facing major unprecedented health and economic crises. The key to preventing a downward spiral of the economy is to avoid a collapse in incomes of...

Government says Australia's coronavirus curve may be flattening

The federal government says there are signs the coronavirus curve may be flattening in Australia.Scott Morrison told a Sunday news conference the rate of increase in cases had fallen to...

All Australians will be able to access telehealth under new $1.1 billion coronavirus program

Scott Morrison will unveil on Sunday a $1.1 billion set of measures to make Medicare telehealth services generally available during the coronavirus pandemic and to support mental health, domestic violence...

Hotel quarantine for returning Aussies and 'hibernation' assistance for businesses

All Australians arriving from overseas will be quarantined in hotels or other facilities under strict supervision for a fortnight, under the latest crackdown in the battle against the coronavirus.Announcing the...

how sharing your data could help in New Zealand's level 4 lockdown

New Zealand and much of the world is now under an unprecedented lockdown. Public health experts say this is the best way to suppress the spread of the virus. But...

What is orthohantavirus? The virus many are Googling (but you really don't need to worry about)

ShutterstockAccording to Google Trends, the top globally trending topic this week is “orthohantavirus”, as spurious sites claim it’s the next pandemic on the horizon.Take it from me: it’s not. This...

MyGov's ill-timed meltdown could have been avoided with 'elastic computing'

DAN PELED/AAPThese past few weeks have shown the brittleness of Australia’s online systems. It’s not surprising the federal government’s traditionally slow-moving IT systems are buckling under the pressure.On Sunday, the...

Popular articles from Modern Australian

Safety First: Tips & Tricks for Your First Road Trip8 Essential Woodworking Tools You Need in Your ArsenalThe Future of Gambling Sponsorship in Australia5 Common First Aid CoursesSafety Tips for Operating Your Wood HeaterANZ Access Advantage card reviewBeyond Beauty - 5 Ways Cosmetic Procedures Can Improve More Than Just Your AppearanceHow to Make Extra Cash From Your AssetsThis can help you regulate the temperature in your bedroomI’m A Nutritionist And This Is The Food I Eat EverydayHow To Get The Best Hotel Experience And Save MoneyTips for new driversSEVEN WAYS TO IMPROVE YOUR VISIONVampire: The Masquerade - Las Vegas free slot