Female representation on boards of directors in Australia: the link to board independence
2017-03-02T02:07:16Z (GMT) by
Female representation on boards has recently received significant attention across the developed world. Several European countries have legislated to boost gender diversity on boards, while the Australian Stock Exchange (ASX) has amended its corporate governance guidelines in order to increase gender diversity on company boards of directors. Corporate scandals (in the U.S.A. and Australia) have also heightened awareness of the importance of effective corporate governance, in particular, the need for greater independence of directors from management and greater diversity among directors. The first objective of this research is to address the knowledge gap regarding the relationship between board gender diversity and board independence in Australia. A second research objective is to examine the reasons for the appointment of women directors. The research draws on agency theory and the literature on diversity, which are used to argue that a more gender diverse board should exercise more independence from management. Token theory, which identifies the inclusion of minority groups as a perfunctory gesture, is used as a possible explanation for the lack of impact that diversity may have on independence when there is a very low representation of a women. Finally, institutional theory explains why women are appointed to boards. Three research questions were developed in order to address the research objectives. Seven background interviews were conducted with representatives of informant organisations. The research then included two studies: • Study One: 25 interviews with board members of Australian listed companies; and • Study Two: survey of 82 board chairs of Australian listed companies. The findings of Study One highlight several direct benefits of board gender diversity and reveal indirect benefits stemming from improved board dynamics. The findings also indicate that recruitment of women is not a priority for the participating organisations, but that external pressure (i.e., coercive isomorphism) has been a factor in some past appointments of female directors. This finding was supported in the results for Study Two, along with findings that the enhancement of corporate reputation is a factor in the past appointment of women to boards. Interestingly, Study Two results indicate those organisations with a small number of women on boards (i.e. one) are more concerned with mimicking other organisations than are companies with more female directors. Study Two is unable to confirm a link between board gender diversity and board independence. This implies that the Australian corporate governance environment is significantly different to similar economies (e.g. the U.S.A) where such a link has been found. Although the interview findings indicate that women contribute to board dynamics in a variety of ways, analysis of the survey results could not confirm board dynamics as a mediator between board independence and board diversity. Consistent with institutional theory the research highlights mimetic isomorphism and concern for public relations as the key factors that have motivated past board appointments. However, consistent with token theory, there is evidence that female board appointments in Australia are tokenistic. The research has implications for regulators, companies and governments attempting to increase board gender diversity.