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The State of Board Diversity in 2024
From gender to age to experience - Carol Schwartz AO's approach to board diversity pushes past traditional paradigms for optimised business outcomes.
Richard Conway
Nov 16, 2024
In this compelling episode of Minutes by boardcycle, Carol Schwartz AO brings fresh perspectives to the ongoing conversation about board diversity. As a member of the Reserve Bank of Australia board, Chair of Equity Trustees, and Chair of the Women's Leadership Institute Australia, Carol offers unique insights drawn from decades of boardroom experience.
Remarkable Progress in Gender Diversity
At the outset, I quoted some data published by Chief Executive Women on women in the boardroom in 2024 and asked Carol for her views on the state of gender diversity in the boardroom in 2024. Looking back over her extensive board career, Carol reflected that there has been substantial progress in gender diversity. She points to research from McKinsey demonstrating that diverse boards achieve "much better outcomes, much more optimised outcomes" - exactly what shareholders should be seeking.
Carol suggests that companies without women directors may be "suffering because they're not optimising their outcomes" and risk losing investors, as shareholders have become increasingly aware of diversity's importance. Rather than advocating for strict 50-50 gender splits, she champions the pragmatic "40-40-20 rule", acknowledging that exact equal representation isn't always practical or necessary. In some cases, she notes, boards might be 80% women and 20% men - the key is flexibility rather than rigid quotas.
Redefining Leadership Prerequisites
When I questioned Carol on gender diversity in leadership roles specifically, she was much less complimentary about the situation. She strongly challenged traditional, gender-based assumptions about board and leadership roles - particularly for CEO and chair positions. "I've sat around boardrooms where the best chairing is done by people who've never been a CEO," she observes. While these chairs had significant leadership experience, their success came from bringing unique perspectives and inclusive leadership styles.
She likens her own role as chair to that of a conductor, focusing on "getting the best out of them sitting around the table, rather than me pontificating about what my views are." This fresh perspective on chair responsibilities emphasises facilitation and collective wisdom over individual expertise.
Carol also highlights the value of entrepreneurial experience in the boardroom. Entrepreneur founders, she notes, bring "a completely different way of thinking and problem solving to a board" - precisely the diverse thinking needed for optimal decision-making.
The Age Diversity Imperative
Perhaps most striking to me was Carol's emphasis on age diversity, which she considers "just as important as gender." She makes a compelling business case for younger directors, noting their crucial understanding of emerging trends and technologies. "I don't look at TikTok," she admits, underlining the importance of having board members who understand "new paradigms that others may not get."
Her perspective on age diversity is refreshingly practical. While she doesn't advocate for arbitrary youth quotas, she emphasises the value of different generational perspectives in understanding customers, staff, and emerging business trends.
Championing Regular Board Renewal
Carol is a strong advocate for regular board renewal, supporting Catherine Livingstone's view that six years is sufficient for a board term. She outlines multiple benefits of regular renewal:
- Fresh perspectives on the business
- New insights about board dynamics
- Enhanced understanding of the executive team
- Regular injection of new ideas
"Whenever you bring on a new director, you learn something new about the business," she explains, highlighting how board renewal drives continuous organisational learning.
Looking Ahead
Carol's vision for board diversity extends beyond gender to encompass age, culture, and experience. She advocates for a holistic approach to diversity that prioritises optimal decision-making and better business outcomes.
Her message is clear: while Australian boards have made significant progress, particularly in gender diversity, there's still work to be done to promote women in board leadership roles and on broadening our understanding of diversity to include age and different types of experience, while maintaining pragmatic rather than prescriptive approaches to board composition.
[00:00:00] Intro: Welcome to Minutes by boardcycle, where in each episode we pack the insights from one of Australia's boardroom leaders into just a few minutes.
[00:00:08] Today, join host Richard Conway as he interviews Carol Schwartz, member of the board of the Reserve Bank of Australia, and chair of the Women's Leadership Institute Australia, on the state of diversity in the boardroom as we enter 2025.
[00:00:24] Richard Conway: Welcome to Minutes by boardcycle. I'm your host, Richard Conway, and today on the podcast, I have the privilege of interviewing Carol Schwartz. Carol's the Chair of Equity Trustees and a member of the Board of the Reserve Bank of Australia, the Chair of the Climate Council, and perhaps most relevantly to today's podcast, the chair of the Women's Leadership Institute Australia.
[00:00:48] Richard Conway: Carol, welcome to the podcast.
[00:00:50] Carol Schwartz: Lovely to be here, Richard, and thank you for inviting me.
[00:00:53] Richard Conway: Great. Carol, you're a leading voice on issues of gender equality and women's leadership. So today I [00:01:00] wanted to talk to you about diversity in the boardroom in particular, and I wanted to start with some data that Chief Executive Women has published about women on boards, in 2024, which there's a couple of data points I wanted to let our listeners know about.
[00:01:18] Richard Conway: So the first, there are 13 companies on the ASX 300 who have no women on their board in 2024, which is actually an increase compared to 2023 when there were 11. Whereas across the ASX 20, now 40 percent of board seats in aggregate are occupied by women.
[00:01:37] Richard Conway: And then the third one, is that 202 out of the ASX 300 have women occupying at least 30 percent of their board seats, up from 195 in 2023. To me, that tells a quite mixed story, but Carol, I wanted to ask you to start off with what your take is on the state of gender equality in the boardroom [00:02:00] today.
[00:02:00] Carol Schwartz: Well, Richard, so much better than it was when I first started sitting on boards. And you know, I think that it has been due to the combined efforts of really good women, as well as really good men who realize the benefits of diversity. And, you know, we have groups like McKinsey's would show that, when you have diverse people constituting board membership, you get much better outcomes, much more optimised outcomes.
[00:02:33] Carol Schwartz: And isn't that what we want as shareholders? I think that, you know, those 13 companies, and it's great that it's only 13, right? And you said 202 of the ASX 300 have over 30 percent women on their boards. I think that's fabulous. I mean, look at the progress over the last 20 years. It's been astounding, really, if you think about it.
[00:02:56] Carol Schwartz: The top 20 companies on the ASX [00:03:00] have 40 percent women on their board. I think they're great moves forward. And the laggards, really, are the ones who probably suffering because they're not optimising their outcomes. They're not optimising decisions for shareholders. And I think that shareholders have become very, very aware of the need for diversity.
[00:03:21] Carol Schwartz: And so they're probably risking losing some of their investors based on the fact that they don't have diversity around the board table.
[00:03:30] Richard Conway: Yeah, absolutely. And Carol, some other data in the same publication from Chief Executive Women goes into kind of a next level of detail around that. So it's looking at what positions women are in on boards.
[00:03:44] Richard Conway: So that would show that in the ASX 300, less than 15 percent of women are in chair positions, and then talking about sort of feeder positions to the boardroom, in the ASX 300, [00:04:00] again, 9 percent of CEOs are women. Although 25 percent of CEO appointments in 2024 were women, and similarly in the C-suite more broadly, I guess, CEO feeder roles, approximately, women are making up less than a third of, of that group.
[00:04:16] Richard Conway: So I wanted to ask you about, when it comes to, participation in leadership positions and whether you see that as the key priority, or something else?
[00:04:25] Carol Schwartz: Yeah, that's definitely too much of a gap, Richard. And I think that it's something that when women are on boards, that they really focus on, that women within the organisations that they're directors of actually have the opportunity to move into roles where they are responsible for profitability, where they're responsible for leading large teams, and where they're on a path to becoming CEO.
[00:04:58] Carol Schwartz: I mean, we've got to [00:05:00] ask the question though, Richard, whether we've been viewing too narrowly what that pathway actually is to CEO. I mean, we've had lots of preconceptions about what sorts of qualifications and characteristics a CEO needs. You know, things that I've been reading lately actually question old paradigms around what constitutes as a good CEO.
[00:05:30] Carol Schwartz: And in fact, the sorts of ways women's characteristics and qualities are described within organisations are actually at the forefront of the sorts of characteristics and qualities that we want in the leaders of our businesses.
[00:05:47] Carol Schwartz: So I think, unfortunately, like everything, this is going to take time. It's also going to, have to, influence old paradigms and [00:06:00] around what constitutes a good leader. But I think the more women we have at the board level, the more we're going to see women coming through in those very senior roles.
[00:06:12] Carol Schwartz: So I'm really very much looking forward to that. And, you know, the fact that 9 percent of CEOs are women, being a CEO does not qualify one for a board role. We look for much more diversity than that. We want people who've had different experiences in different organisations at different times of their lives.
[00:06:35] Carol Schwartz: And that doesn't necessarily mean being a CEO. For example, an entrepreneur founder, brings great skills. Now, they don't necessarily have had the formal, conservative CEO experience because they've had much more entrepreneurial experience. But I can tell you from my experience sitting around board tables, having somebody who has been an [00:07:00] entrepreneur brings just a completely different way of thinking and problem solving to a board.
[00:07:07] Carol Schwartz: And isn't that what we need? We need a diverse array of problem solving focuses so that we actually, hopefully, get to the best outcome.
[00:07:18] Richard Conway: Yeah, I wanted to follow up and ask whether your view is the same around chair positions in boards to what you just said about CEOs. Does the paradigm about what makes a good chair need to change as well? Perhaps there's too much emphasis that you need to have previously been a CEO to take chair roles.
[00:07:37] Carol Schwartz: Yeah, well, I think that's totally, totally erroneous, actually. I've sat around boardrooms where the best chairing is done by people who've never been a CEO.
[00:07:49] Carol Schwartz: It's not to say they haven't had obviously leadership roles and very senior roles. But, they haven't been a CEO, and they've been stunning chairs. Because they bring qualities, [00:08:00] characteristics, ways of thinking to a board that don't exist around the table. And they also lead in a way which is incredibly inclusive and which brings out the best in people.
[00:08:13] Carol Schwartz: I mean, I see myself as a chair, as really being a conductor, right? I have great people sitting around board tables with me who know so much more than I do, very often, about the intricacies of the business that we're dealing with. And I see my role very much as getting the best out of them sitting around the table, rather than me pontificating about what my views are.
[00:08:41] Richard Conway: Yeah, absolutely. So Carol, I now wanted to ask you some questions around diversity in the boardroom more broadly than just gender. And I guess the question is, in general, whether you think organisations are paying enough attention to that broader question.
[00:08:59] Richard Conway: [00:09:00] So just as an example, preparing for this podcast, I had a look at what the AICD publishes around diversity, and they have some very deep data around gender diversity on boards, and they've been releasing that since 2016. So that’s quite long running, but for example, there's not similar data that they publish around cultural diversity.
[00:09:22] Carol Schwartz: Yeah, that's a real shame, isn't it? And also age diversity. I mean, I'm a big believer that you've got to have really effective age diversity sitting around the table. I don't look at TikTok.
[00:09:36] Carol Schwartz: But I like to have someone sitting around my board table who knows absolutely about TikTok and the impact that it's having on our customers, our potential customers, on the business that we're in, on our staff, you know. And the only way we're going to get that sort of exposure is by having someone around the board table [00:10:00] who understands new paradigms that others may not get.
[00:10:05] Carol Schwartz: So I think, for me, age diversity is a huge issue. I also think that cultural diversity is very important. In some organisations, more important than others. But as a general principle, I think it's very important. But for me, the top of the list is actually age diversity.
[00:10:25] Richard Conway: Yeah, that's a great segue, actually, to my next question, because that seems to me to be a real challenge.
[00:10:32] Richard Conway: The Governance Institute has some really interesting information about that, which shows that the average age of a director this year is 61. That went up a little bit compared to last year. And if you look at directors under 50 years old, so only 8 percent of female directors are less than 50, and only 6 percent are directors.
[00:10:56] Carol Schwartz: I'm surprised with that because my experience has been that the female [00:11:00] directors tend to be younger, a lot younger male directors.
[00:11:03] Richard Conway: That's absolutely true that, the Governance Institute data does show that. But, yeah, I guess the question there was, is it the case, I think I know the answer to this from what you said, is it the case that with age comes wisdom or where is the threshold there that it's important to bring younger people in for better connection with new paradigms like you said, but, they obviously must have a broad range of skills and experience to contribute to a board.
[00:11:30] Carol Schwartz: Sure, absolutely. For me, the threshold is you always have to have younger people on the board. Because you have to have that exposure. Now, young doesn't mean you necessarily have someone who's 22 or 23. Although, there could be some circumstances in which you run out a technology business.
[00:11:49] Carol Schwartz: And there is a 22 or 23 year old out there who's been an enormously successful entrepreneur. Why wouldn't you want to harness their skills around your board table? To [00:12:00] me, it's sort of obvious. I, I must say, I'm pretty age agnostic. I do believe that time limits on boards are absolutely essential.
[00:12:11] Carol Schwartz: I know that Catherine Livingston at the AICD said that she feels that six years for a board role is long enough, that potentially nine years is too long. And I absolutely agree with her. I think you need to be constantly refreshing, regenerating, having new ideas, having new people sitting around the table.
[00:12:35] Carol Schwartz: Whenever you bring on a new director, you learn something new about the business. You learn something new about the board dynamic. You learn something new about the executive team. It's such a positive process, board renewal, that I'm absolutely with Catherine Livingston on a six year limit as opposed to a nine year limit.
[00:12:56] Richard Conway: Yes. And to wrap up, Carol, I just wanted [00:13:00] to ask you, what would you challenge boards and chairs to achieve on diversity by 2030 or sooner?
[00:13:07] Carol Schwartz: Well, you know, 40 percent women on boards. I mean, I, I was a believer in the 40, 40, 20 rule, right? Because you're not always going to have even numbers, so you can't always have 50, 50, right?
[00:13:22] Carol Schwartz: And you've got to be pragmatic around that. I mean, in some board situations you might have 80 percent women and 20 percent men, you know, are you going to impose a 50, 50 rule on every business? I think that's unrealistic. However, getting back to what we've just been discussing, age, I would really like to see boards opening up to more diversity in ages sitting around the board table. I think that's just as important as gender.