Woolworths | Review of Board diversity – Assignment Help
Executive Summary
Board diversity is a comprehensive and wide-ranging concept which is not limited to gender-based workforce composition but also considers the personal characteristics of board members. Research indicates that board diversity has a positive influence on organizational performance because the presence of diverse board members drives the strategic vision of an organization. This report presents an analysis of board diversity at Woolworths Group in line with the legislative guidelines presented by ASX and the theoretical frameworks which support board diversity. The report concludes that Woolworths Group is one of the leaders of board diversity and workforce diversity in its industry. The company has an equal representation of men and women on its board. The board members also have unique characteristics in terms of their age, educational backgrounds, experience and personality traits. Moreover, the company has also adhered to the diversity disclosure policies proposed by ASX. The report proposes that the company should have a clear and transparent mechanism which highlights how its senior leadership assesses and monitors the progress of its diversity program.
1. Introduction
Board diversity is one of the most important factors in enhancing corporate governance at an organization. Research indicates that board diversity is one of the ways through which organizational performance can be improved (John, Makhija, and Ferris 2014, p. 84). Board diversity, as a concept, has a comprehensive definition which covers characteristics such as gender and ethnicity which can make a board more diverse in nature. Moreover, board diversity is a wide-ranging term which also includes other variations in identity-based attributes such as sexual orientation, age, physical ability, appearance, family status, race, and weight. A more focused definition of board diversity relates to the composition of the board and its inclusion of women and minorities. However, diversity in the bord may also include distinguishing personality traits of the individuals who are present in the board (John, Makhija, and Ferris 2014, p. 84-85).
The concept of diversity in the field of management holds critical importance because the inclusion of diverse and varied perspectives in the board helps improve decision making expertise. According to the research conducted by Nadeem, Zaman and Saleem (2017, p. 874), Australian companies listed on the ASX launched several initiatives to improve diversity in their boards and their engagement in sustainable practices. In the period between 2010 and 2014, there was a significant increase in gender diversity in corporate boardrooms across Australia owing to a rise in female representation.
The purpose of this report is to assess and examine the concept of board diversity with reference to the corporate structure at Woolworths Group. The concept of board diversity is examined from a corporate governance standpoint and in line with the rules and laws practiced in Australia as well as supporting corporate governance theories and philosophies.
2. Legislation and board diversity
Following the global financial crisis there was increasing pressure on firms to demonstrate exemplary corporate governance and transparency to ensure that economic integrity is protected and maintained. According to the legislation, which was implemented in 2012, companies operating in the non-public sector that have employees of 100 or more are legally bound to report to the government about different indicators representing gender equality. These regulations were released under the Workplace Gender Equality Act which was passed in 2012 (Vafaei, Mather and Ahmed 2012, n. pag).
This regulation highlights one of the initiatives which were implemented by the government to ensure that the representation of women in the workplace is enhanced. Based on the continued importance of improving board diversity, companies listed on the ASX have launched initiatives to achieve gender diversity however it is important to note that a limited number of companies have identified accountable and transparent goals for initiating gender diversity in their boardrooms. In comparison European countries have demonstrated leadership in driving the quest for achieving diversity in. For example, Norway has a gender quota of 40% to promote gender diversity in the boardroom which was implemented in 2005. Other countries which have implemented 30 to 40% quotas for female representation in the boardroom include Malaysia, the Netherlands, Italy, Belgium, France, and Germany (Ahmed and Ali 2017, p. 150).
From a legislation perspective, the Corporate Governance Principles and Recommendations presented by ASX consist of guidelines for promoting gender diversity in the boardroom, however, it is important to note that the implementation of these standards is voluntary in Australia and a similar case is present in the United Kingdom and the United States (Aluchna and Aras, n. page).
3. Theory and board diversity
Apart from the positive impact of boardroom diversity on organization performance it is important to know that there is a positive association between corporate social performance and boardroom diversity (Hafsi and Turgut 2013, p. 470). Board members have a significant influence on the functioning of an organization and their ability to give advice, question and assess critical situations is specifically impactful for the strategic process of an organization. Board members who come from diverse backgrounds and experiences can apply their skills and knowledge for the benefit of the company. Accordingly, individuals belonging to diverse backgrounds also have a wide network and personal links to a wide array of stakeholders which in turn gives them access to distinct sources of information and resources which a company cannot acquire without having a diverse corporate board (Hafsi and Turgut 2014, p. 473).
Promoting boardroom diversity is one of the mechanisms through which companies can achieve good corporate governance. A research conducted in UAE found that the diversity of members in terms of experience and tenure had a direct impact on innovation as members who were more experienced were able to introduce ideas to address company challenges during a critical economic situation (Iren and Tee 2018, n. page).
Another research conducted in Australia intended to test the theoretical framework which suggests that boardrooms that are diverse in nature and have a low gender gap are characterized by the presence of effective monitoring mechanisms. The findings of the study indicated that gender diversity in the boardroom can positively impact stock liquidity thereby contributing to market efficiency (Ahmed and Ali 2017, p. 150).
4. Organisation benchmarked with corporate governance principles or guidelines
The ASX Corporate Governance Council Principles and Recommendations on Diversity consist of diversity disclosures which companies are expected to report on what is known as ‘if not why not’ basis.
The first tenet in the guideline includes the development of a policy on diversity. Woolsworth group has a comprehensive diversity policy which intends to create an inclusive workplace where diversity is accepted and celebrated. The policy highlights the importance of establishing diverse teams within the organization and indicates that the actions taken by the organization are directly monitored by the Chief People Officer and the Chief Executive Officer of the organization against designated measurable goals.
The second recommendation on the legislative guideline presented by ASX is that the diversity policy should require the board to include the measurable goals for diversity which shall be assessed on a yearly basis. In the case of Woolsworth Group, the diversity policy of the company only includes limited statements on this requirement without explaining them in detail. However, it is important to note that the diversity policy is disclosed on public forums and is available for access online as noted in the guidelines presented by ASX.
Moreover, the diversity reporting framework proposed by ASX also requires the company to mention various diversity related statistics in its annual report such as the composition of its workforce which includes the number of female employees and the number of women on the company’s board.
Woolsworth Group complies with this reporting requirement because the annual reports generated by the company include a section on people whereby a group review is presented on the composition of its workforce and the various diversity related initiatives that the company has taken. The corporate responsibility report generated by the company presents statistics on the number of disabled employees, the proportion of female managers in the company, and the integration of indigenous employees in the workforce.
Apart from focusing on gender diversity the company has also taken active steps to improve age diversity in the company by encouraging youngsters to become a part of the team while retaining the experience of older workers that are above 55 years of age.
Moreover, the company is also one of the pioneers of LGBTI workplace inclusion and actively recruits refugees in its workforce to promote diversity and inclusion. Based on the initiative taken by the company to promote diversity within its workforce it can be termed as one of the leaders in organizational and board diversity because there is an equal representation of men and women in the company’s board of directors.
5. Committees and board diversity
The presence of diverse board committees is often witnessed in the FMCG and retail sector. The performance of Woolsworth Group, in terms of diversity, remains well ranked across the globe as per the diversity and inclusion index. It should be noted that diversity in the company is not limited to gender but also reflects the various experiences, thinking patterns, personalities, and tenures of the board members. Accordingly, the board members also have various backgrounds when it comes their professional career and performance. For example, the members of the board have diverse experiences in general management, digital media, public policy, online retail and merchandising which in turn strengthens the strategic direction of the company.
