Proxy advisors' concerns over the make-up of Australian Securities Exchange 200 (ASX200) companies' boards could see directors fail to be re-elected, if the businesses have poor records on diversity.
New research from Blackrock has found that gender diversity is an issue for Australia's three most widely-used proxy advisors — CGI Glass Lewis, ISS Governance and Ownership Matters.
Blackrock's corporate governance and responsible investment director — head of Asia Pacific — Pru Bennett, said the three proxy advisors had stated they would consider changing their recommendations to achieve diversity.
"Proxy advisors give recommendations to a broad array of institutions, including those representing superannuation funds," she said.
"These proxy advisors are now strengthening their stand on achieving diversity. For example, CGI Glass Lewis has said it will consider recommending voting against the chair of the nomination committee, or the equivalent, at the company's AGM if a company's record on diversity is poor.
"The Australian Council of Superannuation Investors (ACSI) also refers to diversity in the discussion of core principles of board composition in their guidelines.
"Our conclusion is that gender diversity can have clear positive ramifications for return on investment over the medium- to long-term. However, some investment is required, backed by clearly detailed and implemented policies, to kick start gender diversity's virtuous circle."
Bennett said Blackrock's research had found that 18 per cent of ASX200 companies had no gender diversity on their boards, with a significant proportion (38 per cent) of those companies being in the resources sector.
She described efforts by companies listed on the ASX200 to improve gender diversity on their boards as "piecemeal".
"The majority of companies are still applying a largely minimal standard mindset to the reporting of their diversity obligations," she said.
However, Bennett said that in the three years since Blackrock first reported on diversity in ASX200 boards, there had been "some improvement".
