The momentum of change - Institute of Directors in New Zealand AGM

  • Pansy Wong
Women's Affairs

Tena Koutou Katoa, good afternoon,

Thank you for the invitation to speak at your Annual General Meeting. It is a pleasure to be here with you today.

The Institute of Directors has been a part of the catalyst of momentum towards getting more women into the boardrooms and I would like to start by thanking the President, Chief Executive Dr Nicki Crauford and her team for that support.

Change is in the wind as more Kiwi companies start to realise the benefits of gender diversity - a change that was sparked last May when the Institute teamed up with my Ministry of Women's Affairs and Business New Zealand as part of a concerted effort between Government and business to raise gender diversity in our boardrooms.

As part of the Women on Boards initiative, the Institute of Directors is effecting a change in boardroom attitudes and ensuring that our companies and our economy prosper through the many benefits of gender diversity.

My Cabinet colleague, Trade Minister Hon Tim Groser, is well known for his diplomacy and it often takes a lot for him to resort to name calling.

The occasion was reserved for the group of United States senators who signed a joint letter expressing concerns over the negative impacts on US dairy trade that could be caused by including New Zealand's dairy component in the regional free trade talks. 

Hon Groser pointed out that the arguments being used were the same he had been hearing for 30 years and were, he said, ‘a load of old cobblers'. He said that this attitude had put restrictions on our dairy trade for more than 30 years and hurt both New Zealand businesses and American consumers.

Imagine some 117 years ago, if Kate Sheppard and her supporters had listened to the arguments against women getting the vote; such as people saying women didn't know how to or want to cast their votes.

New Zealand would not have led the world with a ground breaking reform that has been followed by almost every other nation in the world. The fact that Kate Sheppard changed attitudes and secured Kiwi women the right to vote has nowadays seen women voters as deciding factors in many democracies.

I am fortunate in having the support of an institute that is enlightened and progressive in embracing the drive to lift the dismal 8.6 percent record of women directors in our top 100 listed companies.

Indeed the Institute of Directors is a partner to the Women on Boards initiative alongside Ministry of Women's Affairs and Business New Zealand to make the business case for more women on boards.

The Women on Boards initiative, launched by Prime Minister Hon John Key in May last year, promotes the international evidence showing companies with more women on their boards are stronger performers than those that have no or few women in their boardroom.

For example, the Catalyst Report looks at the performance of Fortune 500 companies in 2007 by ranking them by the number of women board members; comparing the performance of the 25 percent with most women in the boardroom with the 25 percent with the least.

Companies in the top 25 percent showed a 53 percent higher return on equity, a 42 percent higher return on sales and a 66 percent greater return on invested capital than companies in the bottom 25 percent.

This finding is reinforced by other international studies such as the McKinsey & Company 2007 report, Women Matter, which found that "companies where women are most strongly represented at board or top management level are also the companies that perform best, on both organisational and financial performance".

More recent research conducted by Leeds University looked at the link between board composition and company failure. After studying 17,000 companies, they found that businesses with at least one woman on their board were 20 percent less likely to go bankrupt.

This is revealing given that we are just coming out of one of the toughest trading environments in decades and there has been a large number of company failures.

Perhaps these research findings influenced Norway to legislate for a 40 percent quota for women on boards. Kate Sweetman, a former editor of the Harvard Business Review went to Norway to interview board members about the impacts of the quota system.

She reported that many board members interviewed had resisted the change for reasons that are familiar:

  • Business is about meritocracy not diversity
  • Government has no place interfering in business
  • If qualified women existed, companies would already have them on boards, and
  • Women don't want this anyway.

She then went back two years after the change and every person she interviewed said the boards were measurably improved by the addition of women.

One board member said: "I have a big problem with someone saying that a board needs to be a certain way, but I have to admit, looking back on it, no company regrets it."

Australia has put in place a system that makes businesses on the stock exchange report on the gender diversity of their boardroom.

The routes taken vary from country to country, but what we are seeing is an emerging world-wide trend towards more women - and more diversity generally - on boards.

The question for us here in New Zealand is how can we fast-track the process of boosting gender diversity in the boardroom to gain the competitive advantages without resorting to legislation.

A good start was the launch of the Women on Boards initiative, which for the first time brought government together with the Institute of Directors and Business New Zealand to actively push for change in our boardrooms.

As Minister of Women's Affairs, I want to be a catalyst for that change with the help of the Institute of Directors and Business New Zealand to ensure that our companies can reap the benefits of having a wider range of ideas and views within the boardroom.

Government can lead by example, and I'm interested in the quality of governance in the companies that our government owns and I have been working to increase the pool of talented women available to government.

The Ministry of Women's Affairs ensures that our nomination service's women directors' database is kept up to date for this purpose. Last month the government announced nine new appointments to State Owned Enterprises and five of these were women - all of them will add valuable skills to these boardrooms.

The competition is tough for these boards and the appointees get there on merit, not just on gender. The reality is that there are experienced women directors out there; you just have to ask for them.

Since last year's launch, I have been meeting with chairs of some of New Zealand's largest companies and they always raise the perceived risk and lack of suitable women candidates as barriers to them bringing women into the boardroom.

I also note that the chairs usually indicate that they do want to see more women directors but they have to convince the other board members, which is very interesting indeed!

Women are not always prominent in the networks that many companies use to make board appointments, so companies need to start thinking outside the profile of the usual directors to find qualified women.

I have been talking to recruitment agencies that work in the governance area and they have access to women who are board-ready now. 

Boards that use more transparent recruitment processes are likely to have access to a wider range of candidates.

If we can get more women on company boards as well as at senior executive levels within businesses, everyone will benefit.

Of course it is good for women, but more women on boards would also be good for business and for New Zealand as a whole.

The advantage for women is fairly obvious - having their skills recognised and being able to make full use of their talents is clearly something that is rewarding both professionally and financially.

The national benefit is also easy enough to see and explain: clearly it does not make sense for any country  not to make full use of the talents of all its citizens.

As a nation of just 4.3 million people we must use the skills of all our people and if women miss out, then we are wasting the talent of 51 percent of our population - which has the potential to limit our competitiveness and economic growth 

My message for New Zealand companies thinking about how to make the best decisions as they emerge from the recession is:

  • Get a wider range of views around the board table now.
  • Change is coming - there will be more women and more diversity on boards and in senior management.
  • Embrace that change - those who have done so have almost always found that there are real benefits.
  • If you want to gain competitive advantage, anticipate the change and get in first. You will get the best pick of experienced women directors and you will get the benefits earlier.

I am working hard to bring about these changes, which will bring real competitive advantages to New Zealand businesses to complement the National-led Government's resolve to focus on economic growth.

I would like to personally thank the Institute for its ongoing support for our efforts to strengthen boardroom gender diversity and for its broader work promoting excellence in governance.

I look forward to the day when it is rare to find a company that does not have women in its boardroom - and I hope that some of you here today will help lead that change.

And if you do hear board chairs saying that they would like to appoint women but just can't find any qualified female commercial directors -Ask them to give me a call.

Thank you.