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Culture Club: Why are Boards Still so Exclusive?

​Australia is a cultural cornucopia: according to the Australian Bureau of Statistics, our island nation is home to people from more than 270 ethnic groups. But is our multiculturalism inclusive? True multiculturalism should mean the unity of core values and the inclusion of ethnic diversity in all areas of Australian life. However, ASX300 boards remain largely Anglo-European.

It’s disappointing for many that Australian boards are still very much dominated by white people (mostly men) of Anglo-Celtic and European ethnicity. In fact, as Watermark Search International’s 2024 Board Diversity Index shows, there is now a higher representation of Anglo-Celts on boards (91.2% in 2024) than there was seven years ago (90.5% in 2017).

We have had many conversations with leaders who are frustrated that moves to increase the overall cultural diversity of ASX300 boards appears to have stalled in the past 12 months. Indeed, in smaller companies it’s actually gone backwards. We need to confront the truth that the overall percentage of board seats held by directors from culturally diverse backgrounds remains at 9% and that is unchanged from last year. In fact, in ASX201-300 companies, the percentage of directors from a non- European background has dropped from 6% in 2022 to 3.81% this year.

ASX300 boards are lacking First Nations leadership

According to the Australian Bureau of Statistics, Aboriginal and Torres Strait Islander people make up 3.8% of our population. Our 2024 Board Diversity Index found the number of First Nations directors has not grown (still 4 in 2024), although an extra board position is now occupied by a First Nations director, bringing the total to 7, up from 6 in 2023.

However, it’s worth noting those positions are held by the same four people as the previous year. We believe there is a fantastic opportunity for boards to recruit more widely from Indigenous organisations, which are run with expertise by highly skilled people. These inclusions would bring a First Nations voice to the table, which in turn will expand and enhance diversity of thought and give a mutual nod to cultural respect – an important step towards genuine representation on boards.

Cultural diversity isn’t being represented

Looking at other vital areas of cultural diversity and inclusion, most boards still aren’t even close to being representative. To sharpen the point, Mumbrella has cited the 2024 Watermark Board Diversity Index revealing that directors from culturally diverse backgrounds occupy the same number of board seats as last year – that is 183 (9%).

Not all directors live locally. While the percentage of directors living outside Australia currently sits at less than a third (30%), Watermark Search International found the proportion of directors located in Asia has dropped in the last eight years from 13.9% in 2016 to just on 10% in 2024.

Regardless of who lives where, the long term trends from 2017 to 2024 show the percentage of non-European directors doubled, but Anglo-Celtic directors remain dominant. Put into figures:

  • ASX300 directors with non-European backgrounds have increased from 2.4% in 2017 to 6.6% in 2024.

  • European directors have decreased from 7.1% in 2017 to 2.2% in 2024.

  • Anglo-Celts remain steady with 90.5% in 2017 and 91.2% in 2024.

Gender equity overlooks race

While some progress has been made on the gender make-up of ASX300 boards, we’re often simply replacing white men with white women from a similar background. That’s a shortfall when it comes to diversity. As a recent report from Diversity Council Australia points out, “Gender equity overlooks race”.

Boards are missing opportunities by not recruiting directors from different cultural backgrounds – Asia, India, Pakistan and elsewhere. Many of Watermark’s clients acknowledge that the diversity of people in their businesses bring a stronger mix of insights, unique perspectives and cultural knowledge. Cultural diversity on a board can be a potent asset for Australian companies looking to expand overseas or to better serve communities at home.

So why are boards so slow to expand their recruitment networks?

Breaking down the barriers to cultural diversity

Past research by the University of Sydney identified there was a limited supply of culturally diverse candidates at the executive level and that assimilationist attitudes and Western leadership styles were given preference. There also appeared to be what could be construed as biased filters in promotion and recruitment and a lack of awareness and contact with culturally diverse talent. This often amounted to closed and personal circuits in the recruitment process. So how do we address this?

Reporting and measuring cultural diversity, common in the US but currently lacking in the Australian business landscape, could be a strong precursor to change.

The Diversity Council Australia’s Counting Culture report from 2021 guides businesses through how best to count cultural background and language for maximum organisational benefit. But measurement is just the start. It will require some muscular advocacy and behavioural changes to increase cultural diversity on our boards.

Positive behavioural change could commence and evolve through developing a talent pipeline for leadership roles and transparent path to board roles. An active sponsorship approach to culturally diverse individuals to break the “closed circuit” of directors networking with each other for board positions would certainly open a gate in the wall.

It would also be helpful to consider increasing director numbers on boards to accommodate new entrants; and valuable to recognise the different styles of leadership diverse candidates could offer, which is so often unconsidered. For example, in East Asian cultures humility is emphasised over self-promotion, which in a Western context may be misinterpreted as a lack of confidence. This has contributed to a “bamboo ceiling” that prevents Asian people reaching the top levels of leadership. With a globalised economy and important Asian trading partners, this oversight should be taken seriously and addressed accordingly.

Simply put: companies need to get better at building boards where diverse voices are included, encouraged and heard.

Watermark Search International can lend vital assistance with all aspects of diversity. Our board appointment services help broaden the scope of board appointment to bring new skills and voices to the board and assist in conducting successful onboarding for new directors. We look forward to helping your company in any way we can. Contact us here.

Download a copy of the 2024 Board Diversity Index here.