NZ Institute of Directors: ‘Cast a wide net to find the best people for the board’

Boards should be setting their own diversity policies, appropriate targets and declare this in their annual reports, says IoD CEO Simon Arcus

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Ask for CVs without names, gender, age, ethnicity, residential addresses and other personal identifying information to help reduce bias.

The Institute of Directors (IoD) is urging NZX listed companies to set gender diversity targets to improve the sobering board gender statistics.

Seventy seven per cent of the top 122 NZX companies have less than 30 per cent of women directors on their boards, and 39 have no women at all on their boards, according to IoD.

“That is simply not good enough, that needs to change,” says Simon Arcus, IoD chief executive.

The IoD is calling on listed boards to take active steps to achieve membership of 30 to 50 per cent of women directors.

“We need boards that reflect New Zealand’s diversity, the global reach that many of our businesses have and also that of shareholder expectations,” says Arcus.

One of the things we see around the world, and which we will see more in New Zealand, is shareholder activism about diversity, adds Arcus.

You have to have people who understand the cyber and digital world... They need to be people who can ask questions about the digital future of the organisation and get answers that they are satisfied with.

Simon Arcus, Institute of Directors

Read more: Big answers trump Big Data

Beyond gender diversity

“We believe there are plenty of people out there from different and diverse backgrounds that can join boards and add value,” says Arcus, who issued the call during the launch of IoD’s guide on Getting on board with diversity.

In an interview with CIO New Zealand, Arcus says diversity also covers "ethnicity, Maori whakapapa, LGBT ( lesbian, gay, bisexual, and transgender) affinity, age, race, religion.”

He says board diversity also means recruiting for members from the technology and cyber points of view.

Most businesses are realising the digital implications to their business, or are fully realising the whole business model is probably digital in the future, he says.

“If you're going to make a change, that has to be driven at a strategy level which is what the board is responsible for. You have to have people who understand the cyber and digital world.”

“They don't have to be people who can write code or build a website,” explains Arcus.“They need to be people who can ask questions about the digital future of the organisation and get answers that they are satisfied with.”

He says the challenge for diversity is two-fold.

One is the cultural change in increasing an inclusive culture and recognising unconscious bias. The other is taking steps in making a diversity policy for the organisation, reviewing the board’s composition and identifying and appointing diverse talent.

Boards need to lift their game as board diversity is critical to maintaining a competitive and vibrant economy, says Arcus.

“We understand that change takes time. Boards should be setting their own diversity policies, appropriate targets and declare this in their annual reports.

“Timeframes and initiatives should be authentic and set accountability, but also take business needs into consideration."

The IoD guide lists the following five practical steps:

Create an inclusive culture: "The board sets the tone for the culture of the organisation. An effective board champions debate, diversity, thoughtful challenge and dissent.”

Recognise and address unconscious bias: The guide cites in the late 70s, the top five orchestras in the United States had fewer than 5 per cent women members. Today, they make up over 30 per cent. Blind auditions were introduced in the early rounds of recruitment.

Review board composition: “Get the right mix of people and avoid a compliance or tick-box approach...It is about building a board that considers diverse perspectives in discussion and decision making to add greater value to the business.”

Identify and appoint diverse talent: “Cast a wide net to find the best people on board.” Look beyond traditional sources of potential directors such as lawyers, chief executives and accountants. “Consider candidates that have business acumen and core director capabilities but who also have diverse skills, experience and attributes.”

Set targets and measure progress: The guide notes an improvement at a macro level on gender diversity. It cites women now make up 43 per cent of people on state sector boards, which is close to the government’s 45 per cent target. Women comprised 17 per cent of directors on NZX listed companies last year, up from 12 per cent in 2013, when NZX required the boards to report on the gender breakdown of directors and officers in annual reports.

Seek the advice of search firms and ensure they have a commitment to diversity.

Sidebar: Tips for identifying and appointing diverse talent

Skills first: Recruit on the basis of merit and capacity.
Establish a proper process for appointments and benchmark all candidates.
Ensure nomination committees and interview panels have at least one woman as a member.
Ensure transparency in board selection and appointment processes.
Ask for CVs without names, gender, age, ethnicity, residential addresses and other personal identifying information to help reduce bias.
Do not accept short-lists with a lack of diverse candidates, have a process for returning to the market for further candidates.
Periodically advertise board positions to encourage greater diversity in applications.
Provide appropriate support for the candidates.
Seek the advice of search firms and ensure they have a commitment to diversity.

Source: Getting on board with diversity (NZ Institute of Directors)