What does diversity mean for a non-executive director appointment?

The topic of board diversity frequently arises in the media, in the business world, and in the boardroom during discussions regarding the appointment of board members. However, these conversations about diversity often become fixated only on gender diversity. Indeed, it is one of the most common questions I get asked… aren’t boards just looking for female candidates?

In fact, there are six traditional strains of diversity. As a potential board candidate, you need to consider your points of diversity and why it is valuable at the board level or to a particular board role. So, the question that I think you should be asking is… ‘Which organisation will appoint me, and what is my point of difference?’ Knowing the answer might be that extra thing that sets you apart from the competition and gets you appointed.

The six traditional strains of diversity

Boards have many roles and responsibilities. Most of them involve strategic decision-making at the highest level. However, good governance also requires the board to protect the interests of all stakeholders and the organisation’s reputation. The stakeholders they represent or clients they serve are diverse, and those different elements of diversity should be acknowledged and reflected on boards.

The six traditional strains of board diversity are:

1. Gender
2. Race & Culture
3. Religion
4. Age
5. Sexual Orientation
6. Disability

From a board appointment perspective, there might be others as well, including socioeconomic status, education, geography, and cultural background.

The current state of diversity on Australian boards

With the Governance Institute of Australia, Watermark recently released its 2024 Board Diversity Index report. This report represents only the ASX300 companies. While it does not represent the thousands of boards and committees across Australia, it gives us a snapshot of what is happening at the top end of corporate Australia.

This is some of what they reported:

• 69% of boards had 30% or more women on them
• 4.3% of boards were all-men
• only 9% of directors were of non-Anglo-Celtic backgrounds
• there are only 4 First Nations directors
• the youngest director is 29, and the oldest 92, with the average age being 61
• there are only 4 openly LDBTQ+ directors
• there was no data collected on religion, disabilities or socio-economic background

Unlike the UK and USA board diversity requirements, targets and reporting are lacking in Australia. ASX-listed companies are only required to report based on gender diversity. However, earlier this year, the ASX Corporate Governance Council proposed that listed companies expand diversity reporting beyond gender to include sexuality, age, ethnicity, and skills. This proposal faces backlash, with some directors saying that it encroaches on their privacy, particularly around sexual orientation.

Board diversity is a much broader issue than gender

Board Diversity has been proven to increase the performance of the boards and the organisations they represent. Many chairs are aware of this and are asking themselves questions like:

• What does board and particularly non-executive diversity in reality mean to our organisation?
• Does having a diverse non-executive director seem risky?
• What should the gender balance on my board be?
• How could we accommodate a non-executive director with a disability?

However, a strong push for the easier and more publicised gender diversity option puts the other six strains of diversity in the too-hard basket.

Can you offer diversity to a non-executive director role?

At the highest level of corporate Australia, things are slowly changing with a broader understanding of diversity and diverse appointments taking place. This change is further reflected in the boards of smaller organisations too, and will continue to do so as the old guard of chairs and directors complete their tenure and are replaced.

For non-ASX300 organisations, the majority of chairs are highly passionate and recognise the advantage of having diverse non-executive directors on their boards. So, make it easy for them by being able to define your point of diversity and WHY it is valuable to them at the board level.

The statistics show that gender alone may no longer make you diverse, particularly as more and more females climb corporate ladders and gain strategic business skills and experience. For most non-executive director roles, you will not be the only female applicant or short-listed candidate. To stand out from the other candidates based on your diversity, your focus needs to be on any of the other applicable six strains of diversity.

You need to articulate how your ‘diversity’ will contribute to the board’s success, but be careful to ensure that your pitch aligns with the board’s and the organisation’s cultural fit. The chair is the ultimate decision-maker and will not risk his/her and the organisation’s reputation if he/she feels that your diversity is risky because of a bad cultural fit.

Do your homework before applying

I always advocate that conducting research is essential before writing any board application. When it comes to your non-executive diversity, your research should first focus on the culture of the organisation and the board. You need to determine if the role is a good fit for you and them.

Next, study the current business environment and stakeholders to find unique opportunities where your diversity can add value. For example, you may identify a new market, product or service, customer base, supply or distribution option that you have access to or knowledge of due to your cultural background.

Articulate your diversity as a non-executive director

First things first, ensure that your board profile and board CV articulate your unique diversity plus what you offer from a board perspective. You should update your LinkedIn profile at the same time.

Consider how the aspects of your diversity are relevant to each and every NED role you apply for and each and every selection criteria listed for the role. Customise your board cover letter to ensure that it is clear to the reader; don’t assume that it is obvious to them.

But don’t stop there. When preparing for your board interview, know your points of non-executive diversity and why they are valuable to the board. Even if the question about diversity doesn’t come up during an interview, when applicable, highlight what you can offer during the interview or at the end when asked if there is anything else you would like to bring to the attention of the interview panel.

Appointments on the basis of diversity alone?

There is a common misconception that only females are being appointed to boards. The last statistics I saw on this were that 52% of all board appointments were male – so it is a fairly even race.

Still, if you are of a certain age, gender, and race, it might be worth considering what makes you more valuable than a more ‘diverse’ candidate.

Rarely do I see individuals want to be appointed just because they bring a certain element of diversity to a board. I also think that these sorts of appointments rarely happen. Where I see diverse appointments being made, is when diverse candidates also offer core governance skills and experience. After all, just because a candidate is young, gender fluid, culturally different, and disabled does not mean that they should be appointed to a board. It is only when you can articulate the additional value you bring to a board through your diversity do you become more appointable.

Be diverse – but not too diverse

One last thing to consider when applying for a board position is to remember that Chairs/decision-makers are always nervous about appointing new board members. So if your point of diversity is, for example, bringing a completely different perspective to a decision-making process based on a different culture, sexuality or industry, you need to also balance this pitch with some language that shows the value of this approach and that you also understand the basics of /solid grounding in board governance. Don’t be too scary!

In Closing

You can use the question of diversity on boards to your advantage. And it’s not only gender diversity that matters; you can point out all of your diverse attributes that will make you a more desirable candidate than someone with more board experience. A broad range of collective attributes, rather than overlapping or redundant qualities, significantly helps a board fulfil its responsibilities of providing good corporate governance and strategic oversight. Diversity offers different perspectives and leads to more innovation, better risk management, and stronger connections with stakeholders.

Regardless of your level of board experience, you must make your case about what attributes you bring to the table and how they will enhance the overall profile of the board. Every non-executive director brings some element of diversity. Your role is to demonstrate the value of that diversity, why it sets you apart from the other candidates and to dare them not to appoint you.

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