Workplace diversity is shaping to be a talking point for companies in 2011, as boards prepare to comply with the ASX Corporate Governance Council’s (Council) revised ASX Corporate Governance Principles and Recommendations (Principles). The Principles impose, among other things, new obligations regarding workforce diversity on all Australian companies listed on the Australian Securities Exchange (ASX).
These obligations are not technically triggered until a listed entity’s first financial year commencing on or after 1 January 2011 (meaning the 2012 reporting year). However, companies will need to lay the groundwork soon, if they haven’t already, to be prepared in time.
This article will look at the practical effect these new obligations will have from an employment law perspective.
Before we begin, it is worth reminding ourselves how the Principles operate, and what the changes actually are.
The Principles themselves are not mandatory, but under ASX Listing Rule 4.10.3, all companies listed on the ASX must provide a statement in their annual report about how they have implemented the various Recommendations contained in the Principles. If it has not followed a particular Recommendation, a listed company will need to disclose the reason it has for not doing so - the ‘if not, why not’ system This approach avoids an overly legalistic or prescriptive regime, while nevertheless engendering greater transparency and better corporate governance for shareholders.
It is important to remember that it is only the specific ‘Recommendations’ within the Principles with which companies need to comply, or explain in their annual reports why they have not complied. However, the Principles also deal with many other matters, particularly in the ‘commentary’ sections, which go well beyond the limited matters specifically set out as Recommendations. Their purpose is to encourage companies to pursue even better, or more progressive, corporate governance practices overall, without obligations being tied to Listing Rules requirements — which would otherwise be too onerous. This article will deal in the main with the Recommendations, but will also make comment where appropriate on the broader, no-obligation suggestions raised in the ‘commentary’ sections of the Principles.
The new diversity obligations
We are concerned here with only the new diversity amendments made to the Principles in 2010, but readers should be aware that other amendments were made to the Principles in that year outside of the diversity context for which they may need to seek advice.
The Recommendations within the Principles concerning diversity are as follows:.
- that companies disclose the proportion of female employees in the whole organisation, in senior executive positions, and on the board, in each annual report
- that companies introduce a diversity policy and disclose it, or a summary of it, to the public, and
- that boards establish ‘measurable objectives for achieving gender diversity’, and disclose them along with an assessment of their progress in achieving them, in each annual report.
It is somewhat surprising to note how minimal these obligations are when boiled down to bulletpoint form in this way. For instance, companies are required to introduce a diversity policy, but there are no obligations on what such a policy should contain. Of course, the ‘spirit’ of the Principles is much broader. The commentary sections contain substantial guidance on many additional issues concerning diversity, not least of which involves consideration of diversity beyond merely gender (for example, age, ethnicity, disability etc), in addition to suggestions on such other matters as what to include in a diversity policy.
Overlap with Equal Opportunity for Women in the Workplace Act
There are obvious parallels to be drawn between the new gender diversity obligations set out in the Recommendations and the statutory obligations that are already imposed on employers with over 100 employees by the Equal Opportunity for Women in the Workplace Act 1999 (Cth). In basic terms, the Act requires employers to:
- prepare a workplace profile of the composition of their workforce
- prepare an analysis regarding matters such as recruitment procedures, promotion and termination of staff, training programs, and arrangements for dealing with sex-based harassment
- develop, implement and review a workplace program (taking into account the findings of the above analysis) which is designed to ensure appropriate action is taken to eliminate discrimination against women, and
- report on the outcomes of that workplace program for each annual reporting period.
There is clearly an overlap here with the new obligations set by the Principles. However, companies should not assume that compliance with the former will be sufficient to meet the obligations of the latter. This is most obvious when comparing the broader definition of diversity envisioned by the commentary to the Principles (age, ethnicity, disability etc) with the Act — which is concerned exclusively with gender. But it is even evident when looking exclusively at the minimal ‘gender’ obligations set out in the Recommendations. For instance:
- the duty to furnish statistics on female participation within an organisation set by the Principles is more onerous than the equivalent requirements under the Act, with the Principles imposing specific obligations on reporting on participation at higher executive and board levels
- the Act does not specifically require companies to introduce a diversity policy, and
- the ‘workplace programs’ required to comply with the Act may not necessarily contain specific ‘measurable objectives for achieving gender diversity’ that are required by the Principles. Those measurable objectives also need to be established by the board (or an appropriate board committee, such as the nomination or remuneration committee), whereas workplace programs under the Act may be established by anyone in the company with ‘sufficient authority and status within management’.
It is perhaps this emphasis of placing the obligations of the Principles in the hands of the board, along with the increased publicity that will flow from disclosures being mandatory for company reports, that signals the greatest divergence between the two sources of obligations.
However, what exactly are ‘measurable objectives for achieving gender diversity’? Some suggestions include:
- establishing a diversity committee or appointing a diversity manager
- having at least one woman (possibly external) on the nomination/remuneration committee
- ensuring directors and employees are selected from diverse candidate pools and are interviewed by a diverse selection/interview panel
- advertising vacancies more widely and in sectors where women are more prevalent
- requiring at least one serious female candidate to be present on every shortlist
- developing a culture that takes account of the domestic responsibilities of employees
- setting targets to improve the number of women in particular areas of the business where women are not well represented
- introducing mentoring and coaching programs
- undertaking employee surveys on diversity
- arranging executive mentoring programs for women
- inviting women to events and activities that will assist them to build business networks
- supporting and encouraging women to join a board as part of their professional development, and
- adding diversity indicators to board, CEO and senior management KPIs to ensure the issue gets traction.
Obviously these can/should be extended to incorporate non-gender-based categories of diversity as well if companies wish to adopt the broader ‘spirit’ of the commentary sections of the Principles. Companies should therefore look to their obligations under the Principles with a fresh eye, and not assume that their existing practices designed to comply with the Equal Opportunity for Women in the Workplace Act will be sufficient.
Interaction with other equal opportunity and discrimination laws
There are myriad equal opportunity and anti-discrimination statutes across Australia. Federally, these are comprised of the Sex Discrimination Act 1984, the Racial Discrimination Act 1975, the Disability Discrimination Act 1992, the Age Discrimination Act 2004, and the Fair Work Act 2009.
Each state also has its own anti-discrimination legislation, and while there are a lot of similarities across the jurisdictions, there are also many important differences. For instance, discrimination on the basis of things such as criminal or medical record, or transgender status, are prohibited by the laws of some of the states and territories, but not others. Perhaps more relevant, however, are the ways in which the specific wording of each statute has been drafted, the different tests applied to the various prohibitions on discrimination and the defences available to respondents.
This is particularly important for present purposes when we consider special measures introduced by companies that are intended to achieve equality (sometimes referred to, unsatisfactorily, as ‘positive discrimination’ or ‘affirmative action’). Measures taken that favour a particular minority to achieve overall fairness may, strictly speaking, constitute discrimination against the majority as ‘intent’ is irrelevant to a finding of discrimination.
Clearly, many of the steps boards will need to take in order to fulfil the ‘measurable objectives for achieving gender diversity’ referred to above fall within this category (for instance, the examples provided above of targets and executive programs for women are clearly ‘special’ measures intended to achieve equality for women).
Restricting ourselves for the moment to special measures taken to promote gender diversity, this potential exposure is not a problem at a federal level, as the Sex Discrimination Act expressly allows such measures to be taken without constituting illegal discrimination. The only requirement is that the purpose for doing so is truly to achieve substantive equality between the sexes.
However, in NSW the position is much less straightforward. The Anti-Discrimination Act 1977 (NSW) contains no similar provision to protect special measures in a sex discrimination context. Rather, it is up to individual companies to apply in advance to the President of the Anti-Discrimination Board, or the Minister, for an express exemption before they introduce any ‘special measures’ aimed at positively benefiting women. Without such an exemption, the measures taken may be susceptible to challenge by disenfranchised men (assuming they can meet the usual tests for proving direct or indirect discrimination under the Act), with companies at risk of injunctions or damages claims as a result.
There may be some argument that compliance with the Recommendations would not require such preapproval by the President or Minister in order to be legal. That argument would go as follows:
- A listed company introduces a ‘measurable objective for achieving gender diversity’ (say, a target of hiring 50 per cent females for all executive roles within five years) in order to put into effect the Recommendations.
- They comply with the Recommendations in order to comply with the ASX Listing Rules.
- They comply with the Listing Rules to avoid a breach of the Corporations Act 2001.
Section 54 of the Anti-Discrimination Act states that no action will be unlawful if it was necessary in order to comply with statute or some other by-law or rule made under such a statute (in this case, the Corporations Act). However, companies may find it difficult to prove that any particular special measure (such as the example given above or something else such as the introduction of a quota of females on the board) was in fact ‘necessary’ in order to comply with the Recommendation. The Recommendation, after all, merely states that boards are to introduce ‘measurable objectives for achieving gender diversity’— it does not say that specific quotas or targets must be introduced. What’s more, it is perfectly open for companies to elect not to introduce such matters and still comply with the Listing Rules via the ‘if not, why not’ approach. If they do want to introduce measurable objectives with teeth therefore, the only safe path open to companies in NSW is to apply for an exemption from the President in advance.
When we consider the broad concept of diversity as a concept beyond mere gender diversity, similar issues arise in NSW in respect of all other potential grounds of discrimination (except on grounds of race and age discrimination, which have ‘special measures’ exceptions similar to the Federal legislation).
Furthermore, the ‘special measures’ allowances provided for by the various anti-discrimination statutes across all Australian jurisdictions also (though not always) provide the allowance only as a ‘defence’ — meaning that companies will still need to bear the onus of proving on the balance of probabilities exactly what their subjective intentions were, and will also have to adduce evidence necessary to prove that the group for which the measures were taken were in fact in need of such special measures.
Companies will therefore need to be aware of these issues and, particularly those with operations in NSW, ensure they factor them into their timetables (and obtain appropriate legal advice) when preparing to implement the Recommendations in time.
Impact on discrimination-based claims generally
Finally, two things can be comfortably declared about the impact of the Principles on workplace complaints: compliance with the Recommendations, or even with the full ‘spirit’ of the Principles, generally will not eliminate discrimination complaints by staff, and the more a company does to implement the ‘spirit’ of the Principles, the less discrimination complaints it will receive and the more successful it will be in defending them.
A diversity policy, or measures taken to improve workforce representation among disenfranchised groups, will not of themselves give rise to a successful defence against any discrimination claim brought. The law is somewhat different here than with claims of harassment or bullying, where evidence of an employer’s policies, and the implementation and training of staff in relation to those policies, can often assist them defend a claim against it. Discrimination claims, however, particularly claims of indirect discrimination, can generally only be defended by proving that the facts (and this usually means the statistics) show that specific work practices or decisions do not favour one group over another (such as men over women). Diversity policies and ‘measurable objectives for achieving … diversity’ will therefore only be a means to an end. They must be brainstormed, implemented and continually reviewed in a thoughtful, thorough and practical way so that they actually achieve the desired effect of improving opportunities, and removing discrimination, in real terms. 
Rather than being seen as a checklist of new obligations with which to comply in order to satisfy the regulators, a broad commitment to the ‘spirit’ of the Principles will therefore be of significant benefit to not only the corporate governance and public perception of an organisation, but also on workforce morale and lower legal bills generally.
This article originally published in the February 2011 issue in Keeping Good Companies, the official journal of Chartered Secretaries Australia.
About the author
Peter Ferraro, Senior Associate and Team Leader
Peter holds Bachelor of Commerce and Bachelor of Laws degrees from Sydney University, and was admitted as a solicitor in 2004. He worked for several years as a solicitor in the Employment Division of the Treasury Solicitor's Office in London, where he advised and acted for government departments on employment law matters, particularly disability and sex discrimination, and equal pay.
Peter also worked at a large Australian law firm for a number of years, providing advice and representation across the full range of employment law issues. He was responsible for drafting complex enterprise agreements and workplace policies for several household-name companies, helped employers understand and adapt to the changing landscape of employment law, and regularly presented practical seminars to clients on employment law issues. Peter has a keen interest in industrial relations and joined Harmers as a Senior Associate in August 2010.
Peter Ferraro can be contacted on (02) 9993 8511 or at firstname.lastname@example.org.
Harmers Workplace Lawyers - Company Profile
Founded in 1996, Harmers Workplace Lawyers is one of Australia’s largest workplace relations practices, with offices in Sydney, Melbourne and Brisbane. In 2010, the firm won the ALB Australasian Law Award for "Employment Specialist Firm of the Year" for the fifth consecutive year, maintaining its reputation as a provider of high quality and strategic legal advice through its team of approximately 30 specialised lawyers and consultants.
The firm advises on many aspects of workplace relations including industrial relations, employment law, change management, occupational health and safety, human rights and equal opportunity and legal risk management. Harmers' client base is comprised predominantly of blue chip companies, Commonwealth and State government departments, industrial organisations, employer groups and small to medium enterprises. Harmers also acts for individual clients and has been involved in some of Australia's landmark cases. Harmers continues to operate as a leading Australian employer in its own right and to contribute a significant percentage of its profits back into the pursuit of justice and equality in Australia and overseas through a variety of charitable pursuits.
For further information, please contact Harmers Workplace Lawyers on Tel: 02 9267 4322 or visit the firm website: www.harmers.com.au
 Corporate Governance Principles and Recommendations with 2010 Amendments, 2nd Edition, ASX Corporate Governance Council. Full text available at www.asx.net.au/about/pdf/cg_principles_recommendations_with_2010_amendments.pdf
 ASX Listing Rule 4.10.3
 Corporate Governance Principles and Recommendations with 2010 Amendments, supra, at p 3
 Recommendation 3.4
 Recommendation 3.2
 Recommendations 3.2 and 3.3
 Not strictly true. Recommendation 3.2 states that the policy should ‘include requirements for the board to establish measurable objectives for achieving gender diversity, and for the board to assess annually both the objectives and progress in achieving them’. As you will see this is simply a requirement of the policy which is mirrored in the Recommendations themselves. Also, the measurable objectives themselves, however, do not have to appear in the policy
 See Corporate Governance Principles and Recommendations with 2010 Amendments, supra, at ‘Commentary’ to Recommendation 3.2, and Box 3.2
 Equal Opportunity for Women in the Workplace Act 1999 (Cth): s 8(2)
 Equal Opportunity for Women Act, supra: s 8(1)(a)
 See New Corporate Governance Recommendations on Diversity – Tips for Getting Started, Australian Institute of Company Directors, July 2010; and Complying with Principle 3 – Strategies for gender diversity, Chartered Secretaries Australia & Women On Boards. Full text available here at www.csaust.com/AM/Template.cfm?Section=Complying_with_Principle_3_Strategies_for_gender_diversity
 Sex Discrimination Act 1984 (Cth): s. 7D
 Anti-Discrimination Act 1977 (NSW): ss 126 and 126A
 Corporations Act 2001 (Cth): ss 793C and 1101B
 Anti-Discrimination Act, supra: ss 21 and 49ZYR
 This is increasingly important given the potential shift from complaint-based discrimination claims, to ongoing positive obligations on employers to ensure reasonable precautions have been taken to prevent discriminatory behaviour – evident by the radical changes to the Victorian Equal Opportunity Act 2010 due to take effect on 1 August 2011 (which provide for precisely that).