Culturally diverse boards the key to sustainability

Dr Augustine Donkor

Research has revealed the positive impact culturally diverse boards have on the sustainability practices of Australia’s largest companies. However, the study also provides a word of caution on the ability of powerful CEOs to negate this influence.

“While the need for gender diversity in management is well researched, the benefits of cultural diversity have not been closely examined,” Dr Augustine Donkor of Murdoch University’s Business School said. 

“So, we looked at the performance of the 300 biggest listed firms in Australia over a period of ten years to 2020 to see how environmental, social, and corporate governance was impacted by culturally diverse boards.” 

“What we found was that both board cultural diversity and gender diversity are precursors to good corporate sustainability performance.” 

Dr Donkor’s research also revealed that powerful CEOs have the ability to diminish the benefits of the board diversity and sustainability performance relationship.  

“Powerful CEOs create agency problems and mostly use this power for their opportunistic gains, which is detrimental to the positive influence of board diversity on sustainability performance.” 

Dr Donkor’s findings come at a time when progress on appointing diverse directors is stalling in Australia.  

The Governance Institute’s Board Diversity Index 2023 shows that while gender diversity continues to advance, representation of ethnic diversity on boards has stalled.  

Most ASX 300 board members (90%) are from an Anglo-Celtic background, which is not reflective of the cultural diversity of Australia's population.  

We hope the paper informs policy makers and stakeholders in corporate Australia to consider the importance of diversity to the sustainability performance of firms.”
Dr Augustine Donkor

“Any policies should also be mindful of having their impact negated by the existence of powerful CEOs and firms in environmentally sensitive industries.  

And for powerful CEOs – we encourage greater awareness of the influence they hold and encourage them to try to use it positively rather than abusing it.” 

Following the referendum last year, the research acts as a timely reminder for companies to consider how to boost diverse voices in the boardroom – including those of First Nations Australians. 

Dr Donkor worked alongside Dr Terri Trireksani of Murdoch’s Business School and Professor Hadrian Geri Djajadikerta of Curtin University on the research, which can be read in full in research journal Sustainability.

Posted on:

26 Feb 2024

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