Diversity and inclusion in the boardroom and beyond

By Hannah Biggins, Michelle Bennett, Tom Hall, Chloe Wilton, Alexander Batsis, Billy Hade
Boards & NEDS Business & Human Rights Corporate Governance Environment, Social, Governance Risk & Compliance

D&I's growing importance: a focus on uplift 13 min read

Diversity and inclusion (D&I) continues to be an important ESG consideration for companies. There are increasing expectations from investors, governments, regulators and other stakeholders that all levels of the workforce, including the board, are genuinely diverse and inclusive.

In this Insight, we cover some of the key Australian and international D&I-related legal, regulatory and commercial developments.

Key takeaways 

  • There is growing investor and stakeholder advocacy in relation to D&I, including greater scrutiny from stakeholders of companies' D&I-related commitments and disclosures, and any perceived 'blue-washing'.
  • There has been an increase in the number of D&I-related soft and hard laws globally, and Australian governments have recently proposed law reforms to address certain D&I-related matters in the workplace.
  • Companies should continue to monitor developments and consider whether any uplifts are required to their existing D&I frameworks and policies, as well as any methods of operationalising these. This may include applying a broader lens to D&I, and uplifting implementing and reporting on D&I objectives.


In corporate Australia, there has been some positive progress in recent years when it comes to gender diversity on boards: the Australian Institute of Company Directors reported that women now comprise approximately 35% of directors in the ASX 200, and 34% in the ASX 300,1 (as compared to 30% and 27%, respectively, in 2019). We have also seen positive broader D&I-related shifts in society, such as the #MeToo movement. While the progression of these and other D&I-related trends has generally outpaced Australian laws and regulations, Australian governments have recently released critical reports relevant to D&I in the workforce – such as the Respect@Work and Enough is Enough reports – and, in some instances, have proposed legal reform to address certain of the reported findings.

Even so, the current Australian legal and regulatory landscape in relation to D&I may be viewed as less advanced than certain overseas jurisdictions. For instance, there has been an increase in the number of overseas jurisdictions introducing D&I-related laws, such as the European Union's 'Women on Boards' Directive (discussed below). These developments may signal a broader trend in certain overseas jurisdictions of D&I-related rules and recommendations becoming legal requirements, which we may see play out in Australia in the future.

Before we dig deeper, how do we define 'diversity' and 'inclusion'? Our colleagues at Linklaters have provided the following:


Diversity focuses on the ‘who’, ie, the makeup of a company's workforce and, in particular, understanding, accepting and valuing the different personal, physical, and social characteristics of people in the workforce. This includes, amongst other characteristics, gender, ethnicity, sexual orientation, religion, education, physical ability and disability and age.


Inclusion is about the ‘how’, ie, the creation of a work environment and culture that empowers all employees to participate in and thrive at work. This includes the procedures, policies and behaviours a company puts in place to ensure all their workers' differences and needs are taken into account. The goal is to create a respectful company culture where all employees feel comfortable, included and accepted. True workplace inclusion removes barriers, discriminations, and intolerance to ensure that all employees feel physically and psychologically safe, supported and happy to participate and share their opinions. 

The Australian D&I landscape

In the Australian legal landscape, the main D&I-related regimes are the ASX Corporate Governance Council's (the ASX Council) Corporate Governance Principles and Recommendations 2019 (4th Edition) (the ASX Principles) and the Workplace Gender Equality Act 2012 (Cth) (the WGE Act). In addition, many listed Australian companies have voluntarily adopted the United Nations Sustainable Development Goals (which include the goals of 'gender equality' and 'reduced inequalities') as benchmark objectives when measuring and reporting on their progress regarding D&I.

ASX Principles

While not binding, the ASX Principles require listed entities to report on how they follow each recommendation, or give an 'if not, why not' explanation for not following a recommendation (see further discussion in our previous Insight).

These principles only have a direct nexus to entities listed on the ASX, but their prominence means they may be viewed as a yardstick for governance standards across the broader corporate landscape in Australia.

The recommendations relevant to D&I are:

  • Recommendation 1.5, which states that a listed entity should:
    • have and disclose a diversity policy and set measurable objectives for achieving gender diversity in its board, senior executives and workforce generally, and report on its progress towards achieving those objectives; and
    • disclose certain metrics around the respective proportions of men and women on the board, in senior executive positions and across the whole workforce.
    In commentary to recommendation 1.5, the ASX Council also suggests that listed entities consider setting key performance indicators (KPIs) for senior executives on gender participation within their area of responsibility, and linking part of their remuneration to achieving those KPIs.
  • Recommendation 2.1, which states that when a listed entity is recruiting for a new director, it should maintain a diverse nominations committee in order to reduce the risk of 'groupthink'.

Despite these recommendations, a report by the ASX Council released in June 2022, which analysed the diversity disclosures of 600 ASX-listed entities in 2021 (the ASX Diversity Report),2 found that many listed entities are either stagnating or moving backwards with their diversity metrics. The ASX Diversity Report recommendations include that listed companies should:

  • ensure their D&I reporting addresses all levels of their workforce (not just the board);
  • consider D&I beyond gender – it includes employees who identify as First Nations, LGBTIQA+ employees and employees with disabilities; and
  • consider expanding their D&I strategies to ensure they are attracting and securing talent that represents a diverse and inclusive workforce.

The ASX Principles also require listed entities to have and disclose a skills matrix 'setting out the mix of skills that the board currently has or is looking to achieve in its membership' (Recommendation 2.2). There is broad discretion given to the company to determine the criteria to apply in formulating its matrix, but there is certainly room for companies to consider how D&I matters are explicitly or indirectly reflected in the type of leadership it is looking to cultivate and instil across its organisation and decision-making.


The WGE Act requires non-public sector employers with 100 or more employees to submit an annual report to the Workplace Gender Equality Agency, which must include (among other things) details regarding the gender composition of the workforce and the board, pay parity between women and men, and the availability and utility of employment terms, conditions and practices relating to flexible working arrangements for employees. Failure to comply with the WGE Act may result in the employer being named in a report provided to the relevant Minister.

Recent law reform

Alongside these existing Australian legal regimes, some branches of the Federal and State governments have also proposed legislative reforms to more explicitly address the responsibilities of Australian businesses to address sexual harassment and psychosocial safety in the workplace. These proposals reflect a growing expectation in society that companies do more to ensure their workplaces are safe, including by having rigorous processes for receiving complaints, and for investigating and remediating issues.

For instance, the Federal Government has committed to fully implementing, as a matter of priority, all 55 recommendations of the Sex Discrimination Commissioner’s Respect@Work Report. In September 2022, legislation was introduced in Parliament to implement another tranche of the Report's recommendations, including: a positive duty for employers to take reasonable and proportionate measures to eliminate, as far as possible, workplace sex discrimination, sexual harassment and victimisation; and a role for the Australian Human Rights Commission to monitor and assess compliance with the positive duty. The Western Australian Government also recently responded to a Parliamentary report entitled 'Enough is Enough', largely supporting each of the recommendations made in it, which followed a parliamentary inquiry into sexual harassment against women in the fly-in fly-out mining industry.

In April 2022, an updated Model Work Health and Safety Bill was published by the Australasian Parliamentary Counsel's Committee3. The Bill (which does not itself have legal effect) is intended to provide a basis for nationally consistent work health and safety laws for certain areas, and now includes positive duties on employers as to the management of psychosocial risks. Following this, various State governments have introduced (eg NSW on 1 October 2022) or are considering (eg Victoria) specific regulations as to employers managing risks arising from psychosocial hazards at work, including hazards that arise from the work environment and workplace interactions.

The international D&I landscape

While the formal D&I regulatory landscape in Australia may be considered relatively limited, comprehensive D&I laws with more explicit and tangible requirements have already been adopted in a number of overseas jurisdictions, including the United Kingdom, Europe and the United States. We have highlighted some of these key developments below.

The UK

Since 1 April 2022, the UK Financial Conduct Authority (the FCA) Listing Rules require listed companies to explain in their annual report whether they have met the following D&I targets:

  • at least 40% of the board are women;
  • at least one of the holders of senior board positions (chair, chief executive officer, chief financial officer or senior independent director) is a woman; and
  • at least one member of the board is from an ethnic minority background, excluding white British or other white groups.

The FCA Listing Rules also require listed companies to disclose numerical data on the ethnic background and the gender identity or sex of the individuals on the board and in executive management (our colleagues at Linklaters have reported on the FCA's D&I requirements).   


On 7 June 2022, the European Parliament and European Council agreed to adopt a 'Women on Boards' Directive (the Directive). Once in force, the Directive will require that at least 40% of non-executive director posts (or 33% of all director posts) within large companies listed in the EU be occupied by the underrepresented sex (whether that be male or female) by 30 June 2026. Companies must explain the reasons for any failure to meet this quota, and may be subject to penalties introduced by Member States of the European Union. However, the Directive will not apply to small and medium-sized companies with fewer than 250 employees.

Gender quotas for company boards are not new to Europe. Indeed, gender quota laws have been in place for several years in France, Germany and Italy. More recently, each of these countries has strengthened the relevant law by, for example, extending its application to unlisted companies (France), extending its application from supervisory boards to management boards (Germany), or increasing the mandatory quota of women on boards to 40% and extending the term of the law (Italy).

The US

In the US, the Nasdaq Listing Rules will require listed companies to have (or explain why they do not have) at least one 'diverse' (as defined in the Nasdaq Listing Rules) director from 6 August 2023, and at least two diverse directors from 6 August 2025.

Investor and stakeholder expectations

Against this legislative and regulatory backdrop, there are other forms of pressure driving further progress in relation to D&I. In particular, investors and other stakeholders are advocating for change, including through shareholder voting policies and shareholder-initiated actions aimed at increasing diversity on company boards.

healthcare-icons_new-classification.pngVoting policies

A range of stakeholders, including superannuation funds, investment managers and proxy advisers, are adopting D&I-related voting policies to advocate for stronger action on D&I within their investee companies. For example:

  • Some of Australia's largest industry super funds have D&I-related voting policies, with one stating it will vote against the re-election of a director to the board of an ASX 200 company where it has fewer than two female directors and has not made a commitment to rectify the issue in a reasonable timeframe. Another super fund states it might vote against directors up for election where it believes the board has failed to ensure gender diversity on that board.
  • Some of the world's largest investment managers may vote against the chair of a nominating or governance committee if the board does not have diversity of gender or otherwise fails to account for diversity in its board composition.
  • Some of the world's leading proxy advisers will generally recommend voting against the re-election of the chair of a nominating committee if:
    • less than 30% of the board comprises women; or
    • the investee company has a poor record on board diversity, in which case the proxy adviser may recommend voting against the chair of a board that has at least six directors but fewer than two women directors.

As another example, one of the world's largest investment banks has adopted a D&I policy to only advise a private company on a public listing if the relevant board has at least two diverse board members, including at least one woman.

healthcare-icons_new-classification.pngShareholder-initiated actions

Under the Corporations Act 2001 (Cth), shareholders with a 5% interest or 100 shareholders in total may requisition a resolution for consideration at a public company's annual general meeting. In recent times, this mechanism has been used by shareholders to advance environmental initiatives. However, it could equally be used by shareholders to put forward resolutions that advance D&I-related matters.

While Australia has not yet experienced a noticeable uptake of D&I-related resolutions, we have seen a number of companies in the US facing shareholder-initiated resolutions for 'gender' or 'racial equity audits'. In some instances, even where a resolution has not been supported by the requisite majority of votes for it to be passed, some companies have agreed to conduct gender or racial equity audits.

We have also seen recent high-profile cases of shareholder nominees being elected to public company boards, including relating to environmental agendas. It remains to be seen if shareholders may, in future, nominate candidates for election to a board to pursue a D&I-related agenda. This could be, for instance, to counter a perceived lack of D&I by changing the composition of the board through their appointment, or to use their appointment to prioritise D&I-focused matters.

healthcare-icons_new-classification.pngShareholder D&I-related litigation

Increasing expectations among shareholders have also led to greater scrutiny of companies' D&I disclosures and commitments. In particular, there has been a rise in shareholder D&I-related litigation in the US, which has exposed the risks of making public claims of social responsibility without implementing corresponding processes to achieve genuine change (a practice known as 'bluewashing').

In 2021, several shareholder derivative actions were brought against the boards of large companies, including Facebook.4

In Facebook's case, its shareholders alleged that the board breached the Securities Exchange Act of 1934 (US) prohibition on material misrepresentations and omissions, when it said in its proxy statement that the company was 'committed' to diversity and inclusion. Shareholders argued the statement was misleading, on the basis that Facebook only had one African-American board member and had no African-American or other minority individuals in its senior executive team at the time. Although the shareholders' action was dismissed for several reasons – one of which was that the word 'committed' amounted to 'non-actionable puffery' – this and other cases may signal a trend of shareholders resorting to strategic litigation over any perceived 'bluewashing'. Given these developments in the US, Australia may soon see similar litigious and regulatory action, with accompanying reputational fallout, in relation to bluewashing.

While the above investor and stakeholder expectations tend to be more relevant to listed companies, D&I is also becoming a pertinent consideration for private companies mindful of their own social licence to operate (and potentially the requirements of their private capital sponsors, which may mandate positive action). For example, some of Australia's largest industry super funds have adopted D&I-related investment mandates – for instance, by negatively screening for companies (whether public or private) that inadequately address workplace diversity or have single gender boards, or by pursuing so-called 'impact investments' that contribute to gender equality.

What should Australian companies do?

We expect to see continuing focus from investors, governments, regulators and other stakeholders on D&I matters. Australian companies will need to assess whether any uplift is required on D&I matters, including in contemplation of increased regulatory requirements and greater scrutiny of D&I commitments. Further, the focus on D&I matters goes beyond listed companies, in that all companies should also remain alert to D&I-related developments, given (among other things) the potential impact on their ability to attract capital as well as employees.

Accordingly, Australian companies should consider:

  1. establishing and implementing D&I policies across all levels of the workforce (not just the board), using a broader, intersectional lens encompassing gender, gender identity, race, First Nations Peoples, disability, cognitive and neurological ability, and LGBTIQA+ representation;
  2. being aware of international developments in D&I-related laws, voting policies and shareholder-initiative resolutions, which may be indicative of future developments in Australia, and monitoring and preparing for uplifts required by Australian legal and regulatory requirements; and
  3. monitoring and evaluating their D&I-related disclosures closely, to ensure there are reasonable grounds for their disclosures and commitments, and a credible path to achieve them, given the risk of bluewashing and D&I-related litigation.


  1. Australian Institute of Company Directors, Gender Diversity Progress Report: June 2022 to August 2022 (31 August 2022) <>.

  2. ASX and KPMG, ASX Corporate Governance Council: Analysis of diversity disclosures made by listed entities between 1 January 2021 and 31 December 2021 (June 2022) <>.

  3. The Committee comprises the heads of the offices of Parliamentary Counsel for the Commonwealth, the states, the ACT, the Northern Territory and New Zealand.

  4. Natalie Ocegueda v. Zuckerberg, No. 20-cv-04444-LB, 526 F. Supp. 3d 637 (N.D. Cal. 2021).

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