While ASX listed companies report a range of workforce metrics to investors, the four most important indicators which assist them with investment-making decisions are employee engagement, voluntary turnover, employee training and the percentage of women in the leadership team.
Research into ESG reporting among Australia’s top listed 200 companies found that many companies are disclosing workforce metrics and outcomes of employee engagement surveys, voluntary turnover and training – although the lack of standardised reporting makes comparisons difficult.
The research was conducted by the Australian Council of Superannuation Investors (ACSI), which represents 38 Australian and international asset owners and institutional investors, which own on average 10 per cent of every ASX200 company and manage more than $2.2 trillion in assets.
The ESG reporting by the ASX200 report found that one-quarter of ASX200 companies report voluntary turnover but fewer than half of those (22 companies) also provided staff engagement scores, making it difficult to assess how effectively companies engage their workforce.
Employee training was the most frequently reported workforce metric with ‘leadership’ and ‘safety’ the most commonly cited forms of training.
“Value is shown in terms of the productivity and cost advantages generated by attracting and retaining talent (i.e. actively engaging their workforce can reduce the costs associated with staff turnover),” said ACSI in the report, which noted that other research has shown a strong correlation between financial performance and cognitive diversity, most often delivered through higher gender diversity.
The research report found that 60 companies interact with their workforce via an engagement survey, while the level of survey participation as a standalone metric (which provides limited insight for investors on the company’s relationship with their staff) was reported by only 18 companies.
“Significantly, there are still 32 companies that have all male leadership teams, all of which exist outside the ASX20”
Some 22 companies reported the level of actively engaged/satisfaction of their employees as a standalone metric, while one-third of companies that reported employee engagement results reported both participation levels and satisfaction levels.
“This gives investors greater insight into the relationship between the business and its employees, the level of morale and culture, as well as a leading indicator for retaining staff,” said ACSI in the report.
“For example, one materials company had only 53 per cent of staff respond to their survey and of those that responded it was determined that 99 per cent of those were ‘actively engaged’.”
Surprisingly, given the inherent connection between having a positively engaged workforce and voluntary turnover, only 22 companies disclosing both metrics, the report said: “This makes it difficult for investors to assess the integrity of an engagement survey and we found no disclosure that provides comfort with the consistency of engagement questions.”
One-quarter of ASX 200 listed companies report their annual voluntary turnover; the highest annual voluntary turnover rate was 51 per cent while the majority of companies reported double-digit turnover rates.
Only 8 companies reported a level below 10 per cent.
The research report also found that only 21 per cent of executive leadership roles in the ASX200 are held by women, and 32 companies still have all male leadership teams.
This increases to 30 per cent in the ASX20 and decreases to 19 per cent in the ASX101-200.
“Significantly, there are still 32 companies that have all male leadership teams, all of which exist outside the ASX20,” the report said.
Training and development had the highest level of reporting among the workforce indicators, with 88 companies reporting that they provided some type of employee training.
Training programs offered differed between sectors, with no one area of education spanning all the companies.
Many companies reported non-specific training courses, and of specific training provided, the most common forms reported by companies were leadership training and safety training.
“There is a strong correlation between companies with poor gender diversity at board level, and the length of service of directors”
Consequence management is an emerging area of workforce reporting by companies and demonstrates how companies respond to and manage employee behaviour that is risky or in breach of a code of conduct or compliance standards.
“Recent events, such as the Financial Services Royal Commission, serve to highlight its growing importance,” said the report.
In the 2018 reporting period, each of the Big Four banks and Macquarie Group reported incidents that required consequence management.
“This behaviour is often uncovered through calls to whistleblower lines, and internal audits,” said the report.
Reporting examples include the number of breaches of the company’s code of conduct, behaviour that resulted in disciplinary action and the number of company-led terminations that resulted.
“This trend has also been confirmed in our company engagement meetings and we are increasingly asking companies to address this issue.”
Diversity in board make-up is often seen by investors as one indicator of companies that have recognised the risks, and rewards, of appointing directors with a blend of backgrounds, skills and experience to counteract ‘group think’ and refresh viewpoints.
Many companies operating in the retail sector, some of which represent the largest non-government workforces in Australia, have significantly higher percentages of women in their senior leadership (peaking at 47 per cent at Premier Investments, owner of brands including Just Jeans, Smiggle and Peter Alexander) than the ASX200 on average (21 per cent).
Similarly, seven of 11 companies in this category have met, or exceeded, the 30 per cent board gender diversity target.
“Interestingly, in our data there is a strong correlation between companies with poor gender diversity at board level, and the length of service of directors,” said ACSI in the report
The companies below the 30 per cent level are also the same ones with the longest average director service – led by Harvey Norman Holdings with almost 20 years’ service for each director.
The only woman on the board is the CEO, Katie Page, who is also the wife of the Executive Chair, Gerry Harvey.