KPMG Family Business - August 12020

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Welcome to KPMG Family Business eature articles.

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Board gender equali y: mid-marke companies need o ake he ini ia ive n SARAH CAIN OA D OOM diversi y in mid-marke companies is s ill a modes levels and represen s an oppor uni y or business grow h, a s udy o ASX300 companies carried ou by KPMG wi h he 30% Club, shows.

Te repor nds ha , as a April 2020, companies in he ASX201-300 bracke had 22% emale represen a ion on boards, compared wi h nearly 32% in he ASX100 and nearly 31% in he ASX200.

We spoke o eleven ASX200 non-execuive direc ors so hey could give heir advice or mid- ier companies on increasing board and senior execu ive diversi y.

Tere are some posi ive examples – a quar er o businesses in he ASX201-300 ca egory had achieved a 30% level o emale board membership. Bu here are more concerning cases – over a hal had ei her zero (23%) or one (35%) emale direc or.

So wha is he relevance o he 30% hreshold? Te 30% Club (which began in he UK and whose Aus ralian chap er s ar ed in 2015) explains ha his level is widely recognised as he ‘ ipping poin ’ a which he dynamics o he board conversa ion change. Ta is he cri ical mass or diversi y.

Tis was illus ra ed by he in erviews wi h ASX200 non-execu ive direc ors we did during he research. A clear nding rom companies which have already gone hrough he process o increasing board diversi y was ha women direc ors wan heir voices o be heard and valued on a board and do no wan heir appoin men o risk being seen as okenis ic or icking a box.

Female direc ors are more likely o join a board wi h more han one woman already on i – so hose mid- ier businesses which he s udy showed have none or one emale should hink abou he impression hey are giving o he marke .

Inves ors are increasingly asking ques ions on his issue – i is seen as good governance, a a ime when ESG issues are becoming ever more impor an . egulaors oo – changes o he ASX Corpora e Governance Principles & ecommen-

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While there are many priorities now this is not a ‘nice to have’ – mid-market companies need to see increased diversity as a business imperative coming out of the lockdown and an opportunity for growth.”

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da ions las year speci cally re erenced boardroom diversi y as good prac ice.

Bu mos impor an ly o all, here is a botom-line implica ion o his. NEDS we spoke o all agreed wi h wha research has consis en ly shown – ha here is a correla ion be ween grea er boardroom diversi y and beter business per ormance. And our s udy gave ur her backing o his – we ound hose companies in he ASX201-300 bracke which had signi can emale represen a ion on heir boards grew more han o hers in he 12 mon hs going in o he COVID-19 crisis.

Tere were several o her key ndings rom he in erviews: 1. Achieving board diversity is a unction o leadership – NEDS said ha he personal commi men o he board chair was crucial in driving a diversi y agenda.

2. Diversity improves outcomes or the company in the longterm – companies in he op 200 see diversi y as a business impera ive, which research has proved brings long- erm nancial and non- nancial bene s by recrui ing rom he broades alen pool, challenging grouphink and improving governance and risk managemen .

– Sarah Cain 3. Modern, growth-oriented businesses strive or greater diversity – or op companies i is now embedded in heir cul ure bu or businesses s riving o ge in o he op 200, i is impor an o explici ly spell ou grea er diversi y as a source o compe i ive advan age.

4. Progressive companies look beyond line experience as prerequisite or NEDS – skills, ra her han direc sec or line experience is key. NEDS say ha many ASX300 companies end o have a res ric ive view on wha hey need, bu diversi y o skills and capabili ies is more impor an .

5. Focus on building diversity in executive roles and senior management as well – boards need o use heir in uence o in-

crease diversi y hroughou he company and crea e an environmen and ramework conducive o emale career progression in o op managemen roles. Men oring and role modelling is also impor an .

6. Companies should set stretch targets or board and senior exec diversity – NEDS say he seting o speci c arge s and goals is he mos efec ive me hod o increasing women and o her minori y board members.

7. Line experience can be use ul – bu should no be used o preclude o her candida es. O en businesses eel direc execu ive experience in heir sec or is obliga ory be ore hey will consider appoin ing hem o heir boards. Tis requen ly ac s as a barrier o emales in radi ionally male-domina ed sec ors. NEDS we spoke o say he key is he range o unique skills and capabili ies a candida e will bring o complemen exis ing board capabili ies.

Te s rong belie o KPMG – and he 30% Club – is ha he grea er range o views and experiences across he boardroom able which diversi y provides will be crucial in leading businesses ou o he Covid-19 shu down.

Businesses are re-imagining hemselves, looking a how hey use echnology, u ure s ra egic direc ion, workplace prac ices, new s ruc ures and a whole range o issues. Tey are considering wha skills hey migh curren ly lack and will increasingly need, in heir boardroom and managemen eams.

So, while here are many priori ies now his is no a ‘nice o have’ – mid-marke companies need o see increased diversi y as a business impera ive coming ou o he lockdown and an oppor uni y or grow h.

To read the full report, visit KPMG.com.au First published by Sarah Cain, Partner, Enterprise, KPMG Australia on KPMG Newsroom on 7 July, 2020

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Gender Impacts o COVID-19: Budget update n GRANT WARDELL-JOHNSON EFO E he COVID-19 pandemic, he gender pay gap had narrowed o a record low and women’s par icipa ion in he work orce was a i s highes level.

Ta welcome progress is now a risk in a pos -coronavirus environmen . I is cri ical or a as and sus ainable recovery and ha he labour po en ial o he whole popula ion is ully leveraged.

Te impac s o COVID-19 are experienced diferen ly depending on gender. Te efec s on women have been changing over he course o he pandemic. In he early s ages o he pandemic, he employmen gures poin ed o a ‘pink recession’ as he paid hours worked by women ell by more han hal ha o men, wi h women cuting back heir hours by 11.5 percen compared o 7.5 percen or men.

Te mos recen Labour Force da a (las week) ound ha hours worked increased more or emales (5.0 per cen ) han males (3.3 per cen ) over he mon h – however hours worked or emales were s ill around 7.3 per cen below March, compared o 6.5 per cen or males.

Te loss o employmen remains rela ively balanced be ween genders, wi h around 4 percen less male and emale workers oday compared o 12 mon hs ago.

According o oday’s Economic Upda e he employmen - o-popula ion ra io and he par icipa ion ra e declined more signi can ly or women han or men in he June quar er. Te signi can all in emale par icipa ion modera ed he

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rise in he measured unemploymen ra e or women.

JobKeeper 2.0 Te JobKeeper review ound ha young people and women have been dispropor ionally afec ed by he curren down urn. Compared wi h pre-Coronavirus employmen emales are sligh ly over-represen ed in JobKeeper coverage.

Te review ound ha 47.1 percen o employees receiving JobKeeper were emale, compared o 44.9 percen in priva e sec or employmen .

JobKeeper 2.0 is a welcome measure o suppor women during he pandemic given hey make up a grea er share o employmen in he sec ors mos heavily afec ed by virus con ainmen measures.

Childcare Te Economic Upda e oday ou lines he $312 million cos o he Early Childhood Educa ion and Care elie Package which provided ‘ ree childcare’. Tis measure is par ially ofse rom CCS ha would o herwise have been paid in a nonCOVID-19 environmen wi h regular childcare atendance.

While amilies will con inue o be suppor ed hrough he pandemic by easing he Child Care Subsidy ac ivi y es requiremen s and ensuring childcare ees remain a heir pre-COVID-19 levels, he Governmen may need o consider providing ur her suppor o he sec or i amilies choose o keep heir children a home while sel -isola ing or wi hdrawing heir children al oge her. Tis would be in line wi h JobKeeper and i s con inua ion un il March 2021.

Early Access to Super

Key insights

mos o he addi ional burden ha has come abou due o home schooling and caring responsibili ies.

Tere is a real risk ha he progress made in emale par icipa ion may be eroded as high work orce disincen ive ra es and ewer work hours available make i an unviable op ion or women wi h caring responsibili ies o increase heir paid work hours.

Te ex ension o he JobKeeper program, unding or domes ic violence and he Early Childhood Educa ion and Care elie Package have provided signi can suppor or women impac ed by he pandemic.

We would encourage he governmen o moni or super wi hdrawals under he early access o super scheme and conduc a ull dis ribu ional analysis o beter unders and any unin ended consequences o he scheme.

O her measures ha he governmen could con inue o suppor o ensure he crisis and recovery doesn’ disadvan age women includes inves ing in gender-disaggrega ed da a including he ABS ime Use Survey and he con inued ocus on longer erm s ruc ural changes including reviewing inequi ies in he super sys em, such as he paid paren al scheme; and reviewing he afordabili y o childcare as a key elemen o a s rong and sus ainable Aus ralian economy. o read our ull insigh s on he Federal Governmen ’s economic and scal ou look please visi KPMG.com.au

While he da a now indica es a sligh ly more balanced impac be ween he genders, women have s ill been dispropor iona ely impac ed hrough increased levels o non-paid care work by aking up

First published by Grant Wardell-Johnson, Lead Tax Partner, KPMG Economics & Tax Centre, KPMG Australia on KPMG Newsroom on July 23, 2020

Da a rom he A O in May indica ed ha men are wi hdrawing on average 40 percen more in super han women – however, he governmen has no ye comple ed a ull dis ribu ional analysis o he impac on women’s super. We would be concerned i younger women were dispropor iona ely accessing heir en ire super und balance, as has been repor ed by some unds. Tere are also long-es ablished ac ors in he super sys em which disadvan age women.

Domestic violence Te Economic Upda e ou lines $150 million in suppor or Aus ralians a risk o domes ic, amily and sexual violence during he COVID-19 pandemic and ur her suppor o help pro ec vic ims o amily violence in amily law proceedings.

Tis unding is welcome and suppor s he movemen owards he undamen al righ or women o eel sa e in heir homes and respec ed in heir workplaces.

O her gender measures or recovery Te Prime Minis er no ed in his address o CEDA on 15 June ha he governmen needed o main ain a key ocus on i s women’s economic securi y s a emen , which would ge a re resh.

While no included in oday’s Economic S a emen , we would welcome he re resh o his s a emen ahead o he Oc ober budge .

COVID-19 AN OPPOR UNI Y FOR

amily o ices to review their purpose n KEITH DREWERY O Family O ces ( he o ce) now is a good ime o reassess and prepare or he u ure hrough a horough review in o heir s ruc ure and purpose.

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Step one: Organise a meeting of the family and confirm the purpose of the office.

During he pandemic, ensuring communica ion channels are kep open wi h amily members is a op priori y, wi h video con erencing o en he only op ion or a ace o ace mee ing. While hese mee ings are a grea way o see each o her again, i ’s wor h using hem o ensure ha he role o he Family O ce and wha i is designed o do remains relevan . When rs es ablished Family O ces should have a sense o i s ‘mission’. Essen ially wha he amily wan ed i o achieve. Perhaps i was implici bu now i ’s really impor an o ask he ques ion, does ha mission s ill re ec wha he amily needs he o ce o do on i s behal ?

Tis is also impera ive i he o ce is serving he hird or our h genera ion o he amily where he individual needs and wan s o amily members may diverge widely rom i s original purpose.

Te erm ‘ amily weal h’ incorpora es many elemen s no jus he nancial bu also i s social (repu a ion) and human capi al. Te younger genera ions may have a diferen view o wha i mos impor an is his equa ion.

Step 2: Consider a thorough risk review of operations and security.

We’ve been aware o an increase in he incidence and impac o risks ranging rom arge ed cyber securi y breaches, o domes ic raud and payroll misappropriaions over he pas ew mon hs.

I ’s qui e possible ha risks may exis in he way younger amily members use ‘social media’ o en garnering unwan ed aten ion.

Educa ion on sa e use o echnology is undamen al o ensure da a and repu a ional breaches are avoided a all cos s.

A a global level, here has been an increase in hrea ac ivi y direc ed owards high risk individuals and heir priva e residences.

I he o ce’s principle purpose is o ‘preserve he weal h o he amily’ making sure ha all nancial and non- nancial risks have been iden i ed and mi iga ion measures under aken is impor an .

Step 3: Understand how the family’s portfolio is reacting to COVID 19 Te majori y o Family O ces in Aus ralia are well posi ioned wi h su cien liquidi y in heir por olio, well suppor ed by he ac ions o he governmen bo h in reac ion o he crisis and be ore. However, i is wor h iden i ying wha holes have appeared since COVID-19? Are here ex raordinary oppor uni ies o deploy capi al?

Family O ce pla orms enabling ‘peer o peer’ deal ow have become increasingly use ul as a basis or assessing wha o her amilies are considering. e-

cen ly here’s been a grea deal o in eres in priva e equi y deals where ‘ ounders und ounders’, early s age ven ure in o ech orien a ed businesses, and con inued in eres in ‘dis ressed’ si ua ions deb .

Step 4: Review consumption patterns and family expectations.

Whils , inves men oppor uni ies exis ha can genera e signi can capi al grow h, i is likely ha yields on cerain more diversi ed pools o capi al will reduce as in eres ra es con inue o remain low and companies in he shor o medium erm reduce heir dividend payou s. I is also likely he weakening o he US dollar will nega ively impac on he amoun o Aus ralian capi al genera ed rom global equi ies por olios.

One conversa ion ha may be impor an is o manage he expec a ions o he amily as regards he prospec ive re urns he Family O ce is capable o re urning o he amily in he nex wo o hree years and s ar planning wi h he amily wha his may mean or ‘dis ribu ions’.

Step 5: Review technology and reporting Finally, many Family O ces bene rom reviewing heir curren repor ing rameworks and u ilisa ion o so ware.

Te ime cos s rela ed o he manual inpu o da a and upkeep o excel spreadshee s is a common problem and can be s reamlined wi h a more up o da e approach o record keeping.

Tank ully here have been signi can advances made in he capabili y o non-cus odial repor ing pla orms which can lead o he reduc ion in Family O ce inves men managemen cos s rom anywhere be ween 10-50bps on asse s under managemen . Now may be a good ime o es he opera ional ramework rom a cos and durabili y perspec ive. aking hese ve s eps will help o recas he Family O ce’s role, on behal o he amily.

First published by Keith Drewery, Director, Family and Private, Enterprise, KPMG Australia on KPMG Newsroom on July 15, 2020

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