On Oct. 24, the Ontario Securities Commission held a roundtable on the 22nd floor of the OSC’s downtown Toronto office to discuss the results of the Canadian Securities Administrators’ annual report on women’s representation on public company boards. There was a buzz in the room as members of the public, media and panelists took their seats. Once the microphones turned on, however, the general mood turned into one of disappointment.
The CSA report is its third since securities regulators implemented “comply or explain” rules in 2014 requiring companies to disclose the number of women who are directors and executive officers. This year, it found that only 14% of board seats at Toronto Stock Exchange-listed companies are filled by women, a small increase from 12% the year be- fore and 11% the year before that.
Participants at the roundtable—including Judy Cotte, RBC Global Asset Management’s vice-president and head of corporate governance and responsible investment, Tanya van Biesen, executive director of Catalyst Canada, and Ungad Chadda, TMX Group Ltd.’s president of capital formation—agreed that the current regime, which does not require companies to have formal targets, is not doing enough to move the dial for female leadership on boards.
Among diversity advocates, that sentiment isn’t entirely new. But what seemed clear by the end of this meeting is that there is now a substantial, mainstream consensus that it’s time in Canada for stronger measures to get more women on boards. “Our comply or explain rule has been in place for almost three years,” said Maureen Jensen, chair and CEO of the OSC. “We now have enough data and experience with it to assess what’s working and where we can improve.”
While Ontario’s securities watchdog does not have independent authority to set specific universal targets or quotas (that’s up to government), Jensen told the group that the OSC would consider making it mandatory for public companies to set some level of target for the number of women directors on their boards. In addition, she said the OSC would also mull over setting term limits for directors in order to open up more positions, as well as forcing companies to professionalize their board recruitment process to help remove groupthink and unconscious bias.
Part of the reason for this shift in sentiment can be found by drilling deeper into the data. There, one sad statistic is a particular standout: of 505 board seats that were vacant and filled in the past year, only 26% were filled by women. It’s a result, says Andrew MacDougall, a partner at Osler, Hoskin and Harcourt LLP, that undermines one of the primary justifications companies cite for boards still heavily dominated by men: the lack of available board seats.
To see that more women weren’t filling up last year’s vacancies was a huge letdown, says MacDougall. “The percentage [of female appointments] is not significant enough to result in any meaningful change.”
MacDougall is also co-author of an Osler report on executive and director gender diversity released in September. It revealed a number of exemplary initiatives from companies that have prioritized gender diversity, but it noted that the majority of publicly traded companies (88%) refuse to adopt targets that would increase the number of women on their board leadership. The most common reasons given? Not wanting to compromise the principles of meritocracy and concerns that it would not produce the best candidates.
WHILE REGULATORS MULL over their next steps, other organizations keep trying to move the needle. In early November, seven of Canada’s leading organizations on good governance and gender advocacy banded together to form the Canadian Gender and Good Governance Alliance. With a goal to accelerate gender parity on boards, the alliance combined all the best elements of good governance to create the “Directors’ Playbook,” a 28-page report containing five actions for companies: formalize your board evaluations; employ term and age limits; customize skill and competency priorities; develop a gender diversity policy, and expand the scope of candidate searches.
The alliance is led by the 30% Club Canada and includes Catalyst Canada, the Business Council of Canada, the Institute of Corporate Directors, the Clarkson Centre, Women in Capital Markets and the Canadian Coalition for Good Governance (CCGG). “By having multiple groups support this playbook, that would hopefully be more persuasive than having a smaller group doing things on their own,” says Stephen Erlichman, executive director at the CCGG.
Catalyst Canada’s van Biesen says that at this point women should be making up 25% of Canadian boards, not 14%. “Power is difficult to give up and there is still a widely held view that leadership comes in a white, male package,” she says. The playbook is meant to help filter out unconscious biases like these and give companies that don’t yet have a roadmap for increasing gender diversity a “one-stop shop” of resources backed by organizations at the top of their game.
Furthermore, van Biesen adds that one of the recommendations—expanding the scope of searches—is key to creating the best board possible. Currently, candidate searches tend to take place within inner circles, which several roundtable participants agreed discourages diversity. “Companies need to start thinking early about board turnover and not when they need someone tomorrow. They should have an evergreen list of board members,” she says.
Such lists of qualified board candidates already exist, including those assembled by the Institute for Corporate Directors, Women in Capital Markets and Catalyst Women on Board. The latter has a 62% success rate in appointing women to corporate boards.
Women Get On Board (WGOB) is another initiative that has filled 57 board seats with women since launching in 2015. The organization notifies its 280 members of board opportunities and provides shortlist services for public and private companies looking to fill a vacancy. Unlike an executive search firm that employs more rigour and due diligence at a higher price tag, WGOB is more like a connector, says cofounder Deborah Rosati.
“We have a pipeline of qualified women corporate directors who may not be on the radar of some boards,” says Rosati, who has seen increased awareness of her directory in the past year. “I’m encouraged because the calls are coming in. Would I like to see more? Yes.”
With change coming as slowly as it has, however, talk of quotas continues to grow.
“Companies that have quotas hate them,” says MacDougall. “It gets past the barrier of an all-male board, but if you replaced a large percentage of members of boards all at once, that could have some adverse affects for decision-making because you’re losing continuity.”
Despite the fact that countries with mandatory quotas like France, Germany and Norway have seen a rapid uptick in the representation of women in their boardrooms, MacDougall says it’s something Canada shouldn’t need to create meaningful change. Instead, he argues, targets are the better route. “If you don’t have a goal in mind, then you aren’t going to achieve it,” he says.
If all-male boards weren’t already shaken by the fear of quotas, then they might feel the pressure of institutional investors who are becoming more openly vocal in demanding better representation of women. Earlier this year, for example, institutional shareholders filed gender diversity proposals to Canfor Corp. (TSX:CFP) and Constellation Software Inc. (TSX:CSU) asking them to create a plan aimed at adding women to their male-only boards.
In another response, a 16-member group comprised of Canada’s largest institutional investors (managing $2.1 trillion in net assets) issued a statement in September calling on S&P/TSX Composite index companies to achieve 30% representation of women on boards and executive teams by 2022. “It is well established that diverse boards and executive management teams are more likely to achieve better outcomes for investors by introducing a broader spectrum of perspectives, skills and experience,” the statement noted. The group, known as the Canadian 30% Club Investor Group, also listed a number of ways companies can advance the target, including disclosing their process for identifying female candidates and refreshing their board on a regular basis.
There is still much work to be done at the upper echelons of TSX-listed companies. As van Biesen says, “I thought we were going to be further along and start talking about representation of visible minorities. Clearly I was wrong.”
Photography by David Chang