Here’s an eye-opening statistic: Half of all companies listed on the Toronto Stock Exchange have all-male boards. What’s more, women hold just one in five corporate board seats in Canada, lagging behind other developed nations, according to research from Catalyst, a global non-profit organisation that advocates for gender equality in the workplace.
“It’s remarkably outdated, to say the least,” says Brande Stellings, vice president, corporate board services at Catalyst. “Really? In the 21st Century?”
Work is underway in Canada to try to boost the number of women in decision-making roles: Ontario has a “comply or explain” securities law rule to encourage greater representation of women on boards and in executive officer positions, which has since been adopted by 10 jurisdictions in Canada. The federal government set a national goal to have 30 per cent female representation on boards by 2019 and the Ontario government recently announced new gender diversity targets to have women make up at least 40 per cent of all appointments to provincial boards and agencies by 2019.
Still, progress has been slow and, according to a recent Catalyst report Gender Diversity on Boards in Canada: Recommendations for Accelerating Progress, “we are still a long way from reaching the ultimate goal: gender parity on boards, and indeed, at all levels of organizations.”
Catalyst and other advocates of gender parity in positions of power argue more can and should be done to advance the role of women in the workplace.
A better balance is good for business
There are a number of compelling reasons why more women are needed in boardrooms and in leadership positions: Women represent half the population in Canada, nearly half of the labour force, and are more educated than ever, statistics show.
But perhaps the most compelling case for many companies to get with it on gender diversity is the growing body of research showing having more women at the decision-making table is good for business. New research from Morgan Stanley shows companies with a better balance of women and men provide higher investment returns and lower volatility for investors. According to the McKinsey Global Institute, more equality in the economy would boost global annual GDP by $28 trillion, or 26 per cent, by 2025.
“When you have a diverse board, you have diverse conversation” – Korinne Collins
Catalyst has also done research showing Fortune 500 companies with the highest representation
of women board directors had better financial performance. Their return on equity was 53 per cent higher, return on sales rose 42 per cent and return on invested capital increased 42 per cent, according to the report, The Bottom Line: Corporate Performance and Women’s Representation on Boards.
Stellings says her organization’s research also shows companies with a higher number of women leaders are more environmentally and socially conscious, another issue businesses and investors need to pay closer attention to if they want to reduce investment risk.
It’s all good evidence, yet companies still remain slow to act.
Only about 30 per cent of Canadian public companies valued at more than $2 billion have a written policy for identifying and nominating women to the board, according to a review released in the fall of 2015 by Canadian Securities Administrators. Just seven per cent said they had a target to raise the number of women on their boards and only two per cent had targets for women in executive roles. Many responded saying candidates were selected solely on merit, and that targets were restrictive or “would not be effective.”
Some countries, such as Norway and Finland, for example, have government- legislated quotas of 40 per cent women on boards, and in places like Germany it’s 30 per cent. There are also sanctions in some countries for boards that don’t comply, including fines, or the holding back of director fees. In Germany, companies are obligated to keep board seats open until they find a female member.
Governments in places like the U.S., Canada, and the United Kingdom have decided to set targets instead of making gender diversity mandatory. There has been progress in the U.K., which set a goal in 2010 to have 25 per cent female representation on FTSE 100 company boards by 2015. Last year, female representation on those boards more than doubled to 26 per cent from 12.5 per cent in 2011, according to the five-year review summary. What’s more, there were no all-male boards as of 2015. The U.K. has since set a new target to have 33 per cent female board representation across the FTSE 350 by 2020.
Catalyst also favours targets over quotas, and is recommending Canadian firms with at least one female director aim to have 30 per cent women on their boards by the end of 2017. Those with no women on their boards should have at least one before 2018 rolls around. Catalyst also wants boards to set term limits, to help bring in fresh blood, among other recommendations including addressing gender gap equity at all levels of the company.
“Setting goals does have an effect on behaviour, even if there is no repercussions like there might be with a quota,” Stellings says.
“Businesses set goals for every other metric that matters, around sales and revenue, so why not as a business matter set a metric about what you want your leadership team to look like.”
The 30 per cent club
Catalyst is working with a global group called the 30% Club, launched in U.K. in 2010, with an aim to get board chairs and CEOs more deeply involved in the movement to increase female representation on boards and in senior management roles. The Canadian chapter of the 30% Club is nearing its goal to recruit 100 members by its one-year anniversary this fall.
Members of the Canadian chapter to date include executives from a wide range of industries such as resources, telecom, media, education, and financial services, including Martha Durdin, president and CEO of the Canadian Credit Union Association (CCUA) and former CCUA board chair Daniel Burns.
Part of the 30% Club’s mandate is to bust the myth that there aren’t women available to be on boards, an argument Beatrix Dart, country leader for the 30% Club in Canada, doesn’t buy.
“You can’t tell me that you can’t find a qualified women. There are so many women ready to go and itching to be of service,” says Dart. She says a lot of women’s groups keep records of board-ready women.
Part of the conversation with the campaign is also to show boards the advantages of looking for candidates outside of their specific industries, to gain broader economic and management perspectives and to stay competitive. Dart says they’re also tackling the issue of a lack of turnover on boards. Many companies don’t have term or age limits, which means the roster isn’t changing to allow for new members.
It hinders a renewal in thinking, Dart says. “There doesn’t seem to be much progress unless the governance issues change.”
Credit unions lead gender parity
Canada’s credit union industry is ahead of other sectors when it comes to gender diversity on boards, with more than 30 per cent female representation, according to data collected by the CCUA.
Consider that at Vancouver City Savings Credit Union (504,383 members, $19.7 billion in assets), Canada’s largest credit union, eight of the nine board members are women. Women represent 40 per cent of the board at Alberta’s Servus Credit Union (370,990 members, $13.3 billion in assets) and about 32 per cent of the board at Affinity Credit Union (117,300 members, $4.8 billion in assets) in Ontario.
“Credit unions have always been acutely aware of their community,” says Korinne Collins, vice president, professional development and education at the CCUA.
“We know who our members are … and our model puts a huge reliance on those members.”
Collins says credit unions are continuously looking at ways to increase diversity to better reflect their communities, including through training and mentoring programs to build that capacity, and by developing diversity policies.
“When you have a diverse board, you have diverse conversation,” Collins says.
That’s especially key as the financial services industry gets more complex, with regulations as well as changing technology.
“You need that diversity of thought, opinions, and ideas to get to the right decisions at the end of the day,” Collins says.
In June, the CCUA recently struck a partnership with The Schulich School of Business at York University to develop a customized profiling tool that will help to strengthen credit union board governance. The information, collected through a series of consultations, will look at the knowledge and skills, experiences, attitude, and attributes of high-performing credit union directors.
“It will establish a bar that we want all directors to get to,” Collins says. “It will allow us to really determine what kind of people we have on our boards and compare them with TSX companies.”
While the tool isn’t geared specifically to diversity issues, it should help provide insights for future board selection.
Companies with the highest percentage of women board directors outperformed those with the least by 54 per cent when it comes to return on equity
Some credit union partners are also playing a role in helping to increase gender diversity in the workplace. Qtrade Financial Group, which delivers investment and financial planning advice and products to credit union members and others across Canada, is actively working to increase gender diversity in boardrooms.
For example, Qtrade’s investment division, OceanRock Investments Inc., contributed to the discussion that led the Ontario Securities Commission to develop its “comply or explain” guidelines.
More recently, OceanRock led a proposal, alongside the Shareholder Association for Research and Education (SHARE), asking Restaurant Brands International (RBI) to adopt and publish a formal board diversity policy and to report to shareholders on the board’s plans to increase gender diversity on the board and among senior management. RBI is the parent company of Tim Hortons and Burger King. Tim Hortons used to have three women on its board, before it was rolled into RBI in 2014. Today, RBI has an all-male board.
While the proposal didn’t pass at the recently RBI annual general meeting in June, there was a strong level of support from independent shareholders. According to SHARE, 55 per cent of non-controlling shareholders of RBI supported the resolution. OceanRock has said it plans to continue pushing RBI to take steps to increase gender diversity.
In an ideal world, the market would correct itself without having to be pushed by gender-diversity advocates, but that’s not happening, says Dart of the 30% Club. It’s why her campaign and others are pressing so hard to make change now, and for the next generation of leaders.
“I don’t think there’s any question women are just as capable as men,” Dart says. Yet, “There’s still a huge cultural shift required.”
The Global Picture of Women on Boards
Canada lags behind other countries when it comes to the percentage of women on corporate boards, compared to other developed nations, based on research from Catalyst.
Hong Kong 10.2%