It was a call to action that resonated globally on International Women’s Day: a strategically placed bronze statue of a defiant and fearless girl, hands on hips and legs planted firmly apart, brazenly staring down Charging Bull on Wall Street in New York City.
Installed by United States fund manager State Street, the statue was an attempt to increase awareness of the need for equal opportunities and particularly greater gender diversity on corporate boards. “A key contributor to effective independent board leadership is diversity of thought, which requires directors with different skills, backgrounds and expertise,” Ron O’Hanley, State Street’s president said in a statement. “We are calling on companies to take concrete steps to increase gender diversity on their boards.”
O’Hanley’s call to action is backed by research that shows diverse boards produce better results. According to a study by MSCI Inc., a US-based provider of equity, fixed income and hedge fund stock market indexes, companies with strong female leadership — defined as three or more women — generated a return on equity of 10.1 percent per year versus 7.4 percent for those without that critical mass of women.
Despite these supporting numbers, gender bias persists, particularly when it comes to senior leadership positions. When newly elected Prime Minister Justin Trudeau selected his cabinet members shortly after his victory in the 2015 federal election, his ethnically diverse and gender equal cabinet made headlines around the world. As did his reply, “because it’s 2015,” when pressed on his choices.
Federal cabinet aside, the overall lack of diversity in this country’s corporate boardrooms continues to place Canada well behind many European nations, despite concerted efforts by a number of Canadian and international organizations to foster greater diversity, if not greater equity, on boards. According to the Canadian Board Diversity Council’s 2016 Annual Report Card, the representation of women on boards of FP500 companies (Canada’s largest corporations by revenue, as surveyed by the Financial Post) has been increasing over the last 15 years to 20 percent in 2016 from 10 percent in 2001.
“In a perfect world, credit unions would see diversity as an opportunity but it’s going to take credit union membership voting patterns to support it.” – Tamara Paton
The numbers are considerably worse, however, if you look at TSX-listed companies. Of 677 TSX- listed companies analyzed by provincial regulators, women make up only 12 percent of board seats while 45 percent of listed companies do not have a single woman on their board.
Compared to European countries like France, where women comprise 34 percent of corporate board seats, and Norway, where the percentage of women on boards soars to 46 percent, Canada seems stuck in the Stone Age.
Quotas versus comply or explain
Europe’s high numbers are the result of government-imposed quotas coupled with strict penalties for non-compliance. Norway, for example, requires 40 percent of corporate board seats to go to women, with company dissolution the penalty for non-compliance.
Canada has taken a much softer approach to the regulation of board composition. Organizations like the Canadian Council for Board Diversity, Catalyst Canada and the 30% Club have all set aspirational targets for women on boards in the range of 25-30 percent.
In December 2014, the Ontario Securities Commission (OSC) released new regulations requiring
all companies listed on the TSX to adopt policies on gender diversity or explain why they hadn’t. Referred to as “comply or explain,” the regulations have been adopted by regulatory authorities in Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Québec and Saskatchewan.
Tanya van Biesen, executive director of Catalyst Canada, which is part of a leading global non-profit dedicated to advancing women in business, says comply or explain has “raised board awareness and created an active conversation.” But it hasn’t gone much beyond that.
“On other boards, recruitment is typically done with a tap on the shoulder and lunch.” – Colleen Sidford
That’s because the regulations don’t really have any teeth, says Sarah Kaplan, director of the Institute for Gender and the Economy and professor of Strategic Management, Gender and the Economy at the University of Toronto’s Rotman School of Management. “People were shocked that “comply or explain” didn’t work. I wasn’t shocked,” she says, adding that most explanations regarding non-compliance refer to selection based on meritocracy. “It’s clear that a meritocracy is not there.”
Van Biesen says that the “comply or explain” regulations will be reviewed and tweaked. “We’re almost three years in and they will look at it again and change it going forward.”
Are credit union boards diverse enough?
Of course OSC regulations don’t apply to member-owned credit unions. “Diversity is simply part of who we are,” says Korinne Collins, vice-president, professional development and education, of the Canadian Credit Union Association (CCUA). “Credit unions have a different philosophy; they are more representative of their memberships.”
A recent CCUA review of the biggest credit unions in Canada showed an average 35 percent diversity rate on boards. But the numbers vary widely, with front-runners like Vancouver City Savings Credit Union (519,000 members, $21 billion in assets) at 89 percent diversity, while others still sit below 10 percent.
Joanne McDonnell is the sole female board member at Comtech Fire Credit Union (15,878 members, $370 million in assets) in Toronto after a merger with Kingston, Ont.-based Limestone Credit Union (previously the Federal Employees Credit Union) brought her over. She had spent 12 years on her previous credit union board, which she says was more diverse. “That board always had a very good representation of women but it was hard to find people to sit on the board.”
That’s exactly why Catalyst Canada maintains a list of board-ready women, along with a mentorship program that pairs women with influential senior board members who can help open up their network. “Greater diversity creates an environment for different perspectives,” says van Biesen. “You get greater collaboration and greater innovation, which drives performance.”
This has been the case for Assiniboine Credit Union (115,296 members, $4.3 billion in assets) in Manitoba, which has made diversity on its board intentional, says board chair Vera Goussaert. “It’s our goal to have our board mirror the community we work in in terms of ethnicity, gender and age.”
Goussaert says Assiniboine doesn’t set targets but tokenism has never been an issue. “Every year we do a gap analysis for skills and competencies with a diversity lens on board composition,” she says. “If we need certain skills, we communicate that to our membership. “Right now we’re not doing that well with respect to gender,” Goussaert adds. “At one point we were at 60 percent. It ebbs and flows and that’s not a bad thing.”
Some credit unions are beholden to their nominations process, which may hamper diversity efforts. This is the case at Meridian Credit Union (287,310 members, $12.1 billion in assets) in Ontario. “I’m on a number of boards and Meridian has the most robust process,” says Colleen Sidford, who has been a credit union board member for six years. “On other boards, recruitment is typically done with a tap on the shoulder and lunch.”
Meridian’s process is far more complex. “First you have to be a member of the credit union for a minimum of 12 months,” Sidford says. “Then you have to get references from five members who cannot be directors or employees. We want people who are willing to accept the culture and values and reach out to members.”
“It’s clear that a meritocracy is not there.” – Sarah Kaplan
Any member can submit their name for review by the nominating committee. But board members cannot reach out once the nominating committee has begun interviewing incumbents. “It’s fair and no one gets an advantage,” Sidford says. “But we don’t have any way of saying, ‘we want two women this year.’ If no women put their name forward, the nominating committee can not do anything about that.”
When Sidford joined, there was only one woman on the board. “They were struggling with the lack of diversity and that’s why one of the directors reached out to me. I had to become a member, so I had to wait a year to put my name forward.”
Other barriers to diversity
While the selection process can be both a barrier and a boon to diversity, another big barrier is term limits — or lack thereof — which can allow members to stay on boards for decades. Age can also be a barrier, particularly for younger people with families. “Taking time out for two- and three-day board meetings is difficult for people with jobs and families,” Sidford says. “We do have difficulty attracting a younger cohort.”
On the flipside, younger people can have difficulty getting endorsement from credit union boards or members. “People see you as a young person and don’t take you seriously,” Goussaert says. “I’ve been chair for a year and a half and I was mentored by the past chair. I was fairly young but fortunately I was supported by my board to take on this role.”
Tamara Paton got her start on boards in her mid- 30s in an effort to broaden her professional network. “When I started, I needed someone to say, ‘have you considered this?’ I was invited to join the Canadian Automobile Association board. After that, a credit union was the next obvious place for me.” Now a member of Meridian’s board, Paton also runs her own company offering board training for potential directors. “It started as phone calls and one-on-one coaching. Then I started blogging about how to get on boards and be effective.”
Eventually, Paton launched an online training program called Boardroom Blueprint, which covers how to interview for board positions and create impact once you’re on the board. Her clients are mostly male. “I’m not seeing the gender diversity that I think is possible,” she says. “If you’d asked me five years ago, I would have winced at quotas but allowing osmosis as the strategy hasn’t been effective. In a perfect world, credit unions would see diversity as an opportunity but it’s going to take credit union membership voting patterns to support it.”
Goussaert, nonetheless, sees progress. “I’ve seen a shift since I joined,” she says. “As a credit union system, we are making progress. It’s an important conversation to have and we should keep working at it.” ◊