This past winter, former first lady Michelle Obama talked with Tamara Vrooman, CEO of Vancouver City Savings Credit Union (499,039 members,$22.2 billion in assets), in front of an audience comprised mainly of Vancouver-area women as well as 350 girls and teens.
Vancity worked with local community organizations to identify girls who would benefit from hearing Obama’s views on social media and creating opportunities for young people from all backgrounds. Obama, who delivered her talk at Vancouver’s Queen Elizabeth Theatre on Feb. 15, has long championed girls to aim higher in education as well as the professions. What struck Paula Martin, adviser to Vancity CEO Tamara Vrooman, as interesting was how “grounded” Obama’s viewpoints were. Obama wasn’t “approaching this theoretically but with the lived experience that many girls and women have,” Martin says.
Vancity is reaching out to girls and women on the ground too, supporting eight non-profit organizations that serve those in marginalized communities as well as many more female-owned enterprises. Such initiatives are woven into the credit union’s corporate culture: Vrooman has helmed Vancity since 2007, its executive leadership team is 50 percent female and the management cohort 62 percent female. The largest in Canada by asset size, the credit union’s nine-member board is also comprised of eight women. This composition is an anomaly, with the annual 2018 Diversity Disclosure Practices by Osler, Hoskin & Harcourt reporting that women hold only 16 percent of board seats overall. (Osler reports on diversity disclosure practices relating to women in leadership roles by TSX-listed companies.)
Martin believes the strong female presence in governance reflects Vancity’s history of community relationships. It was the first financial institution to offer mortgages to women in the early 1960s. Today it works with nonprofits that value gender inclusion through the Bringing Women Together network and sponsors events like Obama’s visit, organized by the Greater Vancouver Board of Trade’s Women’s Leadership Circle. These relationships have brought a different range of candidates to the credit union’s nominating committee’s attention than if Vancity had focused solely on business profitability.
Credit Suisse found that companies with 25 percent women in senior leadership outperform others at a compound annual growth rate of 2.8 percent. When 50 percent of women ar in senior leadership positions, these companies outperform competitors by 10.3 percent.
Vancity isn’t content to rest at being tops in female representation. It sees its role as helping communities create sustainable wealth for everyone, including the most vulnerable members. Part of the way to achieve that is encouraging women to take on more leadership roles among fellow credit unions as well as the businesses it serves.
Compared to other Canadian industries, financial services have generally been more forward thinking about welcoming women into decision-making roles. The sector boasts 21 percent female board members, five percent more than the national rate. Canadian credit unions are doing even better with female board representation. Directors are 35 percent female, says Martha Durdin, CEO of the Canadian Credit Union Association (CCUA). The largest 30 credit unions by asset size are even closer to an equal split, with boards consisting of 39 percent women.
While this shows the system to be doing relatively well, the result is still far from parity. For every Vancity with 89 percent women on the board, there are several with no women at all. This absence is most common in regions where the local economy is dependent on resource extraction, such as forestry or mining. With fewer women in leadership positions in member businesses, nominating committees see a smaller pool of women to draft onto credit union boards. Are these credit unions missing out by having male-dominated boards and executives?
Yes, according to Camilla Sutton, CEO of Toronto-based Women in Capital Markets (WCM), which lobbies government and business associations for more women on boards of directors. The financial industry has recognized “that having more diverse boards yields lower risks, better results, more discussion and more opportunity for thought,” Sutton says.
Female leaders boost returns
A Credit Suisse report from 2016 supports this view. It found that companies with 25 percent women in senior leadership outperform others at a compound annual growth rate of 2.8 percent. When 50 percent of women are in senior leadership positions, these companies outperform competitors by 10.3 percent.
But the potential for higher returns hasn’t convinced most businesses to change their methods. Another Osler study from 2017 found that only 36 percent of Canadian companies had adopted written policies guiding nominating committees and boards to consider gender when selecting new directors. The top reason companies gave for not adopting such a policy? Not wanting “to compromise the principles of meritocracy,” stated the report. In other words, these businesses were concerned that a focus on achieving gender parity might result in poorer quality candidates.
But does considering gender necessarily prevent boards from recruiting the most competent candidates? Durdin believes this is a myth perpetuated by the notion that the most desirable directors are senior executives. Since only nine percent of CEOs, CFOs and other senior roles in Canada are women, according to 2018’s The 13th Annual Rosenzweig Report, published by executive recruitment firm Rosenzweig & Company, this does shrink the selection pool. However, if nominating committees focused on recruiting people with particular expertise, rather than specific titles, they would find plenty of options. “Look beyond wanting the traditional CEO at the table and be open to a diversity of opinion and experience,” says Durdin.
A few good women
WCM’s research disputes the assumption that there are not enough qualified women available. Most institutions, including WCM, keep a juried list of female candidates who meet stringent criteria such as a high level of competence on a board-ready skills matrix or five years’ experience in a senior leadership role. There are plenty of suitable candidates with their hands up, says Sutton.
“Having more diverse boards yields lower risks, better results, more discussion and more opportunity for thought.” – Camilla Sutton
Despite having qualifications that often outpace their male counterparts, these women still face challenges finding seats on boards. Thus, Sutton says, companies that claim to focus solely on merit are actually allowing unconscious bias against women to influence their decisions. WCM members that have been selected, adds Sutton, have usually known someone on the board, making “network critically important.” New directors, regardless of gender, are often recruited by current board members. Since people tend to associate with others with whom they share traits, chances are high that all-male boards will recruit more men, even though it is not intentionally excluding women, Sutton says.
Since networks are mostly informal, they’re tough to fix. That’s why WCM has joined forces with seven like-minded organizations, including Catalyst and The 30% Club, to create the Canadian Gender and Good Governance Alliance (CGGGA). The alliance is pushing for legislated targets on boards. Though it hasn’t declared numbers officially yet, Sutton suspects it will ask for a target close to 30 percent by 2021.
Unlike Sutton, Launi Skinner, CEO of Langley, BC-based First West Credit Union (225,145 members, $9.9 billion in assets) doesn’t believe legislating targets is the answer. A diverse board isn’t necessarily going to be effective if it hasn’t arisen from real company culture that values difference, says Skinner.
First West only put its official diversity strategy into action a year and a half ago and now has a board that is 25 percent female, although the credit union has been talking about diversity in daily conversation for years, Skinner says.
Like Vancity, First West is inclined to push further. Despite already boasting a 50 percent female leadership team, Skinner signed the Minerva BC Diversity Pledge this past spring. Along with 25 other British Columbia CEOs, Skinner agreed to actively measure and report on her organization’s gender diversity efforts every year. Sharing results with the public has two benefits. First, it holds the pledge-signing CEO accountable for his or her actions within an organization. Second, annual reporting sets a positive example for other private sector businesses to reconsider whether their objectives need updating.
What should an effective diversity policy look like? Durdin believes that a successful policy encourages more turnover on the board, rigorous assessments for current directors and nominations lists that include candidates with a broad range of experience.
Durdin’s position is supported by the CGGGA. Last year it published Directors’ Playbook, with templates and tools for creating board diversity policies that encourage gender balance. For example, the playbook suggests board positions should be fixed to a term of one to three years so that opportunities to recruit new individuals come up more often. When board members have lifetime tenure, changing composition can take decades. The playbook also suggests that nominating committees should evaluate candidates with a skills or competency matrix to restrict the amount that unconscious bias can influence results.
If the government decides to legislate gender numbers for boards, many businesses will be scrambling toward a likely target of 30 percent. But legislation is far from assured. For motivation, credit unions would be better off studying the projected higher returns that accompany businesses with greater diversity in governance. The changes necessary: written diversity policies, recruiting for expertise instead of job title and shorter term limits, may take some effort initially but their effectiveness is already in evidence at top performing credit unions. With the knowledge that credit unions are more profitable when the diverse, gender-balanced makeup of the community is reflected in governance, why not make every effort to achieve this? Eventually, it is hoped, credit union board composition will be sitting pretty at 50/50. ◊