Canadian Corporate Boards: Bridging the Gender Gap

Nicholas J Price

The Canadian government and regulatory authorities have been increasingly aware of the importance of gender diversity on public company boards. They've taken steps in recent years to motivate companies to increase the number of women on their boards, but companies have been slow to move in that direction, or they've expanded the number of board seats to make a good showing.

The New Global 2014 Census by Catalyst reported that only 20.8% of S&P or TSX 60 companies confirmed that they had women on their boards.

The Canadian Securities Administrators (CSA) released new rules in 2014 asking boards of TSX-listed companies to disclose their gender diversity policies and practices at the board and executive officer levels or explain why they had failed to add women to their boards and executive positions. Despite this effort to build up the workforce of women on boards and in C-suites, the number of women on Canadian boards remains low.

The Canadian government took stronger steps to address all minorities on boards with the May 2018 passage of Bill C-25. This move amends the Canada Business Corporations Act (CBCA) and requires boards of publicly traded securities to disclose 'all designated groups' on their boards. This demographic includes visible minorities, Aboriginals, people with disabilities and women.

Governance and Gender

Many studies have been done on how boards can improve their effectiveness. One of the themes that continually emerge is diversity on boards, particularly as it relates to gender. The highest-performing boards have board directors that have a wide variety of backgrounds, views and experiences. Effective boards reflect gender, ethnicity, cultural and other personal characteristics of the community where the company sells its goods or services.

Diverse boards are less likely to fall prey to groupthink than all-male boards. Boards with appropriate levels of diversity have proven to be more effective at monitoring CEO performance, better able to perform complex tasks and more likely to have improved corporate performance overall.

How Did 'Comply or Explain' Work Out?

In addition to requiring TSX-listed companies to 'comply or explain,' the 2014 CSA rules require companies to disclose their term limits for board directors. The rules also require them to disclose other policies on board succession and renewal and policies that relate to how they identify and nominate women directors and consider them for executive officer appointments.

These requirements came from the recommendations of a public roundtable with Ontario Securities Commission (OSC) consultants, experts and representatives from TSX-listed issuers. The participants of the roundtable chose this model because it supports transparency, which is a fundamental principle of securities regulations.

The first review of over 700 TSX-listed issuers' compliance with the new requirements was released in 2015 and showed some interesting initial results, as follows:

  • About 49% of the companies had at least one woman on their boards.
  • About 60% of the companies had at least one woman in an executive officer position.
  • About 15% of the companies had added one or more women to their boards that year.
  • Only about 14% of issuers had adopted formal written policies to recruit more women.
  • Only about 19% of issuers reported having term limits that support board renewal.
  • Only 7% of the companies reported adopting targets for appointing women to their boards.
  • Only 2% of the companies had set a target for women executive officers.

Many of the TSX-listed issuers requested guidance from CSA about the level and detail of disclosure that they needed to satisfy the requirements of the rule.

The roundtable reconvened to discuss the early results of the 'comply or explain' rules. For the most part, participants were cautiously optimistic at the early numbers and agreed that they needed to monitor the numbers in the coming years. The overarching sentiment from the roundtable was that it was too soon to declare the requirements a success or failure and they needed to give the companies more time to implement the rules and assess the impact on their companies.

Gender Diversity Moving in the Right Direction: More Work Needs to Be Done

There's no disagreement among TSX-listed issuers that they need to increase the number of women in their C-suites and on their boards, and some feel the numbers aren't increasing quickly enough. The lack of women on boards and in C-suite positions has also called attention to other unrepresented populations serving in the same positions. The early results suggest that boards could be taking strong steps to increase diversity.

A good start is to start identifying and recruiting talent from the pool of women managers and bringing them into the C-suite. Taking this step will increase the pool of women recruits for board directorships because they usually draw from the ranks of those in the C-suites.

Some boards have merely added an extra position on the board and recruited a woman to fill it. Best practices recommend that boards take a more deliberate approach, such as setting their recruitment criteria to include targeted groups that include women. Boards could also train up an internal workforce of women managers by instituting formal mentorship programs and networking groups.

Two additional ways that boards can increase their percentages of women on their boards are board evaluations and hiring recruitment agencies.

Board evaluations renew and refresh boards by identifying the talents, skills and abilities boards need. Annual board evaluations should help boards find the necessary balance between retaining experienced directors and attracting board directors with fresh perspectives and those who represent diversity.

Boards that lack the time and resources to increase the number of women on their boards may find that it works better to professionalize their recruitment strategies by hiring a recruitment agency. Professional recruiters streamline the process of identifying qualified board directors with different and unique perspectives. This approach eliminates the need for board directors to rely on their existing personal and professional relationships to identify board candidates.

The 2014 CSA 'comply or explain' rules and the 2018 passage of Bill C-25 are increasing awareness of best practices for good corporate governance related to gender and other types of diversity. Boards will need to continue to work on forming new approaches to board refreshment that include adding women and other minorities to their boards. While these are good steps for boards to take, the real results will come to light when the addition of women and other minorities begins to have a positive impact on the companies' bottom lines.

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Nicholas J. Price
Nicholas J. Price is a former Manager at Diligent. He has worked extensively in the governance space, particularly on the key governance technologies that can support leadership with the visibility, data and operating capabilities for more effective decision-making.