By David Kumagai, 2L
What should Canada do about the lack of women serving on corporate boards?
A panel of experts gathered at Victoria College on March 3 to debate this question. “Diversity on Canadian Corporate Boards” was the topic for the first event of a five-part speaker series called All Aboard, presented by the University of Toronto Faculty of Law’s Global Professional LLM program.
The discussion focused on the Ontario Securities Commission’s proposal for a “comply or explain” regime aimed at increasing the number of women on corporate boards and in senior management.
Last year, the OSC surveyed 1,000 TSX-listed issuers. Of the 448 respondent companies, 57 per cent had no female directors.
The proposed rules would require TSX-listed and other non-venture companies to annually disclose their policies – if any – designed to include more women in their boards and executive ranks. The rules would also force companies to report their term limits for directors.
U of T Law professor Anita Anand moderated the panel, which included Maureen Jensen, the executive director and chief administrative officer of the OSC, Pamela Jeffery, the founder of the Women’s Executive Network and the Canadian Board Diversity Council, Sheila A. Murray, the executive vice-president, general counsel and secretary of CI Financial Corp., and Ian Pearce, a partner with X2 Resources.
“The point here is just to shine a light, to have a conversation between the board members and the shareholders and the public,” Jensen said. “It’s impossible to have this conversation without having the information public.”
Professor Anand began the evening by asking the panel members whether there is a need for more diversity on Canadian boards.
One of the studies referenced by the panel, a United Kingdom report titled Mining for Talent, reveals a clear correlation between female board membership and profitability.
“The point is diversity of thought,” Jeffery said. “If you have different perspectives around a table, that would lead to better discussion, and better discussion leads to better decision-making, which improves shareholder value.”
For her part, Murray focused on the lack of women in executive-level positions. “It’s embarrassing to think we still have to talk about this,” she said. “Women are keeping pace at the middle management level, but they’re not cracking the executive ranks.”
Anand then directed the conversation to Canada’s place on the international stage. In 2013, women held only 12.1 per cent of board seats in Canadian public companies, according to research by Catalyst, which places Canada well behind many European countries.
Pearce cited Norway as a leader in female representation on corporate boards. The country’s quota policy has led to 40 per cent of board seats being held by women.
Jensen, the director of the OSC, stressed the need for Canada to keep pace with its trading partners. “We are experiencing a skills gap with the baby boomers retiring,” she said. “If we do not embrace diversity, we will not be able to sustain the competitive advantage we have today. The only way to do that is to set the tone at the top.”
The business case for diversity was revisited throughout the evening. “Companies with more women on boards perform better,” Pearce said.
One of the studies referenced by the panel, a United Kingdom report titled Mining for Talent, reveals a clear correlation between female board membership and profitability.
“Of the top 500 mining companies surveyed,” the report stated, “the 18 mining companies with 25 per cent or more of their board comprised of women had an average net profit margin for the 2011 financial year that was 49 per cent higher than the average net profit margin for all top 500 mining companies.”
So why do corporate boards remain male-dominated?
“There’s a very large untapped market. We know there are many qualified women in this country who are not sitting on public boards. The issue is visibility,” Jeffery said.
Murray pointed to turnover as one major cause. “It is a delicate issue trying to transition people off boards,” she said. Indeed, 82 per cent of the companies that responded to the OSC survey reported that they do not have a policy regarding term limits for their directors.
One audience member suggested that biased selection criteria is another cause. “The moment I say I need a manufacturing company board member, with an engineering degree, 30 years industry experience etc., you end up with a predisposed outcome,” the attendee said.
Jeffery and the rest of the panel seemed to agree. “A key step is adjusting criteria and the skills matrix for new board hires,” she said. “Don’t just look for former CEOs.”
Another audience member, Matthew Fortier, vice-president of policy at the Institute of Corporate Directors, asked whether more work needs to be done to ensure there are enough board-ready candidates who are women.
“We need to ensure that there are more female executives in the coming generations and women who’ve got the education background and professional experience to serve on boards,” he said afterward.
Karrin Powys-Lybbe, a partner at Torys LLP who attended the event, agrees with the OSC’s approach. “Something more prescriptive would not recognize the importance of business judgment being exercised by boards and companies,” she said.
As for a national strategy? “It is still just an Ontario initiative,” Jensen said.
The OSC is accepting comments from the public on its proposals until April 16.
See also Prof. Anita Anand's op-ed, "Getting women on corporate boards: Canada's middling approach just might work" in The Globe and Mail.
