Canadian women represent 48% of the workforce in Canada. But as of early 2018, they hold only 14% of board seats and 22.6% of board seats at Financial Post 500 (FP500) companies. While the FP500 board gender diversity number has increased from 20.8% in 2014, advocacy groups say this isn’t enough and growth is flatlining – especially since the goal set by the Canadian government in 2014 was to have 30% women on corporate boards by 2019. The 2017 Annual Report Card from Phasenyne shows that Canada is falling well short of this goal, with near-stagnant growth for women on boards at only 1% in 2017. This represents the lowest percentage increase since Phasenyne began producing its Annual Report Cards in 2010.
What Initiatives Exist in Canada to Promote Gender Diversity on Boards?
There are numerous initiatives at federal and provincial levels to promote gender diversity on boards.The most widely implemented of these initiatives was the adoption of a “comply or explain” rule, which was initially adopted by the Ontario Securities Commission, and then by its federal counterpart, the Canadian Securities Administrators. “Comply or explain” required member companies to publicly disclose if they had gender diversity policies and practices in place. In this October 2015 position statement, the Canadian Coalition for Good Governance argues that it is not satisfied with results to date and would prefer to see a written board diversity policy which identifies directly the needs of each company.
This was taken out of the private sector’s hands on May 1, 2018, when the federal Government received Royal Assent for legislation to move gender – and all – diversity forward for Canadian business. Bill C-25 requires public Canadian corporations to release figures on board diversity and to have diversity policies which are available to members of the public.
Education About the Efficacy of Women on Boards is Key
In the Phasenyne report card, 86% of respondents said that they thought their board was diverse enough. If top-level directors do not think there is an issue, it is unlikely that widespread action on the issue will occur. It may be necessary to “sell” directors on the concept of gender diversity as more than just a buzzword. Lisa Lisson, the first female president of FedEx Canada, a member of two boards, and a committee chair on one, argues that, “We don’t need more studies telling us why having more women on boards is a good idea. We need an attitudinal shift” in an opinion piece for CBC. Research overwhelmingly supports gender diversity as being beneficial to a corporation. Findings from the International Monetary Fund showed that adding just one woman to a board of a company in the Financial Industry without increasing the size of that board correlates to a higher return on assets.
Term Limits Would Also be Beneficial
Embracing change in the boardroom may not be favored by everyone. Term limits would ensure that board members are rotated out regularly without any shocks to stockholders, making room for more women in the process. Term limits would also ensure that the board doesn’t need to be expanded to allow for more board members, which can lead to inefficiency. Of the 2017 Annual Report Card respondents, only 29.2% of surveyed companies had term limits.
Change is something that, understandably, comes slowly to large corporations. Change is associated with risk, and all businesses are concerned with risk management. However, in the case of appointing more women to boards, the risk is mitigated by proven research into their effectiveness on boards. While the Canadian government’s new legislation may help to force an attitudinal shift in the industry, in the end it is up to corporate leaders and fellow board members to encourage gender diversity on the boards they serve on.
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