Results are much better for TSX-listed companies, with 28.4% of board seats occupied by women. However, the national average is just 16.4%. 2018 was the first year in history in which all companies on the S&P/TSX 60 reported having at least one woman on their boards, and 68.8% of all Canadian companies have at least one female director.
Pace of Improvement Needs to Speed Up
We have already examined the slow rate of women being appointed to boards and how it needs to change. Andrew MacDougall, a Corporate Partner at Osler and leader of Osler’s corporate governance practice, says “At the current rate, it will take us another 19 years to get to gender parity on boards.” MacDougall is referring to a rate of increase for women on boards of only 1.8% over 2017. This pace of change is obviously too slow. MacDougall says that part of the reason is that “Companies are reluctant to adopt targets. Only 17% of companies have adopted targets for the representation of women on the board, although a majority of the larger companies have adopted targets.” The targets referred to are private-sector targets. He suggests that in addition to adopting targets, “Board composition needs to be a recurring topic at board level.”
The same issue of improvement that is happening too slowly is present in the United States. The Harvard Business Review discloses that the number of female board directors has nearly doubled between 2012 (25%) and 2018 (46%) in its Annual Corporate Directors Survey. But women only hold about 24% of S&P 500 board seats, up just 3 percentage points from 2012. The numbers in both the US and Canada seem to indicate that boards are appointing one or two women to boards to answer the call for gender diversity, but gender equality at the boardroom table is still a long way off as it is in Canada, if historical gender diversity growth of 3% between 2012 and 2018 is an indication of future trends.
Three Women Directors is the “Magic Number” for Active Participation
In the 2018 Global Board Diversity Tracker, Egon Zehnder identified three as the “magic number” required for female directors on boards. With at least two female colleagues, women are more likely to speak up and drive real change on a board. The percentage of Canadian companies which had more than one-woman board director was just 34%, according to the report from Osler.
Harvard Business Review lists further steps companies can take to improve board gender diversity, including widening board member criteria to take experience into account rather than just titles; requiring a 50/50 slate in which 50% of board members are women and from underrepresented groups; and expanding the size of the board to combat traditionally low turnover rates.
Institutional Investors are Driving Change
According to the Osler report, institutional investors such as the Ontario Teacher’s Pension Plan (OTPP), are driving change towards board diversity. In February 2018 the OTPP updated its proxy voting guidelines to include a requirement that there be three or more women on the board of companies that it will support. BlackRock updated its proxy voting guidelines in the same month to require two women on a board. Institutional investor interest in board diversity coupled with the Canadian government’s new requirements for corporations to disclose gender diversity policies and numbers to the public may have been responsible for some of the upticks seen in board gender diversity in 2018.
While the pace of board diversity growth is slow, it is reasonable to assume that it will pick up as older board members retire, and measures are taken to increase the size of boards to make room for diversity. Women also have to drive change themselves by professionally preparing for a board role and networking to find out where they can best serve on a board. The Institute of Corporate Directors (ICD) offers a Directors Education Program which can prepare you for being a board member, and it is available across Canada at top business schools. The ICD also offers a matching service for its members who are looking for boards to serve on.
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