This article was originally published on January 4, 2014
The issue is floating around these days, although it is by no means a new one: why aren’t there more women on the boards of directors of our country’s corporations?
Currently, only 15.6% of directors of Financial Post 500 (“FP500”) companies are women, and only 3.4% are visible minorities (both male and female). However, women make up roughly half of the work force of Canada; my law school class was 68% female in 2007 – there is no lack of educated women in Canada. So why the low numbers on corporate boards? Is this question even important? How would having more women on the boards of FP500 companies or publicly traded companies be advantageous? The answer lies in diversity – having women on the board increases a company’s competitive advantage.
In “The Business Case for Women on Boards,” developed by the Conference Board of Canada and commissioned by the Federal-Provincial-Territorial Ministers Responsible for the Status of Women, the Conference Board of Canada points out that having women on boards results in:
Stronger financial performance – women on boards led to companies having higher returns on equity, sales and capital, better share performance, and greater stability in the market.
Ability to attract and retain top talent – top female talent is drawn towards companies with female representation on boards; female representation sends the message that a company is open, progressive, and a desirable work-place.
Heightened Innovation – varied perspectives leads to better identification and capitalization on innovation.
Enhanced Client Insight – again, varied perspectives leads to improved product design, more effective marketing, and enhanced customer service.
Stronger Performance on Non-Financial Indicators – the presence of a woman on the board of directors results in a more positive corporate social responsibility indicator.
Increased Board Effectiveness – boards with female representation trend towards more oversight and accountability, and increased strategy.
Not Just Boards, But Offices
On January 2nd, 2014, the Canadian Centre for Policy Alternatives released a report entitled “All in a Day’s Work,” in which they detail the pay of Chief Executive Officers (“CEOs”) in Canada. The report states:
One notable development is that there are now three women on Canada’s highest paid 100 list: Linda Hasenfratz, CEO of Linamar Corp., Dawn Farrell, CEO of TransAlta Corp., and Nancy Southern, CEO of ATCO Ltd. The previous year there was only one woman.
This is indeed a notable increase in women CEOs; however, it still means that women make up only 3% of the top-earning CEOs in the country. All three of the women on this list have impressive educational backgrounds and work experience, and their companies celebrate their achievements; for example, Linamar Corp.’s website states that since Ms. Hasenfratz became part of the executive at the corporation, its sales have increased from $800 million to $2.8 billion. Still, all three are either the only woman on their companies’ boards, or one of two or three out of 10 or 11 board members.
What Can our Canadian Companies Do?
The Canadian Board Diversity Council (“CBDC”) “2013 Annual Report Card” states that 62% of FP500 companies support a change to the status quo. 54% of directors from these companies support a “comply or explain” model, whereby the government imposes a requirement on corporations to publicly describe the company’s approach to, and progress toward, achieving increased gender diversity on the board. Such an approach requires that Canadian companies take proactive, non-regulated measures to ensuring increased diversity on their boards.
The Conference Board of Canada and CBDC both provide recommendations for Canadian companies seeking to increase board effectiveness and overall corporate performance by appointing more women. In summary, the following are four strategies a corporation may consider:
- Implement a Board Diversity Policy
The CBDC reports that a positive correlation exists between corporations that enact diversity policies and the number of women on boards. Diversity policies may contain provisions that promote affirmative action; for example, by setting term limits in order to refresh the board on a regular basis, by reserving one out of every three open seats for a woman, or by establishing that a percentage of the board is to be made up by women.
- Look Beyond the Executives and Use Outside Search Firms
Engaging a third-party search firm or headhunter enables a corporation to go beyond its traditional networks and social circles to find new directors. Looking past the “C-Suite” (CEOs and former CEOs) to seek competence rather than executive experience will also expand the number of women eligible for boards – competent women may be executive directors of other companies or organizations, senior managers, or professionals from other industries.
The CBDC has also created a list of 100 diverse “board ready” candidates called the Diversity 50. These candidates may be sorted according to industry experience, area of expertise, and gender, among other categories, and have been specially selected by the CBDC as diverse, motivated individuals that nevertheless may fall outside of the traditional pools used by corporations when searching for board members. Such a resource is invaluable to a company looking to inject diversity into its leadership structure.
Other “board ready” candidate lists are produced by Catalyst, a global non-profit organization created in 1962 that is dedicated to expanding opportunities for women in business, and Women on Board, a Catalyst initiative in Canada that has the Women on Board Source – a database of qualified and experienced women.
- Provide Mentoring and Networking Opportunities
Women, and those interested in increasing the visibility of women in business, should mentor, and provide mentoring, sponsorship, and networking opportunities, to high-potential women in their circle. This behaviour can cross professions and generations, and ensures that high-potential women meet more people, get more name recognition, and establish a reputation.
Women on Board provides a resource that pairs women director candidates with mentors and champions who promote the candidacy of the women. It is hard to see how such a relationship is not beneficial to both mentor and mentee.
- Make a Commitment to Change
93% of directors from FP500 companies believe that board diversity is either important, or somewhat important. However, currently, only 21% of FP500 companies have board diversity policies, and 61% of directors from FP500 companies answered “no” to the CBDC’s question, “[d]o you feel that this board should develop and adopt a formal diversity policy?” Furthermore, 76% of directors of FP500 companies believe that their boards are already diverse; however, a quick glance at the websites of many of these companies reveals that the majority of board members are white males. Thus, while it seems that the majority of directors on FP500 companies support a move away from the status quo, the same majority are either not willing to make, or are not aware of, the changes that need to be made.
Board members need to make a commitment towards increasing diversity on their boards. This includes recognizing the disparity between male and female board representation, and then taking positive steps to change it. One positive step a board may take is to sign the Catalyst Accord – essentially, a pledge by the board to increase the percentage of female representation by 2017.
Although the past few years have seen an increase in female representation on corporate boards, the CBDC estimates that at the current rate of change, it will take 75 years before women represent 50% of FP500 directors. Thus, parity is a long way away. However, the steps that can be taken towards parity by boards across the country are relatively simple. Awareness and positive action are all that is needed to influence change.
Canadian Board Diversity Council, “2013 Annual Report Card,” online at: http://www.boarddiversity.ca/sites/default/files/CBDC-2013-ARC_ENG.pdf. Accessed Jan 4, 2014.
Canadian Board Diversity Council, “Diversity 50,” online at http://www.boarddiversity.ca/diversity-50. Accessed Jan 4, 2014.
Canadian Centre for Policy Alternatives, “All in a Day’s Work: CEO versus Average Pay in Canada,” online at http://policyalternatives.ca/ceo. Accessed Jan 4, 2014.
Catalyst, “Catalyst,” online at http://www.catalyst.org/. Accessed Jan 4, 2014.
Conference Board of Canada, “The Business Case for Women on Boards,” online at: http://www.women.gov.on.ca/owd_new/docs/women_on_boards.pdf. Last modified: October 16, 2013. Accessed Jan 4, 2014.
Financial Post, “FP500,” online at http://www.financialpost.com/news/fp500/2011/index.html. Accessed Jan 4, 2014.
Women on Board, “Women on Board,” online at http://www.womenonboard.ca/Home/default.asp. Accessed Jan 4, 2014.