Visible minorities vastly underrepresented in the boardroom, new disclosures suggest

Early and incomplete data but dispiriting:

Canadian companies may be making progress on gender diversity, but a Financial Post analysis suggests that the boardrooms of some of the biggest businesses in the country have much further to go when it comes to including members of visible minorities, Indigenous peoples and people with disabilities.

That analysis is based on a relatively new source of data. Starting this year, publicly traded companies incorporated under the Canada Business Corporations Act (CBCA) are required to report, among other things, the number of women, Indigenous people, persons with disabilities and members of visible minorities on their boards and in their senior-management ranks. The disclosures must be made for their annual shareholder meetings.

The Post looked at companies on the S&P/TSX 60 stock-market index that were both incorporated under the CBCA and had filed management information so far in 2020 — a total of 23 companies — to gather a preliminary picture of the state of corporate diversity. Disclosure was not entirely consistent from company to company and the findings and assessments presented here are based on self-reported information about proposed or current slates of directors, at the time the filings were made.

Combined, however, the Post found that, out of the 23 boards and 255 director positions total, only 14 directors — or approximately 5.5 per cent — identified as belonging to a visible minority. The Post also found only three Indigenous directors (or about one per cent of all directors in the sample) and two directors with disabilities (less than one per cent) among the 23 boards.

Fourteen of the companies reported they did not have a member of a visible minority on the board, while 20 companies reported no Indigenous peoples and 21 reported no persons with disabilities as directors. Eleven companies had no representation from any of those three groups on their board.

By comparison, 22.3 per cent of Canada’s population identified as a visible minority and 4.9 per cent as an Aboriginal person during the 2016 census. And according to Statistics Canada, as of 2017, 22 per cent of Canadians aged 15 and older had one or more disabilities.

All 23 firms included in the Post’s analysis had at least one director who identified as a woman, and 31 per cent of all directors on the Post’s list of companies were women.

Representation of the federal government’s four diversity groups in senior management varied, but were not much better for the 23 companies as a whole.

Discount retailer Dollarama Inc. reported two of its six executive officers (33 per cent) and two of its nine directors were women (22 per cent), but that members of the federal government’s other three designated groups were in zero of those positions. It was similar for e-commerce company Shopify Inc., which reported two of its seven executive officers and two of its six directors were women, but that no other groups were represented.

“We recognize our areas for improvement and are actively working with our Diversity & Belonging team to ensure stronger representation across our senior leadership and Board by hiring and retaining diverse talent,” a Shopify spokesperson said in an email.

Big banks and insurers in the S&P/TSX 60 index were excluded from the Post’s analysis [banks covered under the Federally Regulated Sectors EE reporting]. While some report diversity information (Royal Bank of Canada had said, among other things, that 46 per cent of its executives in Canada were women and 19 per cent were visible minorities), they are incorporated under financial legislation and not subject to the recent CBCA changes. Companies that are incorporated provincially were likewise excluded.

Ratna Omidvar, an independent senator from Ontario, said she was not surprised by the Post’s findings. Omidvar, who was a well-known diversity expert before being appointed to the Senate in 2016, was previously among lawmakers backing an ultimately unsuccessful push to force public companies to set internal diversity targets.

“Certainly I recognize the government has to not over-regulate corporations, because we want them to survive and thrive and make money and lift all our boats, et cetera,” Omidvar said. “But the lifting of all boats is clearly not happening, so we need something else.”

The recent changes to the CBCA also put companies in a position to “comply or explain” in reporting on their diversity policies and targets, the latter of which most of the companies looked at by the Post did not have for members of visible minorities, Indigenous people or persons with disabilities.

For example, the Desmarais-family-controlled Power Corp. of Canada (which reported two of its 13 directors were women, but zero were from any of the other three groups) said in its 2020 management circular that it had not adopted a target regarding the representation of the four groups on the board “as the Board believes that such arbitrary targets are not in the best interests of the Corporation.”

Still, there is a “prevailing view” in the corporate world that diversity is a good thing, which helps create momentum for efforts such as the recent CBCA amendments, according to Rahul Bhardwaj, the president and CEO of the Institute of Corporate Directors.

“It’s a journey for organizations to enhance their diversity,” he added.

While it is the first year for the new federal disclosure requirements, securities regulators were already requiring companies to report figures and targets regarding the number of women on boards and in executive positions. A recent report on the approximately 230-company S&P/TSX Composite Index found the percentage of women on its boards had increased to 27.6 per cent in 2019 from 18.3 per cent in 2015.

Corporate Canada’s latest disclosure requirements, intended to further improve corporate transparency and diversity, are also now in place at a time when firms are pledging to do their part to fight racism following the death of George Floyd, a Black man who was killed while in police custody in Minnesota. Four officers are now facing charges in connection with the killing.

Directors should be aware of the narrative of the day, what people living in the communities in which they operate are thinking, and what customers are feeling, because those directors are setting strategy, according to Omidvar.

“So I would say those are competencies that should be even more hotly searched for and located when corporate directors are appointed to boards,” she added.

Some companies are now redoubling their diversity efforts. On Wednesday, the formation of the new Canadian Council of Business Leaders Against Anti-Black Systemic Racism was announced, as well as the launch of the BlackNorth Initiative, which is aimed at increasing the representation of Black people in Canadian corporate boardrooms and executive offices.

Wes Hall, the founder and chair of the council, and the executive chairman and founder of shareholder services firm Kingsdale Advisors, noted companies were fine when they began actively trying to solve their gender-diversity issues.

“We believe that if you now add another segment of the population to your board, it’s probably going to make your business even better,” Hall said. “So why not do it?”

Source:  Visible minorities vastly underrepresented in the boardroom, new disclosures suggest

How do we fill the pipeline with board-ready women?

While the issues facing women are different, there may be some parallels with respect to increasing visible minority and indigenous representation:

On Tuesday, countries around the globe join in celebrating International Women’s Day, honouring the achievements of women and mobilizing with programs to close the gender gap. This year’s theme, Pledge for Parity, is a call to accelerate equality, with a special emphasis on shrinking the gender gap in leadership positions.

It’s time to consider what this means for Canada’s leadership landscape. We need to take a close examination of who our CEOs are and who is seated in our boardrooms.

It has been just over a year since new regulations required companies listed on the Toronto Stock Exchange to annually disclose the percentage of women on their boards of directors and in executive officer positions. Now companies must report their goals and the actions being taken to increase their figures, or provide reasons when no such targets exist.

Proponents of the legislation hope that the guidelines will raise the percentage of board seats held by women to 30 per cent – but even they acknowledge that progress beyond that level will require a more robust pipeline of female executive candidates. To truly achieve gender-balanced boards, we need to examine some of the root causes of the imbalance. While tremendous energy is being exerted on quick fixes, how do we take a long-term approach?

As someone who works closely with boards and CEOs to identify and develop the next generation of business leaders, I believe that we need to closely examine women in mid- to senior-leadership positions today to build a more robust executive pipeline – particularly since many companies are inadvertently hampering their own progress.

Consider what happens when a high-potential female executive returns from family leave, seeking a position that allows her to ease back into the workforce. Often, companies respond supportively by transitioning her from an operational role into a functional support role, allowing for career development that builds functional expertise and deepens her contribution and seniority without the time and travel demands of operational leadership.

At face value, this seems to be a win for all parties. But there’s a catch. These women with exceptional potential wind up in positions where they get overlooked for future growth or profit-and-loss leadership opportunities. Their steady success in transitional and functional roles limits their potential for future CEO or board roles.

As board positions become available and nominating committees seek new director candidates, they invariably prefer those who have been CEOs or heads of business units, bringing effective P&L management.

Our research shows that 21 per cent of the direct reports to the CEO of TSX 250 companies are women, while two-thirds of those women are leading support functions. Of the direct reports who have operating leadership roles, just 7 per cent are women. The pipeline of board-ready women doesn’t flow.

While we work to make the number of women in the boardroom rise above 30 per cent, both corporate Canada and female executives need to focus on building operational excellence. We must have more female contenders for CEO succession, and in order for this to happen, must collectively consider and thoughtfully engage in career-path decision-making.

Only by addressing these root issues can we hope to move toward full gender equality at the top of the corporate pyramid.

Source: How do we fill the pipeline with board-ready women? – The Globe and Mail

Enough inertia. It’s time for gender quotas in the boardroom: Wells

Jennifer Wells on the need to legislate diversity in the boardroom (because it’s 2016?):

German Justice Minister Heiko Maas offered a more vibrant take, declaring the legislation “the greatest contribution to gender equality since women got the vote.” In other words, the greatest contribution in 100 years.

Here’s the message: when companies won’t budge, legislate.

Here’s the underlying message: left to their own devices, companies won’t budge.

Germany’s experience is not unique. Of course it isn’t. Watch as jurisdictions introduce voluntary quotas. Observe the snail’s pace of change across a decade or two.

Observe Ontario. Nine months after securities regulators, including the Ontario Securities Commission, adopted their so-called “comply or explain” policy, a toothless bit of silliness if ever there was one, fully 65 per cent of TSX issuers sampled reported that they had not adopted a policy aimed at identifying and nominating women directors.

Let me amend that: it’s not that those issuers had yet to adopt the recommended policy, but that they had made the decision not to adopt.

We are in the dark ages.

In 2002, women in Norway comprised six per cent of the country’s board members. The government of the day initially took the voluntary approach, appealing to publicly listed companies to up their game. That didn’t happen. The solution: amendments to company law. New rules, introduced in 2006, demanded that boards of publicly listed companies be comprised of at least 40 per cent women. That did happen.

France took a two-stage approach, giving publicly listed companies until 2014 to reach 20 per cent representation. As of next year, the requirement jumps to 40 per cent.

Iceland (40 per cent). Spain (40 per cent). Finland (40 per cent). There are too many examples to be documented here.

Some quota skeptics have been brought on board, including an initially resistant Christine Lagarde, managing director of the International Monetary Fund.

One of the arguments against quotas is that board parity, or a move toward parity, hasn’t thus far equated in the research to a significantly higher number of women in top management. Women CEOs remain as scarce as hen’s teeth.

Yet it has been demonstrated, most recently in a report this week by the Washington-based Petersen Institute for International Economics, that the representation of women in the C-suite correlates to improved corporate profitability. “For profitable firms, a move from no female leaders to 30 per cent representation is associated with a 15 per cent increase in net revenue margin,” the authors found. (The report was based on a survey of 22,000 firms across 91 countries, albeit it was a single-year snapshot.)

The researchers qualified their analysis as possibly too crude — their words — to discern the significant positive effects of board quotas. But they did cite a correlation between the presence of women on boards and the presence of women in executive ranks. “If increased gender diversity in corporate leadership contributes to firm performance, if quotas have negligible costs, and if the presence of women in the C-suite enhances the pipeline effect by encouraging more women to pursue these positions, as is often claimed, then some kind of quota system may warrant consideration.”

What we do know is that any expectations that boards will organically reshape themselves into balanced assemblies of men and women have not, and will not, be met.

In June 2014, Kellie Leitch, then Canada’s minister for the status of women, announced that a reasonable national goal was to “aspire” to 30 per cent representation on boards by 2019. The result: inertia.

I find “aspire” to be a very genderized word. Like “upset.”

Let’s choose instead “anger” and a need to “force” a dynamic outcome.

Quotas are the way forward. We can discuss a range of sanctions for failure to conform, from empty board seats (I agree) to, as in Norway, threatened dissolution for non-compliant companies (a step too far).

A chorus of voices will no doubt rise in opposition here, citing the argument that directors should be chosen on merit. Excellent idea. Move to parity and you just might find that future members are indeed chosen on merit and merit alone.

Source: Enough inertia. It’s time for gender quotas in the boardroom: Wells | Toronto Star