New disclosure requirements that oblige corporate stock issuers to report on their approach to gender diversity are having little impact on the status of women in Corporate Canada’s boardrooms and executive suites.
In 2014, the Ontario Securities Commission (OSC) led the introduction of new disclosure requirements to improve the representation of women at the highest levels of Canada’s public companies. Under these requirements, issuers had to: report publicly the number of women that comprise their senior leadership (directors and executive officers); disclose their policies on gender diversity in recruiting and hiring for these roles; and reveal whether they have diversity targets.
The idea was to give companies a nudge to improve diversity by increasing transparency in this area generally, and by empowering shareholders to consider these issues as part of their voting and investing decisions.
Yet, when the rules were being formulated, critics warned that simply setting new disclosure requirements would not be enough. For example, the heavyweight Ontario Teachers’ Pension Plan Board argued at the time that mere disclosure wouldn’t be effective and that regulators should consider setting quotas (as several other countries have done) if the regulators expect to see dramatic improvement in the representation of women at the most senior levels of public companies.
Apparently, the critics were right. In late September, the Canadian Securities Administrators (CSA) released the results of its latest review of issuers’ disclosure regarding women on boards, which shows very little real progress.
For example, the review found that, overall, women now hold 12% of board seats at the firms reviewed, up slightly from 11% in the previous year. Similarly, there was very little change in the proportion of women in executive officer jobs; in fact, 41% of firms reported having no women in their executive suite, up from 40% of firms a year ago.
Nevertheless, there is some improvement. For example, the CSA reports that 55% of issuers now have at least one woman on their board, up from 49% a year ago. Furthermore, the number of firms with at least three female directors rose, albeit slightly, to just 10% from a mere 8% in 2015.
In terms of issuers’ approach to gender diversity, the CSA review found that a higher proportion of firms reported that they’ve adopted policies to identify and nominate female directors (21%, up from 15% last year). As well, the use of explicit targets also increased a bit, although the overall level remains very low: just 9% of companies reported they have set a target for female board representation, up from 7% in 2015. (But just 2% of companies have targets for executive diversity, unchanged from a year ago.)
“We are seeing progress and some encouraging trends,” says Maureen Jensen, chairwoman and CEO of the OSC. “Companies that have policies or targets in place have a higher percentage of women on their boards. That makes common sense. Companies that commit to a greater representation of women are making progress because what gets measured gets done.”
Indeed, the CSA found that companies that have adopted board targets have an average of 25% women on their board vs an average of 10% for firms without targets. Similarly, issuers that have adopted a policy on recruiting and nominating female directors reported that their boards are 18% female, on average, vs just 10% for firms that don’t have such a policy.
Despite these signs of progress, Jensen notes, regulators “are seeing some results that are confounding.”
Although the CSA report doesn’t specifically drill into board vacancies and how they are filled, Jensen reports that the OSC looked into this issue as part of its research.
“The results here were disappointing,” she says, noting that just 15% of the 521 board seats that came up for grabs last year went to women. “That means 85% of the time, the seat was filled by a man. Without an improvement here, we will never reach 30% female board representation.”
Moreover, when companies fill vacancies, that’s an opportunity to demonstrate their commitment to improving diversity, Jensen says: “Board turnover is the time when companies can provide leadership to get serious about increasing gender diversity. We encourage Corporate Canada to make gender diversity a priority.”
So far, that’s not the case – although larger issuers may be heading that way. The CSA report notes that the biggest companies (those with market capitalization of at least $10 billion) now have boards that are 23% female, on average, up from 21% last year. These bigger firms also are much more likely to have targets for having women on their boards, as 31% of these companies do.
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