Corporate Canada is running a deficit – a diversity deficit.
A recent Osler report found that women hold only 16% of board seats at TSX-listed companies, and a staggering 66% of boards have either one or zero women.
The figures are even more dismal for the C-suite: women account for only 3.3% of CEOs among TSX-listed companies, and there is only one – yes, one – female CEO among the top 100 publicly traded companies in Canada, according to a report from BNN Bloomberg.
This diversity deficit persists despite the fact that women are outpacing men academically: Girls have been outperforming boys in school for decades, and women are earning about 60% of all bachelor’s and master’s degrees.
Why gender diversity matters for business
This severe gender imbalance is unjust, and it paints a stark picture of how far we have to go on gender equality. A lack of women in leadership also means lost opportunities for companies and investors – there is intrinsic value in having a gender mix around the table.
Data collected by Catalyst Inc. shows that gender diversity is associated with corporate outperformance on a number of financial metrics, including earnings per share, return on assets, return on equity, return on sales, revenue and share price performance.
In a recent McKinsey study, researchers found that companies actually pay a price for lacking diversity. Companies ranked in the lowest quartile on diversity were 29% less likely to achieve above-average profitability.
A gender mix is also beneficial from a risk-management perspective. An MSCI report found that companies with gender-diverse boards tend to have fewer instances of controversial business practices such as fraud, corruption and bribery.
The evidence clearly suggests that companies ignore gender diversity at their own — and their shareholders’ — peril.
Responsible investors take action: gender lens investing
Gender lens investing is a relatively new concept that refers to investing with the intent to address gender issues. Gender lens investing is on the rise in Canada as responsible investors lean in to narrow the gap in corporate leadership.
For example, Canada’s two largest institutional asset owners, the Canada Pension Plan Investment Board (CPPIB) and the Caisse de dépôt et placement du Québec (CDPQ), are engaging with their investee companies to promote more women in leadership. In 2017, CPPIB asked 45 Canadian companies with all-male boards to add women directors. A year later, nearly half of those companies had added a female director. Active ownership can be a powerful tool to influence corporate practices.
But in some cases, companies on the receiving end of these requests will respond with excuses such as “There are no qualified female candidates to join our board.”
Give me a break.
The responsible investment team at CDPQ now maintains a database of highly qualified female directors, which they send to male-dominated boards who claim such falsehoods.
The retail market is also seeing leadership on gender lens investing. A growing number of mutual funds and ETFs are available to retail clients who are seeking exposure to women-led companies. For example, BMO, RBC, Mackenzie and State Street offer thematic products that invest in companies with a minimum ratio of women in senior leadership positions.
Other Canadian efforts are also underway to promote more women in leadership. Earlier this year, Addenda Capital and NEI Investments launched an investor statement of voting intentions on board diversity. On the corporate lending side, CIBC has launched a social bond framework to provide financing for companies that prioritize gender diversity in leadership roles. And more than 260 Canadian executives have become members of the 30% Club, a network of business leaders that aims to achieve better gender balance in corporate leadership.
Although there is still a long road ahead to achieve gender parity, these recent developments are cause for optimism. A growing cohort of market participants are clearly recognizing that companies and shareholders will be better off with more women in leadership. It’s kind of a no-brainer when you think about it: Why wouldn’t a company want access to half the population’s talent?
Considering the benefits that come with a gender balance, the diversity deficit highlights a wealth of unrealized opportunities for companies and investors. The rise of gender lens investing is good news for responsible investors and society as a whole.
Editor’s note: this column was updated on May 1, 2019, to include comments on the unjustness of gender imbalance.