For a number of years now, research has demonstrated that there
is a compelling business case for having women on corporate boards.
Whether you look at the ROE or related metrics, statistics
demonstrating that female directors pay more attention to oversight
on audit, risk management and management performance, or the
linkage between women directors and an increased ability to attract
and retain female talent, there is a growing consensus that having
a critical mass of women directors leads to better corporate
Given the data, Canadian corporations should be concerned that
only 14.5 per cent of board seats in corporate Canada are held by
women, and that this represents only a .5 per cent increase since
2009. Even worse, considering more and more Canadian companies
compete globally for markets and talent, Canada is lagging behind
other countries including the U.S., Germany, the United Kingdom and
Australia - and the gap is increasing each year. In fact, a full 40
per cent of Canada's most important corporations do not have a
single female board member.
It is for this reason that the Federal government and some
provincial governments are looking for ways to accelerate the pace
of creating more diverse boards. On April 5, 2013 Rona Ambrose,
Federal Minister of Public Works and Government Services
and Minister for Status of Women, announced that the Federal
Government was establishing an advisory council to promote the
participation of women on public and private corporate boards.
In making the announcement, Minister Ambrose recognized the
business case for having women on boards:
"Increasing opportunities for women to serve on corporate
boards makes good business sense for Canadian women and for
Canada's economy," said Ambrose. "Businesses with
more women on their boards are more profitable and routinely
outperform those with fewer. The role of the advisory council will
be to advise our government on how industry can increase
women's representation on corporate boards."
The Federal Government's advisory council includes Beverley
Briscoe, Anne Giardini, and Tracy Redies from B.C. The advisory
council's goals include making recommendations on how industry
and government can track and measure progress in this initiative
and what tools, if any, government should employ to achieve this
goal. The advisory council is tasked with coming back with
recommendations for government by this coming fall.
Seven years ago, the Quebec legislature took steps to mandate
equal representation of men and women on that province's public
sector corporations by enacting legislation which set a five-year
target for achieving equal numbers of men and women directors.
Whether or not you agree with affirmative action, the legislation
was effective - by 2011 the overall percentage of female directors
was 52.4 per cent, despite the fact that not every corporation
achieved the 50 per cent target. Presumably, this action will have
some a trickle down effect on private sector corporations.
Yet another approach is being considered by the Government of
Ontario. It has announced that it would be working with the Ontario
Securities Commission to enact regulations which would require
publicly traded companies to disclose their goals regarding
representation of women on their boards, and to assess their
progress annually. It is proposed that failure to do so would
result in these companies having to explain themselves. This
approach is commonly referred to as the "comply or
explain" system of ensuring corporate governance objectives.
Initially introduced in the UK, "comply or explain"
initiatives are viewed as an alternative to mandatory quotas and
regulations. At its heart, is the business principle that
"what gets measured, gets done."
While "comply or explain" initiatives are usually
considered to be a better alternative to setting quotas, they have
had mixed success depending upon the influence, or perceived
influence, a negative report or poor results would have on the
corporation's shareholders or stakeholders. On the other hand,
"comply or explain" initiatives have the benefit of
avoiding the unintended, negative consequences of affirmative
action initiatives. Ambrose has put together a talented group of
individuals on her advisory council. It will be interesting to see
what advice and recommendations the advisory council have, and
whether it is able to convince Canadian corporations that the ROI
of having a critical mass (if not 50 per cent) of women on boards,
This article was originally published in the Vancouver Board of
Trade's July 2013 edition of Sounding Board.
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