Nearly seven months have passed since the formal amendments to National Instrument 58-101 – Disclosure of Corporate Governance Practices and Form 58-101F1- Corporate Governance Disclosure were announced by securities regulators, imposing enhanced disclosure requirements with respect to female representation on boards (the Gender Disclosure Requirements). Although the new requirements do not mandate quotas, they impose stringent disclosure obligations on TSX-listed issuers.
With International Women's Day just behind us, just how well are Canadian companies doing with gender diversity?
The Canadian Board Diversity Council's 2014 Annual Report Card (the Report Card) shows that there has been some progress: in 2014, women held 17.1 % of FP500 board seats, up from 15.6% in 2013. The industries with the most gender diversity on boards (greater than 20%) were the Arts, Entertainment and Recreation, Utilities, Finance and Insurance, Retail/Trade and Information. Those that were the least diverse included the Mining/Oil/Gas industries, with less than 9.7% of board seats being held by women. Despite these numbers, the majority of FP500 director respondents felt that their boards were already diverse. They overwhelmingly reported that diversity was important to them, yet few companies had a written diversity policy in place.
An analysis of TSX60 companies painted a slightly better picture, with women representing 20.1% of directors. However, yet again, very few respondents reported that their boards annually take an active interest in the diversity of the talent pipeline for senior executives.
Overall, the Report Card demonstrates that over the past decade, Canada has witnessed a slow and steady increase in overall female representation on boards. In the US, a recent study published by Ernst & Young also shows that progress towards gender parity is not significant: the percentage of women on boards has only increased by 5% in the last ten years, and there are less women on boards than the proportion of seats held by directors named John, Robert, James, and William. What's more, most companies that have added female directors have done so by expanding their board size rather than replacing seats currently occupied by men with women. Of the S&P 1500 companies surveyed by E&Y, 98% of those with 12 directors had at least one woman on the board, as opposed to only 54% of those with seven directors.
Empirical evidence demonstrates that companies with even only one woman director outperform those with none. So why are companies still struggling to increase female board representation?
It may be the case that a disclosure requirement is not enough and in fact, mandated minimum may be essential. Under the Business Corporations Act (Ontario) (the OBCA), a minimum number of directors must be Canadian resident (see Section 118(3)). In the legislative debates relating to amendments to the OBCA that reduced the number of Canadian resident directors required to transact business from a majority to 25%, the Toronto Board of Trade stated:
We note that section 20 of the bill would eliminate the requirement that a majority of directors at a meeting be resident Canadians in order to transact business. This, in effect, permits the non-resident directors to transact business without the input of any Canadian colleagues. While we welcome this added flexibility, we note that it appears to be inconsistent with the goal of having Canadian input on business decisions. [Emphasis added]
Is it a far stretch to state that a goal within Canada is also to have female input on business decisions? Notwithstanding that it has been shown business performance would benefit from greater female input, we are not seeing a noticeable increase in female representation on boards. Given the slow pace of voluntary change, shareholders will need to speak up and demand greater female representation if they want to see increased representation.
The author would like to thank Carole Gilbert, articling student, for her assistance in preparing this legal update.
 Canadian Board Diversity Council, 2014 Annual Report Card.
 The Credit Suisse Gender 3000: Women in Senior Management, Credit Suisse Research Institute, August 2012; Global Gender Gap Report 2014, World Economic Forum.
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