The diversity of boards has become a target of greater scrutiny.
This scrutiny has come not only from activist investors seeking
higher returns and better governance, but from governments and
various interest groups outside the corporation. It has honed in on
a variety of director characteristics, including length of tenure,
age, gender, and visible minority status. This post begins by
discussing some of the latest metrics on board diversity in Canada.
It then looks at some of the recent measures governments and
regulators have been taking to increase diversity in the
Length of tenure
According to a Financial Timesanalysis, the average length of tenure of
directors for the Canadian companies studied is just above 7.5
years. This is among the longest length of tenure for the countries
represented in the data. While the United States has a longer
average tenure, at roughly 8.5 years, most European countries have
lower average tenures, with Norway, Finland and the Netherlands
each averaging roughly 4.5 years.
A 2015 study by Spencer Stuart, which looked
at 100 TSX-listed companies with revenues over $1 Billion, states
that the average age of non-executive Canadian directors was 63 as
of 2015 (this study was previously discussed on this blog,
in a post by Jenny Yoo). There is also some evidence that age
has been increasing. For the companies in the study, the average
age of non-executive directors in 2010 was 61.
In 2015, 19.5% of Canadian directors at FP 500 companies were
women, according to the Canadian Board Diversity Council's
("CBDC") 2015 Report Card survey. This
represents a 2.4% increase over 2014. While the Financial
Times analysis suggests Canada has a slightly higher
percentage of female directors than the United States (roughly
15%), the figure is significantly behind that in several countries,
such as France (roughly 37%) and the Netherlands (roughly
42%)—though both have quota systems.
Visible minority status
The CBDC states 7.3% of directors at FP 500 companies report
belonging to a visible minority. A paper by Anita Anand and Vijay Jog has
suggested that roughly 5.5% of TSX directors belong to visible
There is increasing evidence that governments and regulatory
agencies are willing to intervene in the area of board diversity.
In Ontario, 2014 saw the introduction of a "comply or explain
policy" on gender diversity by the OSC. Ontario Premier
Kathleen Wynne has also encouraged companies to appoint more women to
their boards, stating that by the end of 2017, companies are
encouraged to set a target of appointing 30% women to their boards
and achieve it within 3 to 5 years of setting it. Attention towards
these kinds of measures is not confined to Canada. SEC Chair Mary
Jo White indicated in a recent speech that SEC staff will be
recommending that the SEC require "more meaningful"
diversity disclosure on board members and nominees in proxy
All of this suggests that issuers should be aware of the
sharpening focus on the composition of their boards and prepared to
explain how board members are chosen.
The author would like to thank Joe Bricker, articling
student, for his assistance in preparing this legal
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