Canada: Women On Boards And In The C-Suite: Will Institutional Investors Close The Gender Gap?

The Canadian securities regulators recently reported on their three-year review of women on public company boards and in executive officer positions. While progress has been made for female representation on boards and in the Canadian C-Suite, the overall pace of change has been slow.

Nearly 40 per cent of all issuers continue to have no female directors or executive officers.1 While there have been gains at the board level, the representation of women in executive officer positions has remained relatively flat over the last two years. From 60 per cent in 2016, now 62 per cent of issuers have at least one woman in an executive officer position.

Only 14 per cent of all board seats are held by women, a modest 3 per cent increase from two years ago.

Despite the overall stats, large-cap issuers continue to lead the way: women hold 20 per cent of the board seats of issuers with market caps over $1 billion (a 4 per cent increase over the last two years) and 24 per cent of the board seats of issuers with market caps over $10 billion (a 3 per cent increase over the last two years). The CSA's review notably does not capture the larger Canadian banks who have been early implementers of diversity initiatives–last year, women held, on average, 35 per cent of the board seats of the six largest banks.2

Regulatory Impetus for Change

At the end of 2014, Canadian securities regulators implemented new disclosure requirements for Canadian issuers relating to female representation on boards of directors and in executive officer positions.3 The rules, which follow a "comply or explain" model, do not mandate the adoption of formal policies or targets. Instead they are intended to increase transparency for investors and other stakeholders about an issuer's gender diversity practices.

Three years in, the disclosure requirements, coupled with increased public interest, appear to have produced some results. Perhaps the greatest progress has been recorded for women gaining access to previously all-male boards. More Canadian reporting issuers now have at least one woman on their board: the total has risen from 49 per cent of issuers in 2015 to 61 per cent.

More positive news: the number of issuers that have adopted a policy relating to the representation of women on their boards has more than doubled over the last two years, now reaching 35 per cent. According to the regulators, issuers with policies in place also tend to have a higher percentage of women on their boards.

But women in director positions continue to account for a significant minority of Canadian board seats.

Mixed results have also been reported in the United States. According to the Head of ISS Analytics at Institutional Shareholder Services Inc., at the end of the 2017 proxy season, boardroom gender diversity was one of the top governance issues. However, ISS notes that while the proportion of board seats occupied by women is on the rise, the number of women serving on each board is not growing as quickly. Overall, women are gaining access to more directorships, but shrinking boards appear to be contributing to a greater percentage of board seats being occupied by women.4

The Influence of Institutional Investors

Like many developments in corporate governance, we anticipate that institutional investors who form the largest shareholder base in corporate America and Canada will be critical in driving any meaningful increase in female representation on boards and in the C-Suite. Increased scrutiny on board composition, and in particular the number of women on boards, has become a growing area of focus for this class of investors.

In the United States, State Street Global Advisors, who has focused on diversity issues including gender equality, announced earlier this year that if companies failed to take action to increase the number of women on their boards, despite its best efforts to engage with them, it intended to use its proxy voting power to effect change.5

Board composition is also a top priority for BlackRock, according to its policies for 2017-2018: BlackRock intends to engage with companies to better understand their progress on improving gender balance in the boardroom. BlackRock considers that diverse boards (including diversity of expertise, experience, age, race and gender) make better decisions, and intends to hold nominating and/or governance committees accountable for an apparent lack of commitment to board effectiveness if no progress is made within a reasonable time frame.6

Increased scrutiny on board composition, and in particular the number of women on boards, has become a growing area of focus for institutional investors.

In Canada, the representation of women on boards is also garnering more attention from institutional investors. While they have traditionally engaged with boards behind closed doors to advocate for governance or other strategic initiatives, institutional investors are becoming more openly vocal about the value of a diverse board that includes women.

The Canadian Coalition for Good Governance (CCGG), which counts among its members a broad range of institutional investors, has adopted a gender diversity policy.7 In its policy, the CCGG states that the CSA should go further than the current rules and advocates for regulators to recommend the adoption of gender diversity policies in corporate governance best practice guidelines.

The CCGG states that the CSA should go further than the current rules and advocates for the adoption of gender diversity policies in governance best practices.

The topic of diversity is also a theme appearing in investors' proxy voting guidelines, such as those of Ontario Teachers', which expressly encourages gender diversity on boards, including a minimum representation of three women on a board, and regularly engages with companies on this topic.8

A number of chief executives of Canadian institutional investors now form part of the 30% Club, a global organization focused on encouraging the inclusion of women at all levels, "from schoolroom to boardroom."9 The 30% Club has set an aspirational goal for 30 per cent of board seats and C-Suite positions to be held by women in Canada by 2022.

Catalyst, a nonprofit organization seeking to accelerate progress for women in the workplace, has advocated for the earlier adoption of more specific targets. In its 2016 report commissioned by the Government of Ontario, Catalyst recommended that, by the end of 2017, all issuers that currently have one woman director set a 30 per cent target for female board representation, to be met within three to five years. Catalyst also recommended a minimum target of 40 per cent of women in government's agencies, boards, commissions and Crown corporations, to be achieved by the end of 2019.10

Meanwhile in the United Kingdom, diversity goals are moving beyond gender to ethnic diversity: the Parker Review Committee, led by Sir John Parker, has released a report in which it recommends each FTSE 100 Board should have at least one director of colour by 2021 and each FTSE 250 Board do the same by 2024.11

For the time being, as the drive for gender diversity in boardrooms and the C-Suite continues to gather momentum among U.S. and Canadian institutional investors, we expect issuers will further engage on this initiative, with the largest gains for women yet to come.

Other Highlights of the Regulators' Report

Targets Remain Unpopular. Issuers with targets set for female representation on their boards rose an additional 2 per cent, reaching a total of 11 per cent of issuers with fixed targets now in place. Formal targets are even less common at the executive office level—at 3 per cent of issuers in 2017, having inched up slightly from 2 per cent in the previous two years.

Women in Industry. Industry continues to be a significant driver in the overall results. The retail, utilities and manufacturing sectors lead the pack on female board representation while mining, oil and gas and technology issuers continue to lag behind. However, in the last year there has been a double-digit jump in the percentage of mining issuers with women on their boards, increasing by almost 20 per cent year-over-year to 54 per cent of mining issuers in 2017.

Board Renewal and Vacancies. Notwithstanding the regulatory push, only 26 per cent of board vacancies in 2017 were filled by women. Introducing term limits, as a means of fostering board renewal and increased representation, has had moderate uptake so far: only 21 per cent of issuers have adopted age or tenure limits for directors.

Reporting Woes. The regulators identified a number of disclosure deficiencies among Canadian issuers:

  • disclosure of both the number and percentage of women on the board and in executive office positions each year;
  • a clear explanation of how an issuer's written policy (if adopted) applies to the identification of women directors;
  • annual and cumulative progress in achieving a target for female representation (where one has been set);
  • how an issuer considers the representation of women in its selection process, where the issuer discloses that it does; and
  • a description of term limits and any other mechanisms of board renewal, and how they contribute to board renewals.

Footnotes

1 See CSA Multilateral Staff Notice 58-309 – Staff Review of Women on Boards and in Executive Officer Positions – Compliance with NI 58-101 Disclosure of Corporate Governance Practices. This notice reports findings based on a review sample of 660 TSX-listed issuers with year-ends between December 31, 2016 and March 31, 2017.

2 At page 6 of the CSA report. The CSA's review excludes issuers with year-ends outside of the period between December 31 and March 31.

3 See Torys' 2014 analysis " Women in the C-Suite: Can Securities Law Advance Gender Equality?"

4 See "The Delightful Dozen: Top Governance Advances in 2017," John Roe, Institutional Shareholder Services, Inc. July 19, 2017.

5 See SSGA's Guidance on Enhancing Gender Diversity on Boards, March 2017.

6 See BlackRock's engagement of priorities for 2017-2018: https://www.blackrock.com/corporate/en-us/about-us/investment-stewardship/engagement-priorities#governance.

7 See CCGG Policy – Board Gender Diversity October 2015.

8 See Ontario Teachers' 2017 Corporate Governance and Proxy Voting Guidelines.

9 See https://30percentclub.org/.

10 See Catalyst's report "Gender Diversity on Boards in Canada – Recommendations for Accelerating Progress".

11 See "A Report into the Ethnic Diversity of UK Boards, Final Report," 12 October 2017.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions