Several years ago, my son came home from school and lectured my husband and I on our driving habits. His class’s emphasis on environmental initiatives meant that each student was asked to examine their carbon footprint and our son received demerit points for being driven to school. The exercise intrigued me since it taught these children that believing in a strong, social initiative sounds good but it must also translate into action. We walk to school now.
As adults, perhaps it’s easy to forget how actions speak louder than words and this week’s Board Games report in The Globe and Mail reminded me just how many words we’ve uttered on the topic of gender diversity in the boardroom.
Although the Board Games analysis marks its 11th year, progress remains “glacial,” with 41 per cent of companies on the S&P/TSX index still without a single woman on their board.
Despite this, and years of hand-wringing over board diversity, we cannot reach a consensus on how to properly tackle the issue in this country. Our current approach appears to be to talk about it. But I worry that the mere conversation about women on boards has been mistaken for progress.
Right now, the same arguments keep getting recycled but with little momentum. The strongest one comes down to the effect of diversity on corporate performance and it’s been almost nine years since Catalyst’s study showed that greater gender diversity at the top translates into higher returns for shareholders.
Companies with more women in top management showed a 35-per-cent higher return on equity and 34-per-cent higher total return to shareholders. The underlying premise is that a variety of opinions and perspectives lead to better boardroom discussions – and hence, decisions – and that positively affects the bottom line.
Various solutions exist , the most extreme being legislated quotas, an idea that continues to be a hard sell in Canada.
“No one wakes up in the morning and thinks ‘I want a quota,’” quipped Lucy Marcus, CEO of London-based Marcus Venture Consulting and the host of In the Boardroom with Lucy Marcus. Ms. Marcus argues that the impetus behind the proposed European Union legislation, which pushed for 40 per cent of company directors to be women by 2020, played an important role: the mere debate, she argued, instigated change.
“Now that this conversation is happening and people are taking it seriously, companies and indeed countries must be seen to be making real progress, as it is not an issue that can be ignored. What is at stake is too important – it is about building strong economies and strong companies,” she added.
The threat of quotas as a vehicle for a wider discussion on boardroom diversity has yet to take hold in Canada, largely since legislation is viewed as a remote possibility.
“I don’t think it’s the Canadian way,” said Spencer Lanthier, a corporate director and a 2011 Institute of Corporate Directors fellowship award recipient about government-mandated quotas. He agrees that constantly talking about women’s representation on boards, without establishing any concrete solutions, remains unsatisfactory. He suggests companies should embrace an “achieve or explain” approach – where they have to be publicly accountable if they don’t reach published targets. If the governance community in Canada embraced this tactic, few companies would relish going on the record to explain their lack of female representation.
The key to this approach relies on a commitment to proper recruitment. He recounts his time on the board at the TSX Group, where recruiters were specifically asked to only source female candidates for two vacant board seats.
For those still arguing that the approach of implementing quotas or restricting applicants to women would bring unqualified candidates to the table, consider the landmark Davies Report in Britain that showed that only 4 per cent of board directors in 2011 participated in a formal interview before getting appointed. What would the percentage be in Canada if we ran a similar poll?
But perhaps this worry that talk about gender diversity has replaced action remains a harsh assessment; there have been signs of progress. For example, 12 Canadian companies including Manulife Finanical, Ernst & Young and McCarthy Tetrault, signed the Catalyst Accord, an initiative by the non-profit group calling for top Canadian companies to ensure 25 per cent of their board members are women by 2017.
Additionally, the Canadian Board Diversity Council, an organization committed to advancing diversity on corporate boards, this week released its first list of 50 board-ready men and women, vetted by leading Canadian CEOs.
“Never before has there been this much interest in board diversity with so many stakeholders weighing in to say ‘now is the time for action,’” said Pamela Jeffrey, founder of the Canadian Board Diversity Council, referencing not only her organization’s initiative but the Federal government’s announcement during the last budget that they will create an advisory council to tackle the issue.
“I daresay Canadian boards are almost at the tipping point,” and are moving in the right direction, she added.
Let’s hope she’s right because there are still voices out there encouraging a “wait and see” approach, such as Inmet Mining chairman David Beatty who suggested checking back on the issue in five years. Unfortunately, that mindset has contributed to this “glacial” progress. If we continue to talk, and concrete progress isn’t made in the coming years, the calls for legislation will only become louder.