Ontario’s proposal to create a voluntary disclosure rule to boost women on boards is unlikely to cause much improvement and will likely have to be turned into a quota, warns the head of Ontario Teachers’ Pension Plan.
Speaking at a public forum Wednesday hosted by the Ontario Securities Commission, Jim Leech said Canada has a smaller proportion of women on corporate boards than countries like Turkey and Poland. He said voluntary disclosure rules can be tried for three or four years, but will probably end up being rejected as inadequate.
“Let’s skip this intermediate step we don’t think is going to work,” Mr. Leech proposed.
Teachers has urged regulators to instead require all public company boards to have at least three women directors.
The OSC organized Wednesday’s meeting to hear feedback on a possible new “comply or explain” disclosure rule that would require companies to report annually on their progress in getting more women on their boards and in senior management. Companies would have to provide the disclosure or explain why they have opted not to comply.
OSC chairman Howard Wetston told the forum he views the initiative as “essentially an exercise in legitimacy and modernization.” He said the OSC plans to report to the Ontario government this fall on how it will proceed.
The packed session heard comments from senior business leaders, including incoming Royal Bank of Canada chair Kathleen Taylor, who said she supports the OSC initiative but wants regulators to keep the rules flexible enough that companies can define for themselves what constitutes a “critical mass” of diversity.
Former Home Depot Canada CEO Annette Verschuren said she would prefer companies to drive diversity initiatives without regulatory intervention, but said there has been no progress and even Crown corporations, which have been leaders in diversity, have seen their numbers slip.
But she warned some companies are so far behind that they need time to start making reforms before tougher standards are introduced, including requiring companies to set firm targets as part of their “comply or explain” disclosure.
“I think there are sectors that need to do a lot of work, and it takes time,” she said.
Pamela Jeffery, founder of the Canadian Board Diversity Council, said the OSC’s rule is needed to spur reform because women will not reach parity on boards in Canada until 2097 at the current pace, according to new research from her organization. “We’re all dead. Our children are dead,” she said.
Women’s advocacy group Catalyst has calculated it will take 20 years just to shift the proportion of women on the boards of Canada’s 500 largest organizations from 15 to 25 per cent.
“I don’t think anyone is comfortable with that,” said Catalyst Canada executive director Alex Johnston.
However, Ms. Johnston told the forum only 90 companies a year would need to add one more woman to their boards to reach 25 per cent within five years. She said it is a target that is not overly daunting and should be achievable.
Osgoode Hall Law School professor Aaron Dhir, who has studied the impact of board reforms in a host of countries, said it is very early to assess how well voluntary comply or explain rules have worked elsewhere, but said research suggests the pace of reform has been “sluggish and uneven.”
“So far we’re not seeing resounding endorsements,” he said.
Wednesday’s forum also included calls for the OSC to broaden its initiative to cover more types of diversity, especially ethnic and racial diversity.
Stan Magidson, CEO of the Institute of Corporate Directors, said a survey of his members found overwhelming support for a broader initiative. But Mr. Leech from Teachers said women are a logical starting point “if you have to eat this elephant one bite at a time” because they comprise half the population and half the work force.