Constellation Software Inc., the Toronto tech company whose stock has risen sixfold in the past five years, is the last firm in the S&P/TSX 60 index to bring a woman on to its board of directors, after yielding to pressure from investors.
A year ago, a shareholder resolution calling for diversity on Constellation’s all-male board garnered support of 42 per cent of votes, a strong signal of backing among investors for change. In March, Constellation appointed former long-time Deloitte LLP partner Lori O’Neill to its board.
Company shareholders, however, voted again on a diversity resolution at Constellation’s annual meeting last Thursday. This time, there was 49-per-cent support, and while the shareholder resolution again failed to pass, it was the largest backing for a gender diversity board proposal in Canada, according to the Shareholder Association for Research and Education, an advocacy group also known as SHARE. (Shareholder proposals are non-binding, but they are clear indications to company leaders about what their investors are thinking on specific issues.)
The vote shines a light on the shifting views in corporate Canada about the importance and value of diversity on boards of directors and in executive suites. But it also highlights the slow pace of change. Among 660 public companies in Canada, just one in seven board seats are held by women, according to research from the Canadian Securities Administrators, and almost three-quarters of those companies have only one – or no – women on their boards.
Jason Donville, an investor in Constellation Software for the past decade, supports the call for greater diversity on the company’s board.
“We see diversity as an opportunity,” said Mr. Donville, president of Donville Kent Asset Management Inc. of Toronto. “It creates strength in your organization. And when big chunks of our society aren’t represented on boards, it’s hard to argue: ‘Don’t worry about it.’”
Mark Leonard, founder, CEO and chairman of Constellation Software, did not respond to an e-mail request for an interview. Mr. Leonard did address the gender diversity question at length in his annual letter to shareholders on April 20.
“Qualified and competent directors are very rare, and not surprisingly, the track record of most boards is awful,” Mr. Leonard wrote. He described trends of independent directors, greater diversity on boards, and term limits as “tools-du-jour” for fixing boards. Mr. Leonard, who recommended investors vote against the diversity resolution, noted his company has added Ms. O’Neill to the board and is working to include more diversity among candidates when it looks for directors and officers.
Mr. Donville, who has watched Constellation Software grow into one of Canada’s biggest tech names, urged the firm to further diversify its board. He said there is an array of female technology talent, starting at the engineering and computer science departments of leading schools such as the University of Toronto.
“What would be really awesome is to put some female technology talent on the board,” Mr. Donville said. “They’re out there. It’s something that will only make the firm stronger. You’re telling me you don’t want a professor from the U of T on the board of Constellation? You’ve done software better than everyone else. Now do diversity better than everyone else.”
SHARE has put forth a handful of diversity proposals in Canada in the past couple of years and has tracked similar votes in the United States. Last year, of nine votes on board diversity in the United States, two gained majority support among votes cast by investors, according to SHARE.
In Canada last year, alongside the Constellation Software resolution, SHARE pushed for a similar vote at Canfor Corp., the Vancouver forestry company whose board was all-male. About half the shares of Canfor are controlled by billionaire Jimmy Pattison, but the resolution received 32 per cent support of all votes. Canfor’s board remains all-male, and the company didn’t respond to a request for comment on Monday.
SHARE last year also put forth a diversity resolution at Restaurant Brands International Inc., the parent company of Tim Hortons. Management did not oppose the resolution, but major shareholder 3G Capital Partners voted against. Almost two-thirds of independent shareholders were in favour, according to SHARE. Restaurant Brands has one woman among its directors, Cecilia Sicupira, who joined in mid-2016.
Delaney Greig, an analyst at SHARE, said a key factor in change will be companies embracing specific strategies to go beyond a single woman on the board.
“There’s definitely progress, but to move that progress beyond tokenism is the next step,” Ms. Greig said. “It’s not just that a woman gets on the board or in an executive chair but that there’s a plan for the longer term, how diversity is going to be addressed in future, so that it doesn’t require a shareholder resolution.”
Positive trends include women gaining prominence at the country’s largest publicly traded companies, as well as women receiving more consideration for vacant seats. According to the Canadian Securities Administrators, 24 per cent of board seats are held by women at companies worth $10-billion or more, compared with 14 per cent of companies in general.
The research also showed one-quarter of board vacancies last year were filled by women.
Still, Canada ranks far behind countries such as Norway and France in terms of board diversity. In those countries, where gender representation on boards is legislated, about four in 10 directors are women.