There were still three companies on the S&P 500 with all-male boards at the start of 2019. By the end of the year, there were none. The holdouts—Skechers, the footwear maker; travel website TripAdvisor; and Copart, an online vehicle auctioneer—all added women within the span of a few months.
It’s a bit surprising that companies have been slow to diversify their boards, given the hundreds of studies demonstrating the benefits that come from better representation of women and people of colour in positions of authority. To wit, a recent study from the University of Calgary’s Haskayne School of Business shows companies with women on their boards perform better on environmental issues than those without female representation. Using data from Sustainalytics, a firm that rates companies’ sustainability, researchers found boards with women directors were more likely to have formal environmental policies, protecting biodiversity and reducing air emissions.
“Diversity, put simply, is good,” says Irene Herremans, a Haskayne professor who co-authored the study with her former PhD student Jing Lu. As the pair writes: “Diversity allows for a healthy mix of knowledge and experience to improve the decision-making process of the board.”
Moreover, the researchers found the beneficial impact of having women as directors is more pronounced in environmentally sensitive industries, such as mining, forestry and energy, compared with other sectors, such as finance. “Women think a little bit differently than men. So they bring a different point of view to a board,” says Herremans. They also offer unique skills. By comparing directors’ biographies, the study found 18.6% of women have expertise in sustainability, compared with 5.1% of men. Women more often have backgrounds in government or academics, or working for NGOs; those varied experiences lead them to value different corporate objectives.
Men are inclined to focus on the economics of business and to be more skeptical about the environmental effects of their industries. “Women tend to be a bit more practical and risk-averse,” says Herremans.
The researchers do worry their study’s implications might be misconstrued. “We don’t want companies to interpret our results as saying, ‘Okay, if I just put more women on our board, we are going to have better environmental performance.’ That’s not what our intention is. We want them to put qualified women with environmental experience on their boards,” says Lu, now an assistant professor of accounting at the University of Guelph’s Gordon S. Lang School of Business and Economics.
The researchers observed companies appointing one or two women to their boards for the sake of optics, in a practice dubbed “twokenism.” But in Canada, even symbolic progress is slow. Statistics Canada released a study in January of 10,108 public, private and Crown corporations that revealed the majority of them—61.7% in 2016 and 61.2% in 2017—had boards completely devoid of women. Women held just 17.8% of the board seats covered by the Statistics Canada study. A year later, there was a paper-thin increase to 18.1%.
And while the benefits of adding women to boards is well-documented, the exact reasons are unclear, says Claude Francoeur, a professor at HEC Montréal and a leading expert on the subject. “One thing that’s been assumed,” he says, “is that a more gender-diverse group at the board table tends to discuss issues more in-depth than a board that is just men alone. It helps break down the groupthink that often happens in more homogeneous groups.”
If reams of evidence show diversity improves corporate governance and performance in such increasingly important areas as environmental and social sustainability, why are North American companies slow to appoint women to boards or the C-suite? “It’s not easy to explain,” says Francoeur. “[Men] have subconscious biases. It’s human nature. You tend to want to hire people that are similar to you.”
To overcome that phenomenon, corporations in European countries such as Germany, Spain and France have been legally required to have women holding at least 40% of their board seats. (Skechers and the other holdouts made their changes in the face of new diversity regulations in California.) No such quotas exist in Canada, though there’s mounting pressure for governments and other bodies to push harder for diversity in corporate governance.
As of Jan. 1, companies governed by the Canada Business Corporations Act must provide information to shareholders about what efforts they are making to nominate women and members of minority groups to their boards and senior management. If they have no such policies, they must also explain why.
That might eventually help women and break corporations’ bad habit of choosing board members from a mostly male pool of current or former CEOs. “It’s a vicious circle,” says Francoeur. “It’s really hard to get out of that.”