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More than half of Canada’s largest companies have adopted formal policies for increasing the proportion of women on their boards of directors, but only a small minority are creating specific targets for gender diversity.

More than half of Canada's largest companies have adopted formal policies for increasing the proportion of women on their boards of directors, but only a small minority are creating specific targets for gender diversity.

A review of proxy circulars filed this year shows 56 per cent of companies in Canada's S&P/TSX composite index have adopted policies to address the representation of women on their boards, while 44 per cent have no policies. Most of the policies were developed over the past year after Canadian regulators announced new guidelines requiring companies to report annually on their approach to improving gender diversity on their boards or explain why they have no policies, according to the study by law firm Torys LLP.

Lawyer Rima Ramchandani of Torys, who co-authored the report with two colleagues, said that while regulators hoped the policy would spur a large majority of companies to adopt diversity plans, some are still working on new board policies or are waiting to see how their peers respond.

"I would have thought we would have seen more, but I do think it's early days and I suspect next year and in a few years there will be an increase in that number," Ms. Ramchandani said.

The new disclosure rule, which took effect Jan. 1, requires companies to report on how many of their directors and senior officers are women, explain whether they have a written policy regarding female directors, and disclose any targets the company may have adopted for women on their boards. The rule is known as a "comply or explain" standard, which means companies do not have to comply and have the option to instead explain why they do not have diversity policies or targets.

The most common reason cited by companies for not having a diversity policy or not developing targets is that their board candidates "are selected based on merit" rather than gender, followed by concerns that the policies would reduce their board's flexibility or would be unduly restrictive. Five companies said their industry is male-dominated or the talent pool of available female directors is too small, and four said they feel their level of diversity is already adequate.

The report said only 24 companies, representing 13 per cent of the sample, had measurable targets for women on their boards, and most had already met the targets they set, which Ms. Ramchandani said suggests companies are reluctant to set targets unless they know they are achievable.

"The rules require that you measure your progress in achieving the targets, so there's a general feeling that we don't want to set aspirational or stretch targets without doing a deep enough dive that we feel confident we can meet them," she said.

Companies with targets are not typically aiming for gender parity on their boards. The most common target is 30-per-cent female directors, followed by targets of 25 or 33 per cent.

The Torys review looked at 179 companies in the S&P/TSX index that had filed their 2015 proxy circulars as of May 10, which accounted for 71 per cent of the index. The study did not provide details for individual companies or break down companies by industry sector, but it separately looked at nine Canadian financial institutions including major banks, which have Oct. 31 fiscal year-ends and did not have to comply yet with the new disclosure rule.

The study found seven of the nine financial institutions reported having a diversity policy, and had an average of 34-per-cent women on their boards, compared to an average of 16.4-per-cent female directors among all companies in the survey. Women accounted for just 15 per cent of all directors of S&P/TSX index companies in 2014, so the preliminary data from the 179 companies in the study suggest the proportion may have grown this year.

"The advantage of these new rules is that they really force the board and the governance committee to actively think about this and put it on the agenda," Ms. Ramchandani said. "It was on the agenda for some previously, but now it becomes something they have to talk about every year at least."