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Starting this year many Canadian companies will resolve to boost diversity on boards and in senior management ranks. New regulations from the Ontario Securities Commission, which seven provinces and two territories have adopted, now require Canadian companies trading on the Toronto Stock Exchange (TSX) to report annually on their policies for increasing diversity on their boards of directors or else explain why they have opted not to comply.
Reporting on policies will be easy compared with the commitment and change required to promote qualified women to the highest ranks in an organization. Egon Zehnder recently analyzed nearly 1,000 of the largest publicly traded companies worldwide (with market capitalizations in excess of $5.5-billion), including 50 in Canada, and found both signs of progress as well as stubborn challenges for female women leaders.
Companies in the U.K., for instance, have benefited from voluntary measures to increase female representation. Our analysis shows that, since 2004, women's share of board positions among the largest publicly traded British companies has jumped to nearly 23 per cent from 10 per cent. But women in chief executive officer and board chair roles are still rare; only 5 per cent of FTSE 100 companies have a female CEO.
Our analysis of the 50 largest publicly traded Canadian companies shows a similar pattern of improvement and opportunity. Of the companies studied, women's share of all board seats has increased to 18.3 per cent in 2014 from 17.6 per cent in 2012, but women hold only two board chair positions and represent less than 4 per cent of executive directors on these boards.
To address the global shortfall of women in leadership roles, we've launched several initiatives, including a London campaign "25 in 2025," the goal of which is to get to 25 female CEOs among the U.K.'s FTSE 100 companies by 2025. In general, it takes years to nurture and guide high-performing employees to senior leadership – typically 20 to 30 years from university graduation to CEO – so we advise companies to focus on broader skill sets and potential when considering women for the top jobs.
As publicly listed companies come to terms with a worldwide push to increase board diversity, boards, top management and female candidates each have an important part to play.
· Broaden your definition of leadership experience. The focus should not be on whether a candidate has had financial responsibility, but whether he or she has competence in an area that the board is lacking.
· For any shortlist of candidates, commit to half being women. This exposes the board to highly qualified female candidates they might not otherwise see and compels all candidates to genuinely compete for the position.
· Trust in-depth evaluations of candidates and new director training to reduce concerns regarding a lack of prior board experience.
· Integrate diversity into board succession planning far in advance of vacancies.
· Establish a program to identify talented female executives.
· Provide those executives opportunities to round out their capabilities and readiness for CEO roles, such as overseas assignments, operational roles of scale, exposure to regulatory bodies, and cross-industry leadership roles.
· Encourage talented women to pursue board service and introduce "board-ready" candidates to influencers, search firms, and other board-level executives.
· Seek experiences that provide the breadth of view and responsibility that would prepare you to deal with broad oversight at the board level.
· Seek sponsors both inside and outside the company, and networking with relevant individuals and organizations; do not assume that high performance will suffice in getting your name in circulation.
· Aim appropriately. More than 1,500 companies list on the TSX. Target board service that aligns with your career path and offers opportunities to learn and grow.
· Be bold, take risks, and don't be intimated by lack of board experience.
The new securities rules that took effect on Jan. 1 are an opportunity for organizations to turn their commitment to diversity into action. Our research shows that countries and companies can achieve great progress voluntarily without government-imposed quotas.
With the optimism of a new year ahead of us, let's be bold and resolve to accelerate diversity on corporate boards and realize the promise of the well-established business case.
Pamela Warren leads searches for CEOs, senior executives and board directors across industries for Egon Zehnder, the world's leading privately owned executive search firm, and is a regular speaker at the University of Toronto Rotman School's director education program.