Rahul K. Bhardwaj is president & CEO of the Institute of Corporate Directors
One measure rarely factored in board performance is innovation.
This may be because the question is too big: "How innovative is your board?" is almost impossible to answer in any measurable way.
But one function of innovation we can all measure is diversity. And I believe the more we view diversity as a driver of innovation, the better Canada's boards, companies and economies will perform.
I have recently returned from the Institute of Directors in Southern Africa conference in Johannesburg, and it's clear that just as diversity is a big competitive advantage for Canada in attracting the best and brightest from around the world, so, too, is good governance a growing force in attracting capital, business and people to our shores.
These three concepts are all connected, of course. Greater diversity promotes better governance, which in turn promotes more innovation. After all, what is innovation but new thinking translated into the marketplace?
By diversity, I don't just mean promoting gender, ethnic and age diversity on boards. That said, if your board looks much as it did 10 years ago, you have a problem. I also mean diversity in being able to master the context and environment in which companies operate.
To say we live in an era of unprecedented change wildly understates the speed, scope and hurricane power of the forces at work in the marketplace, the boardroom and the corridors of power.
Given this, innovation in the makeup and thinking of boards is not just nice to have; it's critical to an organization's survival. When an app created in a teenager's garage can cause the boards of big banks to adjust their entire business models, those boards have to be even more agile, disruptive and innovative in their thinking.
To my mind, the one tangible way to both understand this level of innovation, and demonstrate it, is through diversification. I say this because now more than at any time in Canada's history, there is a direct connection between an engaged, knowledgeable, ethical and prepared board of directors and an organization's ability to advance, innovate, profit and grow.
If you're going to be ready for the astoundingly different world tomorrow will bring, you need the right people at the table.
But do we have enough of these right people on our boards?
Frankly, no. At least not yet.
In September, the Ontario Securities Commission reported that only 21 per cent of issuers have adopted a board diversity policy, and that only 12 per cent of total board seats are occupied by women.
So we have a choice. We can moan about it or we can do something about it.
And the companies choosing not to wait are the ones poised for performance. They have made the case for board diversity by implementing rigorous board evaluation processes and skills, competency and behavioural matrices. They have drafted diversity policies that set targets for the percentage of women who will serve on their boards against realistic timelines.
They have also recognized that identifying experienced, talented female candidates is not a barrier to board diversification. The Institute of Corporate Directors has over 3,500 women in the ICD Directors Register. Nearly a thousand of them have their ICD Directors' Designation, which means they're not only board-ready, but in many ways innovation-ready. One reality is becoming clear from the recent political upheavals in the United States and Britain: They were a function of the precipitous decline of trust in institutions of all kinds. Yet, Canada has been faring well because of our strong systems of oversight and accountability.
All the more reason I believe Canadians should recognize and exploit our emerging competitive advantage. However, as with all our natural resources, good governance is renewable only if it is continually renewed. Establishing greater diversity on our boards is long overdue – recognizing that it's about performance, not conformance.
We just have to exert the will to make diversity happen.
Think of it this way. In the time it took you to read this article, that teenager in the garage could have said, "Why don't we have an app for that?" and set in motion an innovation that could transform your industry.
Will your board have the agility in action that comes from diversity in thinking? Will they be able to turn an unknown threat into an unheard of opportunity?
They should. They can. And more and more, they must.