Ontario is crafting new rules requiring public companies to set targets for the number of women in senior roles, a move with national implications that could reverse Canada’s decline in global standings for gender diversity in the corporate world.
Laurel Broten, Ontario’s minister responsible for women’s issues, revealed in an interview that the provincial government is working with the Ontario Securities Commission on ways to compel companies to set goals for boosting the number of women sitting as corporate directors, as well as in senior management.
Ontario is eyeing a “comply or explain” approach: Companies must either publicly disclose a diversity policy, including goals, and provide a public annual assessment of progress, or explain why they have set no goals.
“We’re saying, ‘Have the conversation. Focus on it, and set your own targets,’ ” Ms. Broten said Monday.
“But we must do something different than is being done right now. The world is describing our progress right now as ‘glacial’ in relation to other countries, and we are slipping.”
The proportion of women serving as directors of Canadian public companies has been stuck at about 10 per cent since the mid-2000s, even as the number of women in senior business roles increases in other countries.
The provincial government signalled its intent to address that gap in the latest provincial budget in early May, saying it would work with the OSC to “consider the best way for firms to disclose their approaches to gender diversity.”
A new OSC rule would cover any company that has shares traded in Ontario, in essence setting a nationwide standard for Canada’s largest public companies.
At least nine countries have some form of quota for women on boards, and many others have disclosure and reporting rules. Canada has none, although the Quebec government requires parity on boards of provincially run Crown corporations and agencies.
Ms. Broten says “comply or explain” standards have a history of success in Canada on other issues. They would allow companies to develop their own strategies, rather than having the government impose a mandatory quota that requires all firms to have the same proportion of women on their boards.
“It won’t be a one-size-fits-all approach, but it will be that you need to have this conversation about your approach to gender diversity,” she said.
Boards without female members have traditionally argued there is a shortage of qualified senior businesswomen to fill director seats, especially among smaller companies, and that the problem would be exacerbated if companies are forced to hire more women.
Others say there is no shortage of experienced businesswomen, and note that even smaller companies have found female directors when they make the effort.
Organizations such as women’s advocacy group Catalyst Canada, the Institute of Corporate Directors and the Canadian Board Diversity Council all have databases of available female directors that companies can tap for board searches. Catalyst has even arranged for senior business leaders to serve as references for women, providing the personal endorsements often needed to secure board appointments.
Alex Johnston, executive director of Catalyst Canada, said the Ontario government’s plan should help Canada to regain ground it is losing to other countries that have taken action on the issue.
Catalyst says the proportion of women on boards of publicly traded companies in Canada is virtually unchanged in recent years, climbing to 10.3 per cent of all board seats in 2011 from 10.2 per cent in 2007.
The Australian Institute of Company Directors reported this month that women fill 15.7 per cent of board seats in Australia’s 200 largest public companies, an increase from 8.3 per cent in 2009.
While many Canadian companies have been slow on board diversity, over the past year, more than a dozen companies – including Bank of Montreal and Royal Bank of Canada – publicly signed the “Catalyst pledge,” agreeing to adopt voluntary gender diversity targets for their boards.
Yet more than 40 per cent of Canada’s major companies in the S&P/TSX composite index have no women on their boards, Ms. Johnston said.
The Institute of Corporate Directors, which represents more than 5,000 board members in Canada, says it has been urging companies to develop diversity policies and disclose them, arguing the approach is better than legislated quotas.
The ICD would be supportive if regulators in Ontario and across Canada picked up on that model and built it into a comply-or-explain rule, ICD chief executive Stan Magidson said.
The powerful Canadian Coalition for Good Governance, which represents most of Canada’s largest institutional shareholders, with more than $2-trillion in assets under management, also recently came out in support of “comply or explain” rules.
CCGG executive director Stephen Erlichman said in an interview on Monday that his group believes mandatory quotas are too blunt an instrument, but endorses comply or explain rules as a “significant step.”
Ms. Broten said women are close to parity on the Ontario government’s own agencies, boards and commissions. “What I would say to business is that we achieved success of 47 per cent women because we focused on it and it was important, and we made an effort to find women through the Public Appointments Secretariat,” she said.
Editor's Note: An earlier version of this story incorrectly said women account for 47 per cent of directors on the Ontario government’s agencies, boards and commissions. In fact, women make up 42 per cent of all directors and 47 per cent of directors who are full-time employees of the organizations.Report Typo/Error