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More work must be done to boost gender diversity in Canada’s boardrooms

Ekta Mendhi is senior director of corporate strategy at CIBC. She serves as the co-chair of Women in Capital Markets' Women in Leadership Network. Beatrix Dart is the professor of strategic management at the Rotman School of Management. They co-founded and co-chair the Canadian Gender and Good Governance Alliance. This column reflects content developed in partnership with members of the Alliance

Why does gender diversity on boards matter? Because purposeful board composition can enhance decision-making processes and augment an organization's performance and market reputation.

There is strong evidence that companies with gender-diverse boards are more likely to yield stronger financial results in the long term, and to enjoy a more positive and empowering organizational culture. They lead by example, sending a clear message that they value diversity of thought and experience. Research has shown the greatest benefits of diversity come with female representation between 40 per cent and 60 per cent at all levels.

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Many boards have demonstrated intentional commitment to nominating women, and there are lessons to be learned from their success.

Collectively, however, the numbers are disappointing: only 14 per cent of all board seats at TSX-listed companies are held by women. In fact, 39 per cent of TSX-listed companies still have no women on their boards. And when boards have gender diversity, it is most often (in 55 per cent of those companies) in the form of the lone female director.

The largest Canadian companies with more than $10-billion market cap have almost 25-per-cent female representation on their boards. In contrast, those with a market cap of less than $1-billion (65 per cent of TSX-listed companies) have only 10-per-cent female representation.

The retail, utilities and manufacturing sectors are leaders in board diversity, whereas our resource sectors of mining and oil and gas (more than 40 per cent of TSX-listed companies) have the least gender-diverse boards: Roughly 50 per cent of these firms have no women on their boards.

To make any meaningful advancement, it is important to recognize why there has been insufficient progress to date. Some companies use the "merit" argument to explain why they are not specifically looking for a female board director.

Often, attempts by boards to improve gender balance yield poor results simply because the board is stuck in its old networks. The need for collegiality and familiarity promotes homogeneity that does not guarantee effectiveness nor the right skill level.

Gender diversity on boards is a matter of good business as much as an issue of fairness. An extensive body of research points to the significant relationship between board gender diversity and corporate performance. Simply put, organizations with gender-diverse boards and senior leadership teams exhibit higher returns on equity, higher valuations and higher profits.

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Over an eight-year period, S&P/TSX companies with at least one woman on their board produced an annual 11-per-cent compound return – outperforming peers by more than 3 per cent.

In a recent survey of Canadian board directors, more than half of respondents (51 per cent) stated that a lack of diverse thinking is a barrier to innovation in the economy.

The Institute of Corporate Directors has also shown that companies with diverse boards tend to file more patents. If Canada aspires to be an innovation economy, this has far-reaching implications.

There are a number of tools to improve gender diversity and to realize its benefits in the boardroom – well documented in a "Directors' Playbook" developed by the Canadian Gender and Good Governance Alliance. But these tools are only effective in the presence of clear and intentional leadership by the chair of the board and the CEO, clearly stated diversity objectives, strategic recruitment and inclusive practices.

Corporate Canada enters 2018 at the cusp of a seismic shift. Institutional investors are rallying to press companies to reach the 30-per-cent goal by 2022. Governance research and leading practices are cascading down to small and medium enterprises. Several board-ready lists featuring the most accomplished women in Canada are being developed by organizations such as Women in Capital Markets and Catalyst, and provided to boards as a resource.

Bill C-25 has amended the Canada Business Corporations Act to, among other things, reform some aspects of the process for electing directors. The Ontario Securities Commission is seriously weighing whether to mandate targets for the number of women in director positions and executive roles for public companies.

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Momentum is building, and we invite corporate leaders to join the movement.

Help build a pipeline of women ready for senior leadership and corporate boards. When you have a position to fill, demand a balanced slate of women and men – don't accept a male-only shortlist, nor the response that there aren't enough qualified women.

Familiarize yourself with the Directors' Playbook (at cggga.ca), use it, and help raise awareness. If there are companies on your radar for whom corporate governance is going to become an important theme – for example, a company on the verge of an IPO or a family-run business in the succession process – send them the Playbook as a toolkit, share an easily accessible board-ready list of potential women candidates, and/or point them to the Alliance.

And as we are facing an increasingly volatile world economy, let's recognize what so much research points to: that companies with diverse boards and leadership teams are better at managing risk. In times of corporate or economic crisis, they have demonstrated better decision making.

We, not just as corporate leaders but as society, are stakeholders – and this affects us all.

Hadiya Roderique is a former lawyer in Toronto. As a PhD candidate studying organizational behaviour and human resources, she discusses her own work experience and ways to improve diversity and retention in the workplace. The Globe and Mail
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