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corporate governance

This is part of a series examining corporate governance issues at Canadian companies.

Tim Hortons Inc. had a 12-member board with three women before Burger King acquired the company in late 2014. When the new company, Restaurant Brands International Inc., rolled out its leadership, its 10-member board was all-male.

This year, the company had an opportunity to name at least one female director – and did not, choosing to add another man instead. Restaurant Brands is one of just two companies in the S&P/TSX 60 with no women on the board.

Enough is enough, says shareholder OceanRock Investments Inc., which has placed a resolution on the Restaurant Brands proxy statement calling for a written board diversity policy, which the company also lacks. Shareholders will vote on the measure at the company's annual meeting Thursday. The company has declined to oppose the measure, and proxy advisory services, including Canada's Shareholder Association for Research & Education, are recommending shareholders vote in favour. This will make the vote an interesting test of shareholders' appetite for pushing companies to diversify their boards.

The Canada Pension Plan Investment Board, Ontario Teachers' Pension Plan and British Columbia Investment Management Corp. have all voted in favour of the shareholder proposal, and BCIMC has also withheld its vote for Alexandre Behring, chairman of the company's nominating committee, "for a lack of adequate gender diversity on the board."

"[Restaurant Brands'] approach has been 'just trust us' and we'll get there, but the evidence points the other way," says Fred Pinto, the head of wealth and asset management for Qtrade Financial Group, OceanRock's parent. Mr. Pinto notes pre-merger Burger King had no female directors and no female senior executives, and Restaurant Brands' board nominating committee is made up entirely of former Burger King directors. "So the proposal was spurred not only by the lack of women, but by the lack of a plan and the lack of a good track record."

By any measure, Restaurant Brands lags. Proxy advisory service Institutional Shareholder Services says of the 111 consumer services companies in the U.S. Russell 3000 Index, 81 per cent have at least one female director and 51 per cent have two or more. Of all Russell 3000 companies, 75 per cent have at least one female director.

Proxy advisory service Glass Lewis says its 2015 review of board gender diversity in 14 different global markets found that 75 per cent of all companies reviewed had at least one woman on their boards and 100 per cent of Canadian companies in the consumer discretionary sector had some level of female board representation.

While the Ontario Securities Commission made regulatory amendments on board and executive diversity, they can be considered "comply or explain," in which companies are allowed to make disclosures rather than adhere to strict rules.

The OceanRock proposal is a request for Restaurant Brands to adopt and publish a formal, written board diversity policy and provide a report outlining "the board's plans, timelines, process and activities for increasing gender diversity on the board of directors and amongst senior management."

Restaurant Brands declined to comment for this article, instead pointing to the response it provided to shareholders in the proxy statement.

In its defence, Restaurant Brands said its board has amended the charter of its nominating and corporate governance committee so that it must "consider diverse candidates in terms of race, gender, geography, thought, viewpoints, backgrounds, skills, experience, and expertise." Any recruiting firm used for a director search "will be instructed to seek to include diverse candidates."

"While our board has determined not to make a recommendation either in favour of or opposed to the shareholder proposal, we believe that our current practices and recent enhancements to our new director candidate selection process support board diversity," the company wrote to its shareholders.

Restaurant Brands' recent changes still leave it closer, in its policies, to companies with a lack of gender diversity. First Quantum, the other S&P/TSX 60 company with no female directors, says its written diversity policy defines diversity "in the broadest sense" to include "expression of thought, business experience, skill sets and capabilities."

First Quantum's board "has determined that merit, skills and business background is the key requirement for board appointment and employee advancement. As a result, the diversity policy does not mandate quotas based on any specific area of diversity and specifically does not set targets for women on the board or in executive officer positions."

Other companies, however, have chosen very specific guidelines and goals, particularly for gender diversity.

Canadian Imperial Bank of Commerce told shareholders in its proxy this spring that it enhanced its board gender diversity policy by increasing its target from "25 per cent to 30 per cent" women on the board by 2017 to "at least 30 per cent" women. It has already met that goal, as the April board election resulted in a board that's 35 per cent women. "All dimensions of diversity are considered valuable when hiring, advancing and developing our executive population, as well as our leadership pipeline, and is critical to ensuring an inclusive environment that supports all leaders and employees," CIBC told shareholders.

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