Forty per cent of the world’s largest publicly listed companies have not appointed a single woman to their boards and even in major markets such as Japan, Italy, the United Kingdom, the United States and Canada, women continue to be grossly under-represented.
That’s according to GovernanceMetrics International, which found the aggregate percentage of women on Canadian boards was 12.9 per cent in 2011, an increase of just 0.7 percentage points from 2009. And the percentage of Canadian companies with at least one female director is now 71.8 per cent, up from 68.4 per cent in 2009, according to its March 2011 Women on Boards Report.
While the presence of women on corporate boards has very slowly improved over the years, there is still much room for improvement — let alone gains to be made, according to groups pushing for gender parity.
“If we want to have the positive benefits of having women on boards, one is not sufficient. You have to have a critical mass in order to have the benefit and some scholars will say that the critical mass must be around 25 per cent of a group,” said Sylvie Champoux-Paillé, a board member at Mouvement d’éducation et de défense des actionnaires (MÉDAC) in Montreal, a shareholder rights group that has put forward a proposal for gender parity on boards in Canada for three years.
Studies have shown better representation of women can lead to better performance in a financial crisis because women have a different management style and, where risk-taking is concerned, tend to be more cautious and take prudent positions, said Champoux-Paillé. More women on boards can also improve governance and decision-making, she said, as seen in a 2002 Conference Board of Canada study that compared the performance of boards with three women versus no women.
Employers are limiting representation on the boards to a portion of the population, said Carol Hansell, a senior partner at Davies Ward Phillips & Vineberg in Toronto. “There are talented women who would make excellent directors and they’re not really being considered.”
If everyone feels the same way about everything, you’re basically going to have a more stunted conversation, said Laura O’Neill, director of law and policy at the Shareholder Association for Research and Education (SHARE), which has recommended shareholders vote against the nominating committee of boards of directors if there are no women on the board.
But, over the last 10 to 20 years, the changes to board representation can be described as glacial, said O’Neill.
“That’s what’s prompting the real sense of urgency around this issue now and really starting to kick at the door a little bit more than just politely knocking.”
Judging by Canada’s 2011 proxy voting season, there’s still some kicking to do. The average percentage of shareholders in favour of MÉDAC’s proposal for “a critical mass of women on their board of directors” was 9.5 per cent, based on five major banks, up from 5.5 per cent in 2008, said O’Neill.
However, 18.3 per cent of Bank of Montreal shareholders voted in favour of the proposal in March. RBC came next at 10 per cent, followed by Scotiabank at 6.93 per cent, TD Bank Financial Group at 6.9 per cent and Laurentian Bank at 5.27 per cent.
While the average is below 10 per cent, it’s still a huge cross-section of investors, said O’Neill.
“That’s a lot of investors looking at the proposal and saying, ‘I think this makes sense.’”
It’s also possible some shareholders might be less in favour of the proposal if their board already has a stronger representation of women, she said, citing Laurentian’s 13-member board, which has five women.
“The proxy ballot is a fairly crude instrument and you don’t have a space to write in your explanation of why,” said O’Neill.
The recommendations in the proxy circulars can definitely have an impact. While laying out MÉDAC’s possible competitive advantages to women on boards, — such as better performance during a financial crisis and better governance and decision-making — the banks stated adoption of the proposal was not needed.
“Our commitment to diverse representation on the board helps ensure we draw on the best talent available when seeking candidates for the board,” said TD’s circular. “However, we do so without losing sight of our main objective of ensuring the overall board has the right mix of skills, experience and capabilities to serve the bank and its shareholders.”
Scotiabank has three women on its 14-member board, which compares favourably with other major Canadian banks, it said.
“Gender is just one factor among the many factors considered by the board and the committee in the review of prospective directors,” said Scotiabank’s circular. “It would be inappropriate to constrain the board in this regard by imposing a requirement that a fixed percentage of directors must be women.”
Board recommendations tend to hold considerable sway, said O’Neill.
“I certainly don’t see Canadian shareholders as docile sheep. At the same time, they very carefully consider what the board has to say.”
Most companies want to focus on the best-qualified people without having to take into account issues they don’t think are relevant, said Hansell.
“Ideally, gender shouldn’t be relevant,” she said. “Companies don’t want to find themselves restricted in terms of who they will look at. There are very few board positions and they don’t come up all that often and they want to make sure they have the very best people available to them.”
“Beyond that, some investors, shareholders look at this as being a social issue, not a corporate issue and there are other issues that are of greater concern to them,” said Hansell, citing say on pay and majority voting as examples.
The criteria used to assess whether someone is suitable for a board are also working against women. Between 45 per cent to 50 per cent of board members are CEOs or ex-CEOs, said Champoux-Paillé.
“If we look at women in the CEO function in Canada, we don’t have a lot of them. So, when you are using such criteria, there is a gap,” she said.
However, some boards are looking at greater flexibility in terms of specifications, said Hansell.
“When they kind of re-evaluate what it is they’re actually looking for, they’re looking for people who have been in senior leadership positions in an organization and they may find divisional heads are fine or functional heads will get them what they need.”
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