Women on Boards: A Competitive Edge

Great leadership generates great results

In an increasingly fast-paced and ever-changing global market, companies need to sustain a competitive edge.

A range of talent, experience and skill in the boardroom drives performance and generates better results. Executives are looking to attract the best. However, they may be missing out on a key source of talent: women. Countless skilled and experienced women are ready to take on the challenges of the corporate boardroom and contribute to the success of companies across Canada.

Benefits of Having Women on Boards

Diversity of talent is associated with diversity of thought. Research shows that having women in the boardroom is linked to better business results.Footnote 1 Benefits of having women in the boardroom include:

Increasing the number of female directors is not just about creating equal opportunities for women. It's about strengthening the performance of Canadian companies in a global economy.

Women on Boards: An Untapped Competitive Advantage

Women make up almost half of the Canadian labour force, and yet:

How does this stack up globally? In 2011, Canada ranked ninth among major industrialized nations in the representation of women on boards—down from sixth place in 2009.Footnote 4

Canadian companies can take action and make change happen.

Six Ways Companies Benefit from Having Women on Boards

1. Strong Financial Performance

Having women on boards is good for business.

Research has shownFootnote 5 that companies with more women on their boards tend to outperform their competitors on a number of financial measures, including:

For example, Catalyst tracked the performance of Fortune 500 companies between 2004 and 2008 and found that companies with the most female directors outperformed those with the fewest. They yielded:

A 2012 study by Credit SuisseFootnote 7 found that the financial benefits linked to having women on boards were more pronounced in the post-2008 period than in the three years leading up to the stock market crash. The researchers concluded that the evidence suggests gender balance on the board brings greater stability throughout the market cycle.

Spotlight: TransCanada Corporation

Number of Women on Board: 3/10

TransCanada Corporation, an energy infrastructure company based in Calgary, sees the advantage of promoting diversity across the company and actively seeks out qualified women for board positions. TransCanada draws from lists of highly skilled and experienced "board-ready" women developed by organizations like Catalyst and the Canadian Board Diversity Council, and evaluates these candidates against a matrix of skills and expertise needed by the board.

TransCanada is committed to encouraging gender and cultural diversity across the company, including the board of directors. Ensuring a broad representation on our board is not just something that is nice to have; it is essential. We recognize that having people with different viewpoints and backgrounds enhances our decision-making, helping to keep it informed and prudent. Women can bring valuable perspectives that an all-male board may lack.

Barry Jackson, Chair of TransCanada Corporation's Board of Directors

2. Top Talent

Recruiting qualified women and men ensures that boards draw from the biggest and brightest talent pool.

Women make up a significant portion of key candidate pools, including:

Companies with women on their boards are better able to attract and retain excellent employees. Footnote 10 Women are drawn to companies that already have women on their boards, because they see opportunities to advance. Having women in the boardroom sends a strong message that a company is progressive and recognizes merit. These companies become employers of choice for the best candidates.

In the war for talent, this is a serious competitive edge.

Spotlight: Intact Financial Corporation

Number of Women on Board: 4/11

Intact Financial Corporation is a Canadian provider of home, auto and business insurance. The company believes that achieving greater diversity enriches its discussions, broadens its thinking and improves the depth of its strategy development.

Embracing diversity reinforces the importance of valuing differences for the entire organization and better enables Intact to reflect the varied perspectives of its stakeholders.

The Canadian economy needs the contribution of all the diverse talent in the country to achieve its full potential and improve our standard of living.

Claude Dussault, Chair of Intact Financial Corporation's Board of Directors

3. Heightened Innovation

Having women on boards fosters creativity and innovation.

Research shows that Fortune 500 companies with female directors are better than others at identifying and capitalizing on innovative opportunities.Footnote 11

Having both women and men on boards brings varied perspectives and experiences to the boardroom table. Diversity of thought counteracts "groupthink" and encourages board members to consider a broad range of ideas and possibilities.

Staying Ahead of the Pack

Companies with women on their boards tend to be highly innovative. They:

Numbers Matter

Companies can cultivate innovation by making sure they have at least three women on their boards. In general, the presence of three women on a board forms a critical mass that changes board dynamics to foster creativity and encourage new ideas.Footnote 13

4. Enhanced Client Insight

Boards that reflect the composition of society can better understand the needs and preferences of their clients.Footnote 14

This leads to:

In fact, consumer-facing industries have a higher representation of women on their boardsFootnote 15 in part because they know that a female perspective is crucial to their business success.

A board of directors that includes women tends to communicate more actively with clients and shareholders.Footnote 16 This helps companies improve their stakeholder insight and understanding, and build stronger relationships.

Spotlight: Shoppers Drug Mart

Number of Women on Board: 5/11

Shoppers Drug Mart, a drugstore retailer based in Toronto, uses a number of strategies to increase the representation of women on its board. For example, the board chair and the nominating and governance committee begin the director recruitment process by identifying competencies needed to enhance board dynamics. Then, they ensure women are proportionately represented on the list of candidates.

Some other strategies Shoppers uses to promote board diversity include:

In addition, when Shoppers began recruiting women to its board, it appointed two at the same time. This was to give the board a better chance of changing behaviours and successfully integrating the new directors.

It is very simple in my mind: a successful board requires diversity—not only in terms of gender, but also experience, strategic thinking, geography, personality (character) and industry. You are seeking people with different viewpoints and the courage to speak up and challenge each other in a respectful manner. You want a board culture that challenges the status quo and has the right board dynamics. It takes time, but it is worth the effort in the long term to build a board that excels.

Holger Kluge, Chair of Shoppers Drug Mart's Board of Directors

5. Strong Performance on Non-Financial Indicators

Corporate social responsibility (CSR) is a core element of a company's reputation.Footnote 17 Stakeholders judge a company not simply on its profitability, but also on its contributions to local and global communities. A positive reputation increases a company's ability to retain its market value.Footnote 18

Companies with both women and men on their boards tend to have a positive CSR profile, characterized by:

Spotlight: Manulife Financial

Number of Women on Board: 5/16

Manulife Financial, based in Toronto, is a financial services company with principal operations in Canada, the United States and Asia. Changes in Manulife's board over the past four years created opportunities for the company to search for new directors with the right set of skills to advance the company's strategic direction.

Manulife's Board Diversity Policy outlines factors to consider when nominating new directors, including gender, ethnicity, and geographic representation. The company conducted an extensive, disciplined search for top talent, and the outcome was a diverse set of candidates. Manulife hired 10 new directors with a broad range of professional expertise—half of whom were women.

By having talented women on the board, Manulife communicates to its stakeholders that it is a strong and diverse organization. Board diversity is important not only to the company, but also to potential employees.

Our HR professionals tell us that they are asked not only about the numbers and positions of women in senior management, but about women on the board.

Gail Cook-Bennett, Former Chair of Manulife Financial's Board of Directors

6. Board Effectiveness

Boards with both women and men tend to be more active in overseeing the strategic direction of the company, and in reinforcing accountability through audits and risk management.Footnote 20 They also tend to make decisions more objectively.

Key practices of boards with female directors include:Footnote 21

Boards with three or more women

Boards with three or more women

Source: The Conference Board of Canada

Eight Strategies for Increasing the Number of Women on Boards

Increasing the number of women on Canada's boards of directors makes good business sense.

There is no shortage of "board-ready" women in Canada. Countless women across the country possess skills and experiences that are highly valuable for corporate boards.

Here are some strategies that companies are using to increase the representation of women on their boards. Keep in mind that no single practice is the ultimate solution; they are all pieces of the puzzle.

Ensure Leadership Commitment

CEO and board chair commitment to increasing the representation of women on boards is essential to sustainable and meaningful hange.Footnote 22

Adopt Formal Board Policies

Diversity should be a criterion of board composition.Footnote 23 This is a good way to embed women's representation in the boardroom into the structure and culture of the organization. Companies should set goals for the representation of women, and regularly evaluate their performance against these targets.

Recruit Outside the "C-Suite"

CEOs and former CEOs are often seen as the best candidates for board membership. Bear in mind, however, that 60% of FP500 company directors don't have CEO experience. Companies should consider women from outside the "C-suite" with skills that are essential to effective board performance.Footnote 24

Recruit Beyond Traditional Networks

To gain diversity of talent, seek board candidates from outside the business and social networks of existing board and company members.Footnote 25

Increase the Number of Women in the Leadership Pipeline

Ensuring that more women can reach the top levels of the company will make it easier to find qualified women for board positions.Footnote 26

Sponsor High-Potential Women

Being visible to the "right" people is key to becoming a director. Sponsorship is one way to enhance visibility for women.Footnote 27

Focus on Competencies

Now more than ever, companies need industry, human resources, audit and management expertise on their boards of directors. Boards should periodically assess the types of expertise they need, and then target both women and men with these skills.Footnote 28

Ensure Nominating Committee Impartiality

Companies should include women on nominating committees, and adopt nomination policies and practices that promote diversity and impartiality. For example:

Key Canadian organizations working to promote women on boards:

The Federal-Provincial-Territorial Ministers Responsible for the Status of Women commissioned The Conference Board of Canada to develop this resource.

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