Women on BoardsWomen on Boards

Good for Business: A Plan to Promote the Participation of More Women on Canadian Boards

Report by the Government of Canada's Advisory Council for
Promoting Women on Boards to
the Honourable Dr. K. Kellie Leitch, P.C., O.Ont., M.P.
Minister of Labour and Minister of Status of Women

June 2014

Copies of this document may be obtained from:
Status of Women Canada
22 Eddy Street
10th Floor
Gatineau, Quebec

PDF – English
ISBN : ISBN: 978-1-100-25408-1
Catalogue No.: SW21-162/2014E-PDF

Table of Contents

Foreword

The Honourable Dr. K. Kellie Leitch

I am pleased to share the final report of the Government of Canada's Advisory Council to promote women on boards.

The report, Good for Business: A Plan to Promote More Women on Canadian Boards, highlights how the public and private sectors canincrease the representation of women on boards. It includes some of the current ‘best practices' in use within corporate Canada to successfully advance women into leadership positions on boards of directors.

This report was made possible through the generous contributions of time, energy and wise counsel from Advisory Council members. I sincerely thank them for the wealth of knowledge and experiences they shared during the Council's discussions, and the development of this report.

The Government of Canada believes that increasing economic opportunities for women, including increasing their representation on corporate boards, makes good sense for Canadian women, and for our economy. I am confident that the Advisory Council's report will help engage Canadians in the effort to advance more women than ever before into positions of leadership.

The Honourable Dr. K. Kellie Leitch, P.C., O.Ont., M.P.
Minister of Labour and Minister of Status of Women

Summary of Recommendations

The following summary of recommendations is influenced by best practices, from across Canada and internationally, and informed by the experience and expertise of the Advisory Council for Promoting Women on Boards members. Based on these factors, the Council is offering the following recommendations for the Government of Canada.

  1. Aspire to 30% over five years (2014-2019) as a reasonable national goal to achieve gender balance, with the longer term goal being gender balance on boards.
  2. The Advisory Council encourages the Government of Canada to:
    • Build on past progress and work towards greater gender balance in its own appointments;
    • Monitor and report on gender diversity in Governor-in-Council (GIC) appointments;
    • Simplify and promote the GIC process;
    • Ensure greater participation in the recruitment of women to leadership positions and GIC appointments by working with Government agencies, including the leadership of Crown Corporations ; and
    • Promote networking and mentoring between public and private sector corporations.
  3. Institute a "comply or explain" approach for moving publicly traded companies toward an identified goal within published annual reports, with an explanation of results or lack thereof.
  4. Promote increased representation of women on boards by mobilizing and working with key stakeholders, including prominent Chairs, Financial Post (FP) 500 companies, national business associations, shareholder groups and advocacy organizations. It would be advantageous and critical to work towards:
    • Adopting a strong commitment, sound implementation strategies and reporting mechanisms, while maintaining flexible approaches;
    • Making gender balance on boards a priority to be advanced by board governance through policies, human resources, and board recruitment and nomination committees; and
    • Encouraging nomination and recruitment committees and executive search firms to ensure that equal numbers of qualified women and men candidates are presented for consideration for board vacancies.  
  5. Develop a coordinated pan-Canadian approach by working with provincial and territorial governments.
  6. Support the adoption of short- and medium-term goals in the private and public sectors, recognizing that some sectors are further ahead than others.
  7. Publicly traded companies should establish and publish, through annual financial statements, two- and five-year goals within the context of a board renewal plan.
  8. Publicly traded companies should report and explain annual results against their goals, reinforced as required by regulatory authorities, as part of their transparency responsibilities, and by departments through their business-related initiatives. 
  9. Launch a national initiative led by the Government of Canada, to encourage the private sector to attain gender-balanced boards.
  10. Develop a sustained and deliberate communications strategy to mobilize all relevant stakeholders.
  11. Encourage private companies to emulate publicly traded companies and undertake similar measures to increase representation of women on boards.

Within Reach: Progress is Achievable

"The problem is solvable – and progress toward gender parity is closer than you think."

Catalyst 2013: Narrowing the Financial Post 100
Gender Leadership Gap

The Case for Change: Context and Rationale

Over the past three decades, women's participation in the Canadian workforce has more than doubled, to approximately 47%Footnote 1 Women now earn over half of all Canadian university degrees, and 34.5% of the Masters of Business Administration (MBAs) granted in 2011 were to women.Footnote 2  In addition, women represented 47% of students in business and management programs at the master's level in 2010.Footnote 3

The level of progress among Canadian women, in just a few decades, is impressive, with women achieving unprecedented success in a variety of settings, sectors and roles, including medicine, law and other professions. Yet, the representation of women on boards has not followed suit.

Consider the following statistics, which speak to the notable disparities among the decision-makers in Canada's top publicly traded companies, and the sharp contrast to the leadership role being played by the Government of Canada. In 2012, women held:

Inertia in leadership networks is a key institutional obstacle to women's advancement to board positions. The Canadian Board Diversity Council 2011 report on FP500 boards states that 73% of board directors thought their boards were diverse, despite facts that indicated otherwise.Footnote 8 Underlying reasons for low female representation include:

According to Forbes Magazine, women have limited access to leadership networks and high-level mentors, which can restrict their opportunities to gain a range of critical work experience needed for senior decision-making roles.Footnote 9

As several of our Advisory Council members state, high-potential women may also be self-limiting their career aspirations due to a lack of information about the knowledge, training and skills needed for board work, as well as the shortage of inspiring role models.

What is clear is that the current pool of talented women in the workforce with business skills, experience and education exceeds their levels of representation at the highest levels.

And, as noted by the Advisory Council, the case for change will require the development and execution of a sustained effort, led by the Government of Canada, in order to achieve a significant increase in women's representation on boards across Canada within a reasonable time frame.

"This initiative is much-needed in corporate Canada. Women are critical to successful businesses and all of us have a role to play in getting more of them involved on corporate boards."

Dawn Farrell, President and CEO, TransAlta

Minister’s Mandate

Canada's Economic Action Plan 2012 announced the creation of an Advisory Council of leaders from the private and public sectors to develop recommendations aimed at promoting the participation of women on corporate boards.

Members were identified based on their awareness of the importance of promoting gender diversity on boards and their ability and willingness to champion the issue within their own networks, and more broadly across corporate Canada.

Specifically, the Minister mandated the Advisory Council to:

"Linamar Corporation is dedicated to having a diverse workforce and enjoying the many benefits and strategic balance of such. We believe that we should target proportionate representation of our workforce at every level. That means ensuring the same levels of representation of women at every level of management in the company as we see women represented overall within our company. That level of representation should extend all the way to our Board of Directors."

Linda S. Hasenfratz, CEO and Director, Linamar Corporation

Leading by Example: Public Service and Crown Corporations

Currently, approximately 31% of GIC appointees are womenFootnote 10 – a number that is more than double that of women on boards in the private sector.

To build on this success, Advisory Council members agreed that not only is the Government of Canada in a unique position to continue leading by example, but that the GIC appointment process, in the public service and Crown corporations, is seen as:

The Advisory Council encourages the Government of Canada to build on past progress and work towards greater gender balance in its own appointments, thus establishing credibility when calling on the private sector to act.

Advisory Council members emphasized that the Government of Canada should monitor  and report on gender diversity in GIC appointments. As indicated by Advisory Council members, this is an important aspect of board renewal, which could ultimately lead to a greater number of female appointments.

The Advisory Council agreed that, by demonstrating leadership, the Government of Canada can play a key role in working with Government agencies, including the leadership of Crown Corporations, to ensure greater participation in the recruitment of women to leadership positions and GIC appointments. The Advisory Council members believe that this could contribute to a consistent increase in women being appointed to boards until goals are achieved. Also, in an effort to increase the number of women considering GIC appointments, the Advisory Council recommends that the Government of Canada simplify and promote the GIC appointments process.

The Advisory Council suggests that the Government of Canada promote networking and mentoring of high-potential women between public and private sector corporations, in order to attract private sector talent to public sector roles.

Finally, many corporate boards require directors to have prior board experience, which is often a challenge for talented women who have never before served in this capacity. The Advisory Council believes that, through the GIC appointment process, the Government of Canada could provide women with the experience needed to be considered for corporate sector board opportunities.

Women in the Private Sector: The Competitive Edge

"When Jill Ker Conway was the sole female director at Nike in the early 90s, she suggested that the company launch a female sports apparel division. Today this division accounts for a large percentage of Nike’s revenue. This is one of many examples where a different set of backgrounds, a different set of ideas can create profitable change"

Jane Allen, Partner
Egon Zehnder, International

The research is very clear. Increasing the representation of women on boards is good for business and associated with higher profitability.

Not only does an improved gender balance enable corporations to hire and recruit board members from a broader talent pool, it more accurately reflects clients and markets. In fact, with women controlling 80% of consumer spendingFootnote 11, the presence of women in senior management and as board directors:

Studies in Canada, the United States (US), Australia and Europe demonstrate that businesses with more women on their boards and in senior management outperform those with fewer women. For example, American Fortune 500 firms with the highest representation of women in senior management have a 53% higher return on equity than those with the lowest proportion of women.Footnote 12

In 2010, among Canada's FP500, the top quintile firms had women holding over 18% of senior officer positions, compared with 13.5% in bottom quintile firms.Footnote 13 Similarly, a 2009 study of European companies found that firms with higher levels of women senior decision-makers had a 10% higher return on equity compared with firms with the lowest percentage of women in leadership roles.Footnote 14

Further, a 2011 survey by Canada's Institute of Corporate Directors concluded that board gender diversity contributes to better governance and decision-making.Footnote 15 This is especially true in times of economic stress. A 2009 study of over 800 European firms by management consultants McKinsey and Co. showed that women board directors demonstrate good governance and prudent risk management behaviours that contributed to their firms' successes in weathering the most recent economic crisis.Footnote 16 These characteristics are valued by shareholders, as recently noted in December 2013 by the Financial Post.Footnote 17

Board diversity, including gender, enhances the international competitive advantage of firms by expanding their labour pools and increasing the availability of diverse knowledge, skills and experience.Footnote 18 As labour shortages increase, Canada must maximize its labour pool and compete internationally for top business talent.Footnote 19  Board diversity will contribute to Canada's competitive edge.

With the ongoing retirement of the baby-boom generation of board directors and senior managers, organizations must develop recruitment and retention strategies to meet the demand for qualified leaders in Canada's increasingly knowledge-based economy.Footnote 20 Canadian women have high levels of education and management experience, and thus are well positioned to play an important role in filling future skills shortages on boards and in senior management.Footnote 21

"I have always believed that human capital is our most important asset and talent comes in both genders. Canada cannot succeed in an increasingly global and knowledge-based economy without the full and active participation of women and visible minorities."

Gordon M. Nixon, RBC's President and CEO
37% of executive roles are held by women at RBC.

Issues Considered

The Advisory Council fully considered a wide range of issues, relevant research and topics drawn from across the scope of experience of its members, related to increasing the representation of women on boards across Canada. Within this context, the Council developed recommendations in the following areas:

Imperial Oil is a leader in the energy industry when it comes to female representation on its board of directors, according to an organization that tracks the performance of Canadian corporations. In its fall issue, Corporate Knights magazine released its 2011 rankings on the boardroom diversity of major public and private companies in Canada. At 29%, Imperial was at the top of the Canadian energy sector, the survey found. Two of Imperial's seven-member board are female.

Goals and Timelines

There was consensus among Advisory Council members that at least one seat on every corporate board in Canada must be held by a qualified woman. There are no longer any reasons, especially from a business perspective, not to proceed in this direction.

Drawing on best practices, Advisory Council members agree that a goal of 30% over five years (2014 – 2019) is a reasonable national threshold to aspire to, with the longer term goal being gender balance on boards. Recognizing that some sectors may not be in the same place today as others, tailored sectoral goals and strategies will be important.

The Council ruled out legislative levers, believing that the "comply or explain" approach is the most appropriate for moving publicly traded companies toward an identified goal. From the perspective of the Advisory Council, corporations should publish:

International experience has shown that tracking progress is an important component of increasing the representation of women on boards, without the need to set stringent regulations or legislated quotas. For example, in February 2011, the United Kingdom (UK) set a target for FTSE 100 boards to have a minimum of 25% female representation by 2015. As of October 2013, women accounted for 19% of FTSE 100 board directors, up significantly from 12.5% in 2011.

THE BOTTOM LINE:

The "comply and explain" approach needs to be implemented with associated goals, timelines and reporting.

Private Sector Leadership

"You don’t find excellence just among men. You adapt your search process to also find excellent women leaders and that is what we have done."

Gail Cook-Bennett, Board Chair, Manulife Financial

Manulife, a signatory to the Catalyst Accord – a voluntary pledge to reach 25% of women on boards by 2017 – has already exceeded the 25% target.

Engaging and securing the support of business leaders at the highest levels will be critical to the success of a national initiative. Participation of the leaders representing the Canadian Council of Chief Executives (CCCE), the Canadian Coalition of Good Governance (CCGG), and other key influential shareholders and associations will help broaden interest and play a key role in proving the case that women's representation on boards is good for business.

CEOs, board chairs and board members responsible for governance and nominating committees will need to champion board gender diversity in order to overcome barriers. It is known that many sectors face greater challenges in identifying and attracting women for their boards. Leaders in these sectors will need to be encouraged and supported on how best to contribute to an increase in the representation of women on their own boards.

All of the members of the Advisory Council have made the commitment to champion board gender diversity. We challenge others to join us.

THE BOTTOM LINE:

A strong commitment and sound implementation strategies and reporting mechanisms will be critical while maintaining flexible approaches.

Board Governance

Currently, reporting on the gender composition of boards is not a requirement for publicly traded companies in Canada. However, public companies are required to disclose the board nomination process. The Canadian Securities Administrators have suggested that issuers should, but are not required to, discuss whether the board takes into account diversity when considering a candidate for appointment to the board.Footnote 22

The Advisory Council believes that the primary way to ensure that companies are accountable to their shareholders is through public reporting and disclosure of the gender composition of boards within their annual financial statements.

One of the main challenges to board gender diversity is the common belief that there is a short supply of qualified women. The increased participation of women in the workforce, in professional education and in corporate executive positions indicates that there is no shortage of talented women to be appointed to boards.

The issue is not on the supply side, but rather on the demand side. Advisory Council members, echoing the position of Australian counterpartsFootnote 23, agree that Chairs of boards and their CEOs need to insist that women be considered in board renewal processes and accompanying succession planning for senior corporate positions.

THE BOTTOM LINE:

Gender balance on boards needs to be identified as a priority to be advanced by board governance through policies, human resources, and board recruitment and nomination committees.

Championing, Mentorship and Networking

Advisory Council members emphasized the importance of mentorship in ensuring that women have access to professional development opportunities. Business leaders should encourage women with talent to benefit from mentoring and coaching, and to participate in a range of development programs offered by academic institutions and non-profit organizations. In addition, they have a role to play in promoting their women protégés.

Business leaders have a responsibility to champion and support the next generation of women leaders. The importance of long-term mentorship relationships cannot be overstressed. Championing young women as part of the next generation of leadership will contribute greatly to ensuring they have the experience required for them to be considered for Board appointments.

Networking is a time-tested strategy for developing important connections for career advancement. Women participate in networking opportunities, but whether it is due to work-life commitments or challenges related to breaking into traditional networks, they may not have access to the right business networks for consideration for promotion or board opportunities.

Many sectors and workplaces offer networking opportunities for young professionals which provide a variety of opportunities to develop important informal relationships to support career advancement. This practice needs to be encouraged with particular attention on women.

For those who own small businesses, getting board experience could prove challenging. In order to learn firsthand how a board operates, women should be encouraged to sit on community boards or the board of their local Chamber of Commerce or Board of Trade.

Advisory Council members also emphasized that there is an opportunity to increase the number of women on boards through board evaluation and renewal processes. Nomination and recruitment committees need to be diligent in requesting search firms to provide Canadian female candidates for consideration for appointment.  

THE BOTTOM LINE:

Selection committees and executive search firms should require and ensure that both qualified women and men candidates are presented for consideration for board vacancies.

Communications and Engagement

Internationally, the most successful initiatives have been advanced by government leaders and key business figures that put forward positive and persuasive messages regarding the business benefits of women on boards.

The Advisory Council strongly believes that the Government of Canada should build on successes to date by launching a national initiative, with key business leaders and Advisory Council members to encourage the private sector in attaining gender balanced boards.

A key component of the national initiative will be sustained external messaging that focuses on:

"Studies have consistently shown that a diverse team – which includes both visible differences such as gender and ethnicity, as well as invisible difference, such as diversity of thought and education – can have significant impact on both the top and bottom lines of an organization. Having a diverse board is just as important as having a diverse staff. In fact, it’s the key to success."

Michael Bach, Director of Diversity, Equity and Inclusion
KPMG LLP.

Internally, the degree to which this initiative will succeed will be based on the ability of the Government of Canada and Advisory Council members to effectively communicate with and engage business leaders and board chairs. Key elements of this dialogue could include:

THE BOTTOM LINE:

Shareholders have a role to play in encouraging their companies to address gender balance on their boards. By educating shareholders on the increased profitability of gender-balanced boards, they may become some of the greatest proponents of this national initiative.

In short, any and all communications avenues and proponents should be pursued using deliberate and sustained strategies to ensure goals are achieved, within identified timelines.

Recommendations

The following recommendations are influenced by best practices, from across Canada and internationally, and informed by the experience and expertise of Advisory Council members. They are presented under three main categories.

Leadership at the Highest Levels

  1. The Government of Canada should take a leadership position on gender balance by setting an ambitious goal for public appointments of women. Drawing on best practices, Advisory Council members agree that a goal of 30% over five years is a reasonable national threshold to aspire to, with the longer term goal being gender balance on boards. Recognizing that some sectors may not be in the same place as others, tailored sectoral goals and strategies will be important.
  2. The Advisory Council encourages the Government of Canada to:
    • Build on past progress and work towards greater gender balance in its own appointments;
    • Monitor and report on gender diversity in GIC appointments;
    • Simplify and promote the GIC process;
    • Ensure greater participation in the recruitment of women to leadership positions and GIC appointments  by working with Government agencies, including the leadership of Crown Corporations; and
    • Promote networking and mentoring between public and private sector corporations.
  3. The "comply or explain" approach is an excellent way to move publicly traded companies toward an identified goal. From the perspective of the Advisory Council, corporations should publish the following:
    • Company specific goals and timelines within the broad public policy framework;
    • Associated policies and modalities;
    • Annual progress reports within existing financial reporting; and
    • Explanation of results.
  4. Federal Ministers and the Advisory Council should work with prominent individual Chairs, FP 500 companies, national business associations, large shareholder groups and advocacy organizations to promote increased representation of women on boards.  It would be advantageous and critical to work towards:
    • Adopting a strong commitment, sound implementation strategies, and reporting mechanisms, while maintaining flexible approaches;
    • Making gender balance on boards a priority to be advanced by board governance through policies, human resources, and board recruitment and nomination committees; and
    • Encouraging nomination and recruitment committees and executive search firms to ensure that both qualified women and men candidates are presented for consideration for board vacancies.
  5. The Government of Canada should actively encourage and work with provincial and territorial governments, on an ongoing basis, with a view to ensuring a coordinated pan-Canadian approach to increasing women on boards.

    Goals and Timelines
  6. Canada should adopt short- and medium-term goals to achieve 30% over five years (2014 - 2019) for the representation of women on boards in the private and public sectors, recognizing that the long term goal is achieving gender balance on boards.
  7. Over the next year, each publicly traded company in Canada should establish and publish, through annual financial statements, its own two- and five-year goals within the context of a board renewal plan.
  8. Publicly traded companies should report and explain results against their goals, reinforced as required, by regulatory authorities as part of their transparency oversight responsibilities, and by government departments through their business-related initiatives.

    Communications and Engagement
  9. The Government of Canada should build on the positive efforts it has achieved, by launching a national initiative to encourage the private sector to attain gender-balanced boards.
  10. The Government of Canada should work with business to develop a sustained and deliberate communications strategy, including media outreach and initiatives to celebrate success, in order to demonstrate that increased representation of women on boards is good for business and good for inspiring a new generation of female leaders.
  11. Through targeted communication and engagement activities, private companies should be encouraged to emulate publicly traded companies and undertake similar measures in their own business interests.

Endnotes

Acknowledgments

The Advisory Council for Women on Boards would like to thank Barbara Biggar, President and CEO of Biggar Ideas Inc., for her communications advice and expertise.

Appendix A - Advisory Council for Promoting Women on Boards – Members

Image of Beverley Briscoe Beverley Briscoe

President, Briscoe Management

Image of Maureen Kempston Darkes Maureen Kempston Darkes

Former Group Vice President and President Latin America, Africa & Middle East, General Motors Corporation

Image of Joan Dea Joan Dea

Managing Director & Founder Beckwith Investments

Image of Arlene Dickinson Arlene Dickinson

CEO, Venture Communications

Image of Janet Ecker Janet Ecker

President, Toronto Financial Services Alliance

Image of Murray Edwards Murray Edwards

Chairman of the Board, Canadian Natural Resources Ltd.

Image of Dawn Farrell Dawn Farrell

President & CEO TransAlta Corporation

Image of John Ferguson John Ferguson

Board Chair, Suncor

Image of Sheila Fraser Sheila Fraser

Corporate Director Bombardier Inc.

Image of The Honourable Linda Frum The Honourable Linda Frum

Senate of Canada

Image of Anne Giardini Anne Giardini

President, Weyerhaeuser Canada Ltd.

Image of Mike Greenley Mike Greenley

Chair, Canadian Association of Defence & Securities Industries

Image of Linda Hasenfratz Linda Hasenfratz

CEO, Linamar Corporation

Image of >Alan Horn Alan Horn

Chairman, Rogers Communications, and President & CEO, Rogers Telecommunications Ltd.

Image of Isabelle Hudon Isabelle Hudon

President, Sun Life Financial Quebec

Image of Tom Jenkins Tom Jenkins

Executive Chairman, Chief Strategy Officer, OpenText

Image of Monique Leroux Monique Leroux

Chair of the Board, President & CEO, Desjardins Group

Image of Andrew MacDougall Andrew MacDougall

Managing Director for Canada Spencer Stuart

Image of L'Honorable John Manley The Honourable John Manley

President & CEO Canadian Council of Chief Executives

Image of Tracy Redies Tracy Redies

President & CEO Coast Capital Savings Credit Union

Image of Susan L. Riddell Rose Susan L. Riddell Rose

President & CEO Perpetual Energy

Image of Kathy Sendall Kathy Sendall

Director, CGG Veritas

Image of Nancy Southern Nancy Southern

CEO, ATCO Group

Image of Catherine Swift Catherine Swift

Chair of the Board, Canadian Federation of Independent Business

Image of Charles Winograd Charles Winograd

Chair, TMX Group/p>

Image of Annette Verschuren Annette Verschuren

Chair & CEO, NRStor Inc.

Ex-Officio Members

Image of Pamela Jeffery Pamela Jeffery

Founder of the Women's Executive Network & the Canadian Board Diversity Council

Image of Alex Johnston Alex Johnston

Executive Director, Catalyst Canada

Appendix B

Eight Strategies for Gaining Ground: A Planning and Evaluation Tool
 
As part of its "Business Case for Women on Boards" report, commissioned by the Federal-Provincial-Territorial Ministers Responsible for the Status of Women in (2013), the Conference Board of Canada itemized eight strategies currently being deployed by companies, in some combination, to increase the representation of women on their boards. Consider this abridged version as a planning document and evaluation tool:

Ensure Leadership Commitment

Adopt Formal Board Policies

Recruit Outside the "C-Suite"

Recruit Beyond Traditional Networks

Increase Women in the Leadership Pipeline

Sponsor High-Potential Women

Focus on Competencies

Ensure Nominating Committee Impartiality

Source: The Conference Board of Canada (2013), The Business Case for Women on Boards

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