Speaking last Thursday in Toronto, federal Minister of Innovation, Science and Economic Development Navdeep Bains spoke to a Women in Capital Markets seminar at Stikeman Elliott LLP about bill C-25, An Act to amend the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not-for-profit Corporations Act and the Competition Act. It was tabled in the House of Commons in late September. It has now passed second reading.
The bill requires corporations to disclose the number of women on boards and in senior management, as well as divulge their diversity policies to shareholders, as well as provide diversity information to the director of corporations Canada, the country’s federal corporate regulator.
“Those corporations without a diversity policy will need to explain to shareholders why they don’t have one,” said Bains. “These changes are in line with policies already adopted by most provincial securities regulators.”
If passed, the bill will apply to all publicly traded companies incorporated under the Canada Business Corporations Act, regardless of which securities regulator they report to.
Another measure requires annual board elections for public companies as opposed to every three years and individual votes for director candidates.
“This measure will encourage companies pull from a wider pool of candidates,” says Bains. “This is really about shareholder democracy and what is best for the shareholder.”
Bains says the bill is already receiving support from all parties in the House of Commons.
“This is not a Liberal, Conservative or NDP issue, this is a Canadian issue,” he said.
Last year, 521 board seats came up on publicly listed companies in Canada and only 15 per cent of those seats were filled by women.
The Canadian Board Diversity Council publishes an annual list of qualified candidates for leadership roles and the Institute of Corporate Directors has a list of more than 3,500 women registered.
“There is an enormous pool to select from,” said Bains.
Jennifer Reynolds, chief executive officer of WCM, said studies show women hold 13 per cent of all seats on corporate boards. They hold roughly one in five seats on boards of FP500 companies and those on the S&P/TSX 60 index.
In the U.K., the baseline in 2010 was 13 per cent of the number of women on corporate boards and, since implementing a similar “comply or explain” policy, they have doubled to 26 per cent of women on boards. In Australia, the baseline was 11 per cent and is now 22 per cent.
“There is evidence to suggest there can be real change associated with this approach and that’s what we’re hoping for,” said Bains.
However, during a Q&A with the minister, Tanya Van Biesen, executive director of Catalyst Canada, said “we have been making the business case since 1962.” She asked Bains what kind of “teeth” C-25 will have if companies don’t comply with the new requirements.
“All options are on the table and I’m serious about this. In a few years, if we don’t see equal progress, and I’ve said this to corporate Canada on many occasions, every single option is on the table to find how we can move the needle,” Bains said. “This is their warning, we want corporate Canada to step up.”
When asked what options he would consider, Bains said quotas. “Ultimately, you have to say something like that to show people you are serious. We will look at every conceivable option.
“There is a pipeline out there. We need to start dismissing this argument that there is no pipeline. There are very qualified women out there for these board seats,” said Reynolds.
She said the idea that board gender diversity will happen organically needs to be dismissed.
“We are abundantly present in senior management and have been for a couple of decades. It’s in senior roles where we’re not seeing the progress we need to see,” said Reynolds. “We just can’t have a conversation about innovation and competitiveness without talking about talent and how we are going to use this incredibly diverse talent in Canada effectively.”
Bains said research shows there is a “strong and compelling business case” for diversity, noting that corporate boards that are made up of diverse backgrounds have a 53-per-cent higher return on equity than those that don’t.
“Think about that. They made 54-per-cent more profit on the money shareholders have invested. The business case is very compelling,” he said.
Another study found that companies with diverse leadership teams are 70-per-cent more likely to report capturing a new market share each year.
“If we want to succeed globally, we need to be export oriented and we need our companies to succeed abroad,” he said.
Trudy Curran, former senior vice president and general counsel at Canadian Oil Sands, says she is pleased to see the move to a disclose-and-explain system. In July, Curran was appointed to the board of directors of Baytex Energy and is a member of its audit committee and nominating and governance committee, and in August she was elected to the Dominion Diamond Corporation.
Last spring, after 15 years with COS and high-profile positions at Encana, Canadian Pacific Ltd. and Canadian Airlines, Curran didn’t feel there was a GC role in Canada that suited her expertise. So she embarked on a mission to her next career serving on public boards.
“I believe we need to focus on the discussion around diversity and having a depth of knowledge and skills, not just in the boardroom but through all level of management and the board. From a shareholder/business perspective, we need to seek to employ and engage all our human assets and not leave half of the talent behind, be it women or men,” she says.
But Curran isn’t a fan of the concept of setting quotas.
“There needs to be an understanding of the needs for each entity in a given business and financial environment. I do understand though that if the general masses don't progress the next step would be quotas. Based on commentary from other jurisdictions, that move to quotas could have a negative immediate effect of depleting top executive ranks,” she says.
Stikeman Elliott LLP launched its Board Diversity Initiative in November and will host a number of events and roundtables to discuss the issue of gender diversity on boards.