During the 2015 proxy season, for the first time, Canadian non-venture issuers were required to report on the new corporate governance disclosure rules regarding the number of women on their Boards of Directors.
Torys LLP analyzed 179 of the 243 companies listed on the S&P/TSX Index that had, as of May 10th, filed their 2015 proxy circulars. With 71% of the Index represented, Torys’ preliminary study shows that:
- 44% of issuers have no policies for increasing the number of women on their Boards
- 56% have adopted formal policies for increasing women on their Boards
- Of the 56% that have policies, only 13% (24 companies) had measurable targets
Of the 44% with no formal policy, 32 issuers disclosed no reasons for the lack of diversity policies. Of the rest, the reasons most commonly cited for the absence of a comprehensive diversity policy were:
- Their Board candidates are selected based on merit (86 issuers)
- It would not be in the issuer’s and/or shareholders’ interests (17 issuers)
- It would be unduly restrictive and reduce the Board’s flexibility (16 issuers)
- The targets would be arbitrary and ineffective (16 issuers)
- The level of diversity is already adequate (10 issuers)
- They want to select candidates from the broadest talent pool (8 issuers)
- The industry is male-dominated and the female talent pool is too small (5 issuers)
- A policy change was currently under consideration (2 issuers)
It has been only six months since the new disclosure rules came into effect, and although most financial institutions were not required to report at the time of the Torys study, the early results aren’t very encouraging: almost half of the S&P/TSX Index companies indicated a reluctance to improve the transparency of any measures being taken to increase the number of women on their Boards.
What is interesting about the results, however, is that the issuers’ explanations don’t reflect the reality. In truth, selecting Directors based on their merits, being unrestricted and having flexibility, acting in the best interests of company and shareholders, and being able to recruit from a broad talent pool are all factors that are congruent with considering diversity and not reasons to exclude it. The misguided belief that there aren’t enough qualified women in a particular male dominated industry is a matter of misinformation and a result of entrenched thinking and bias, and, consequently the broader pool of non-traditional and qualified talent that actually exists is often overlooked. The New York Philharmonic is a great example of entrenched thinking and bias; it is also a great example of how change is possible.