Only 14 per cent of board seats are occupied by women, according to securities regulator
In an effort to bolster the number of women, Indigenous people and racial minorities sitting on corporate boards, a group of senators is poised to amend government legislation that would force companies to set internal diversity targets.
Independent Ontario Sen. Ratna Omidvar, one of six members of the Red Chamber backing the amendment, said the Liberal government’s current approach in Bill C-25, which would simply encourage companies to boost gender diversity without applying any sort of target, is too timid.
The amendment would compel all publicly traded Canadian companies — roughly 600 on the Toronto Stock Exchange (TSX) — to set targets for increasing underrepresented groups, but would leave it up to each company to decide on what the target should be.
“The bill, as it currently stands, is just a tap on the shoulder, whereas our amendment turns the tap into more of an intentional nudge in the right direction,” Omidvar, an expert in diversity, said in an interview with CBC News. The amendment is expected to be introduced by Independent Sen. Paul Massicotte on Thursday, some 18 months after the bill was first tabled in the House of Commons.
Voluntary approach not good enough: senator
Under the government’s bill, a diversity policy is not mandatory. If a company does not develop one, they would simply have to tell their shareholders why, the so-called “comply or explain” approach adopted by other regulators in Canada.
“For us, that’s too soft a nudge,” Omidvar said. “What we may well get, as a result of this bill, is corporations developing diversity policies and putting them on the shelf and no action.”
Omidvar points to research from the Canadian Securities Administrators (CSA), an umbrella group of provincial securities regulators, which suggests a voluntary approach to diversity has led to little improvement.
Only 14 per cent of board seats are occupied by women, a three-percentage-point progress from 11 per cent in 2015. Forty-five per cent of all publicly listed companies do not have a single woman sitting on their board of directors. As for senior management, only 15 per cent of positions are filled by women, a proportion that has not progressed at all since 2015.
The research found that 1.1 per cent of board members are Indigenous, 3.2 per cent are persons with a disability and 4.3 per cent are members of a visible minority.
CSA also found that only 9 per cent of companies have internal targets for women on their boards, with a mere 2 per cent having targets for women in executive positions.
Omidvar said targets are not “quotas” per se as each company would be able to decide how many diverse candidates should be added to a board, but, at the very at least, they will have to commit to doing more.
Those targets, and a company’s success in meeting them, would then have to be reported to the federal government on an annual basis.
In turn, the minister responsible, the innovation minister, would prepare a public report documenting how well companies in Canada, writ large, have done in adding women and minorities to the seats of power at these companies. The company would also have to disclose progress to shareholders at their annual meetings.
Importantly, the amendment would actually define what exactly “diversity” is as the government’s bill, as currently written, is vague on that question.
If passed, the amended bill would compel companies to replicate definitions used by the federal government, namely that “diverse” candidates would include women, visible minorities, Indigenous people and those with disabilities. Notably, LGBTQ people would be excluded under such a definition.
Innovation Minister Navdeep Bains is unconvinced amendments are necessary and will not support this move to alter his bill.
“The minister has been clear that the act and the forthcoming regulations are an appropriate and balanced approach that will facilitate a conversation on diversity between shareholders and the management and boards,” a spokesperson said in a statement to CBC News.
The spokesperson pointed to the success of the “comply or explain” model in the United Kingdom and Australia, where the number of women on boards stands at more than 20 per cent in both jurisdictions.
“Given this, we believe Bill C-25 is a good bill for corporations, stakeholders, shareholders, and all Canadians, and hope for its quick passage through the Senate,” he said.
Opposition to quotas
There is a reluctance from some in the business community to set hard quotas — as has been done in Norway, for example, where 40 per cent of all seats must be occupied by a woman.
Paul Schneider, a senior executive at the Ontario Teachers’ Pension Plan Board, one of the largest institutional investors in the country, told the Senate committee studying Bill C-25 last month that he’d like to see a culture shift rather than the imposition of quotas.
“To be truly impactful, boards must take ownership of diversity. With a quota, they can abdicate ownership to the government,” he said.
“In the short run, quotas can indeed lead to greater diversity, but we fear that while establishing a quota incents boards to hit a specific number, it may hinder any progress over and above that target … Diversity should be achieved because it is good, sound business, not because it is a rule,” he said.
Omidvar said many companies are naturally sceptical of more regulation. “Generally, this is not particular to this bill, business leaders feel the less encumbered they are, the more capacity they will have to succeed in their business goals … but, as I’ve pointed out, [the amendment] just takes the bill from a tap to a nudge.”
And yet the proposed reporting regulations have the potential to be onerous as the more than 600 companies would have to take stock of how each of their board members (some have more than 20) identify, and then report that information to the government where the data would then be analyzed and catalogued, taking up time, money, and other resources.
Others, including Conservative Sen. Betty Unger, have said appointments should simply be based on who is best for the business.
“People invest in corporations to get a return on their investment, and this is best accomplished by appointing merit-based people to boards … As a woman — and, as you can see, I am not young — I could never feel good about myself if I knew that I got a position simply because I am a woman,” she said at a Nov. 30 committee meeting on the bill.