This op-ed was originally published by iPolitics on April 12, 2021.
In Canada, comply or explain was a well-intentioned step toward increasing the number of women on corporate boards, but it is clear that it’s not enough.
While some incremental progress has been made, there is no compelling evidence that voluntary “comply or explain” disclosure requirements have accelerated the entry of women into the boardrooms of companies listed on the Toronto Stock Exchange.
New research from The Conference Board of Canada shows women remain underrepresented on corporate boards in Canada. “Comply or explain” disclosure requirements were implemented in 2014, fuelled by a belief that greater transparency would motivate companies to increase the number of women on their boards.
However, the pace at which women are being invited into Canada’s boardrooms remains slow for the great majority of companies listed on the Toronto Stock Exchange, whether they complied with the disclosure requirements or chose to explain their non-compliance.
This is not to say that representation didn’t increase. The research shows that between 2015 and 2018, the representation of women on corporate boards in Canada rose from 11 per cent to 15 per cent. While increasing the proportion of women on boards by four percentage points is progress, in reality the pace of change falls far short of expectations and basically mirrors the increase in the three years immediately prior to the disclosure requirement. At this rate, it will still take another 17 years to achieve gender parity in Canada’s boardrooms.
The pace of change has improved for most companies but more so for Canada’s largest corporations. While these organizations may have been influenced by comply or explain regulations, many have a longstanding commitment to inclusion and diversity and have made extensive investments in numerous diversity policies and practices. Many of these companies are now at or nearing 30 per cent representation of women on their boards, which, research suggests, is when they’ve achieved a critical mass and the board tips towards a more inclusive culture, with the consequent organizational benefits.
The current under-representation of women on corporate boards is not due to a lack of available seats. There have been plenty of existing opportunities to bring more women onto corporate boards. More than half (53 per cent) of the board seats that became vacant in 2018 went to men and about a quarter (23 per cent) were left unfilled or eliminated.
This is not to say that representation didn’t increase—women on corporate boards in Canada rose from 11 per cent to 15 per cent. While this is progress, at this rate, it will still take another 17 years to achieve gender parity in Canada’s boardrooms.
Given that there are open seats on boards of directors, the real question is why aren’t companies taking the opportunity to fill these seats with women? And what will it take for all of Canada’s publicly traded companies to recognize the importance of diversifying their boards—and put a concerted effort into making it a reality?
Finding what works in Canada is not a one-size-fits-all approach and further research on what works best in place of, or in addition to, disclosure is critical. There are a wide range of options that can be brought to bear on this issue—ranging from the relatively benign such as increased investor pressure to the punitive, in other words, binding regulation.
Legislative action is increasingly being used around the world to bring more women into the boardroom. Countries such as Norway and France have forgone so called “soft targets” in favour of “hard quotas.” In these countries, representational targets of women on corporate boards are legally binding and failure to comply is met with financial penalties. Unsurprisingly, the seven countries with hard quotas showed more progress, averaging about 31 per cent representation, compared to an average of 26 per cent representation amongst the 14 Organisation for Economic Co-operation and Development (OECD) countries that use soft quotas.
Given the slow pace of change, and the European experience with quotas, Canadian companies that don’t want to risk the prospect of hard regulations would do well to act now and adopt policies and practices associated with greater board diversity. More importantly, they can be more intentional about how they fill each vacant board seat.
In Canada, comply or explain was a well-intentioned step toward increasing the number of women on corporate boards, but it is clear that it’s not enough and not a singular solution. Finding and implementing solutions that work in Canada is not only in the best interest of women, but it’s good for business and the bottom-line.