Canada will lose a competitive edge if women continue to be a significant minority in corporate boardrooms, suggests a recent report released by Catalyst, a non-profit research organization specializing in diversity issues.
The study, released in June, suggests that the persistent under-representation of women on corporate boards and the slow pace of change may have disturbing implications for company performance and governance in Canada.
The 2007 Catalyst Census of Women Board Directors of the FP500: Voices from the Boardroom report found that women represent 13 per cent of corporate board seats in the Financial Post’s top 500 corporations.
This representation increased by only one per cent since 2005, says Deborah Gillis, vice-president of North America for Catalyst.
The slow inclusion of women in corporate governance is a fact that does not seem to be changing. “Since we began tracking this statistic in 2001, we have noted an average in-crease (in the inclusion of women on corporate boards) of 0.5 per cent per year.”
At this pace, it would take about three more decades for women to have equal representation on boards, according to the study. The survey also says that 40 per cent of FP500 companies in Canada have no women directors on their boards.
“This is really about the competitiveness of business,” says Gillis.
“Despite the fact that half the labour force, half the population and a key group of shareholders and consumers are women – who represent 80 per cent of the purchasing decisions – the exclusion of women in corporate governance means that companies are ignoring their bottom line.”
This bottom-line impact has been shown in a number of previous studies, including another report released by Catalyst in fall 2007.
“We found a strong correlation between women on the board and finance,” Gillis explains. “On average, looking at the FP500, those companies with the highest representation of women board directors outperformed those with the lowest representation, and not just by a little.
Return on equity was 53 per cent higher; return on sales was 42 per cent higher; and return on invested capital was 66 per cent higher.”
The new report, which also examines the impact of women in boardrooms, suggests that having more women on a board translates into higher revenue by attracting new customers and finding new markets. It also brings fresh perspectives to the table.
“Diversity of thought, perspective, and experience on boards enhances the quality of dialogue around the board table, producing more opportunities for innovation and improving the overall quality of governance,” the report said, based on interviews with 56 women directors.
Yet, “the tendency for boards to recruit from the same narrow pool of candidates acts as a barrier to women seeking board seats,” says Gillis. “Board chairs, CEOs and corporate governance chairs are in unique positions to jump-start the process and drive change.
“By championing gender diversity and looking beyond the C-suite and FP500 boards to find qualified women directors, they can provide a better, more transparent environment in which Canadian businesses can succeed.”
For companies, this means broadening the list of woman from the C-suite – which amounts to 39 candidates currently available in Canada – to include those in the corporate office.
“If directors in the FP500 and the 100 largest subsidiaries in Canada expanded their search to include corporate office candidates, they would have 1,002 women to choose from.”
Gillis adds that these women have significant expertise in law, accounting, human resources, IT, and other “critically competitive areas” that all boards seek.
In Japan, companies are trying to improve their record of promoting women, says Gillis, by developing coaching and mentoring programs.
They are finding that the biggest problem isn’t defeating the chauvinism of Japanese men, says Jan Combopiano, chief knowledge officer for Catalyst.
It’s building up the confidence of Japanese women.
“Nissan found a lot of women were self-selecting out of business leadership,” says Combopiano. “It was partly a matter of having no mentors. They didn’t see other women making it so they didn’t see themselves making it.”
Nissan is among the companies that has decided to spearhead a drive to increase the representation of women in top-level positions.
The Driver’s Seat Program is a network of coaches, mentors and diversity officers who work to persuade women they can move up the ranks – without sacrificing family or losing their femininity.
According to the report, many female directors in Canada continue to be plagued by exclusion from “old-boys’ networks” and job recruiters seem to stick to the same old pool of candidates.
The report also found that:
* More than 20 per cent of vacant board seats and 30.5 per cent of board seats in public companies were filled by individuals already serving on a corporate board; and
* Women were “recycled” in public companies at greater rates than their male colleagues — 40 per cent of female directors as compared to 28.9 per cent of male directors sit on multiple FP500 boards.
Gillis, however, is optimistic.
“We do see some signs of progress – small signs, but progress,” she says.
* The number of companies with multiple women directors increased by 2.5 percentage points since 2005, to 28.5 per cent;
* Women’s representation as board chairs increased 1.3 percentage points since 2005, to 3.4 per cent;
* The percentage of key public company board committee chairs held by women rose one percentage point to 6.8 per cent; and
* This spring, a few major companies all announced women to top-level jobs, including Manulife Financial Corp., Desjardins Group and Lululemon Athletica Inc.
“Those appointments were really positive and we celebrated each, but at the same time, it’s hardly a trend,” says Gillis.
Bruce Simpson, Canadian director of McKinsey and Company, a global management consulting firm that has conducted extensive research on corporate governance, believes that businesses are dropping the ball by not diversifying.
“We need to be realistic: 65 per cent of university graduates are women; more importantly, 65 per cent of the top university graduates are female,” said Simpson while moderating a panel at the Toronto Board of Trade for the Institute of Corporate Directors in early June.
“When we don’t attract women and create an environment for females to break the glass ceiling, we lose out, particularly when we know that businesses with females in the boardroom perform significantly better.”
Says Gillis: “Our research shows a compelling case for diversity on boards; what we want to do is draw awareness that increased diversity is good for business, good for the bottom line. We want to issue a call to action to the corporate community to be much more proactive in looking for women directors.”
Originally published in Business Edge on July 11, 2008