How boards are faring under regulator’s diversity imperative

By Melissa Shin | January 26, 2018 | Last updated on October 27, 2023
6 min read

In the wake of CSA’s women on boards initiative, 26% of the average S&P/TSX 60 firm’s directors are female. In the C-suite, the average firm has 15% female executive officers.

Two firms out of the 60 had no female directors and no female executive officers, and a further 10 firms had no female executive officers. collected these figures when reviewing the 2017 management information circulars for the S&P/TSX 60 constituents. The review looked at the percentage of women on boards, percentage of female executive officers, and whether the firm had targets or quotas for female representation. also looked at whether firms had formal diversity policies and what those policies encompassed.

Read: More women on boards is ‘high priority’ for CPPIB

S&P/TSX 60 stronger

The S&P/TSX 60’s 26% average of female directors compares to 20.6% for the S&P/TSX Composite, a figure current as of October 2017, says Beatrix Dart, professor of strategic management at the University of Toronto.

Dart is also country lead for the 30% Club Canada, a group of business leaders who have pledged to reach a non-binding goal of women holding 30% of board seats and executive officer roles by 2022.

NI 58-101 requires that non-venture issuers disclose annually:

  • the number and percentage of women on the issuer’s board of directors and in
  • executive officer positions;
  • whether it has a policy relating to the identification and nomination of women directors;
  • whether it has director term limits or other mechanisms of board renewal;
  • whether it has targets for women on its board and in its executive officer positions; and
  • if it considers the representation of women in its director identification and selection process and in its executive officer appointments.

Why 30%? “Research suggests that 30% is the proportion when critical mass is reached,” she says in an emailed statement. “In a group setting, the voices of the minority group become heard in their own right, rather than simply representing the minority.” She adds that when the goal was set in 2010 in the U.K., the percentage of women on boards was 12%. “It felt like the right stretch target at the time, and we are indeed getting closer to it,” she writes.

As of the 2017 proxy season, women make up 30% or more of the directors at 24 companies in the S&P/TSX 60, and at least 30% of executive officers in seven companies.

Read: Scotiabank’s head of FX to lead Women in Capital Markets

Dart says the S&P/TSX 60 tends to have stronger diversity numbers because it “has mainly professional services firms in it (such as banks), which do much better in terms of number of women on boards.”

Among those larger firms, financials tend to lead the way, says Rahul Bhardwaj, president and CEO of the Institute of Corporate Directors (ICD). “They have extraordinarily large labour bases, and gender policies, typically, that dovetail with their governance policies,” he says. “There’s individual leadership behind gender diversity within the executive ranks. That’s been part of their HR culture for a while. Taking that step and making it part of their board culture is quite natural.”

Of the 10 financial firms in the S&P/TSX 60, the average percentage of women on boards is 33%. Nine have targets or quotas for female directors and all 10 have formal diversity policies.

More broadly, 46 the S&P/TSX 60 had formal diversity policies in 2017. In most cases, these policies extended beyond gender, mentioning other markers of diversity such as race and ethnicity; some also mentioned disability. Companies that did not have policies often said they didn’t need one to achieve gender and cultural diversity.

“There are a lot of companies struggling with starting the conversation, […] moving that conversation to actually having a policy, and then actually acting on it,” says Bhardwaj. He says a recent survey of ICD members showed almost half had no policy. “And some don’t have plans to develop [one]. They’re already […] overburdened and under capacity. They’re focused on operations.” He notes that ICD has a board diversity toolkit to help boards that are “struggling to get their foot on the ladder.”

Targets and quotas

In diversity conversations, few topics can be as divisive as that of setting targets and quotas.

This plays out in the numbers. The S&P/TSX 60 is split on targets and quotas for women in leadership: exactly half the companies has a target or quota.

Those 30 companies had an average of 31% female directors and 18% female executive officers; the 30 companies without policies had an average of 21% female directors and 13% female executive officers.

“I’m not a huge fan of quotas personally, because I believe in hiring the best person for the job,” says Sybil Verch, senior vice-president and national director of wealth management at Raymond James. “That being said, a lot of employers are not seriously considering the best candidates for the job because of unconscious bias [against women].” To mitigate that, she instead suggests quotas for the candidate slate, saying Raymond James has implemented such a policy to help it reach its goal of 25% female advisors in Canada by 2025.

“We were at 15% in late 2015 when we set the goal, and now we’re closer to 17%,” she says.

Bhardwaj agrees that voluntary targets are more palatable. “They gain a lot more traction,” he says. But he says quotas may have a place, pointing to a webinar the ICD held in 2017 that discussed quotas. At the beginning of the session, about 65% of the audience was against them, but by the end, about 60% were supportive. The presenters explained that other countries found voluntary targets were taking too long to bear fruit, and that they turned to quotas because of slow progress.

He says he got the sense that attendees would see if voluntary targets worked in Canada, and that “if we don’t see anything happening in 10 or 15 years, then we may have to seek other options, including quotas.”

Read: Quotas needed to get women on boards, says AFFQ

Investment argument for diversity

A 2016 Credit Suisse report found that companies for which gender diversity is an important strategic factor had excess returns running at a CAGR of 3.5%.

In the same year, MSCI found that U.S. companies that began the period from 2011 to 2016 with at least three female directors “experienced median gains in ROE of 10 percentage points and EPS of 37%.” Companies that began the period with no female directors experienced median changes of -1 percentage point in ROE and -8% in EPS.

“Much of the momentum around gender diversity on boards was initiated through a lens of fairness, [but] we’re also recognizing that diversity on boards is an enabler for company innovation,” says Bhardwaj. “Innovation, by definition, requires new thinking, new ideas. Therefore, diversity is actually an enabler of innovation.” He adds that diversity can help de-risk a company and prevent groupthink.

A Wharton professor summarizing women-in-leadership research cautions, however, that “rigorous, peer-reviewed studies suggest that companies do not perform better when they have women on the board. Nor do they perform worse. Depending on which meta-analysis you read, board gender diversity either has a very weak relationship with board performance or no relationship at all.”

Verch appreciates the investment argument but says the equality argument also holds weight. “It’s pathetic that the numbers are as low as they are considering 50% of the population is women,” she says.

When it comes to responsible investors, she says that, anecdotally, clients ask more about the environmental aspects of ESG factors. “Gender diversity will come up, but it’s lagging. It’s not a regular conversation yet,” she admits. But she says it can be. “Clients tend to discuss the seeds the advisors plant in their head.”

Also read: Unsure how to use ESG analysis? Start with G, says RI expert

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Melissa Shin

Melissa is the editorial director of and leads Newcom Media Inc.’s group of financial publications. She has been with the team since 2011 and been recognized by PMAC and CFA Society Toronto for her reporting. Reach her at You may also call or text 416-847-8038 to provide a confidential tip.