According to the Canadian Board Diversity Council’s second Annual Report Card, Canada’s boards feel conflicted about diversity. The research shows that while the vast majority of board members across Canada’s top 500 companies and top 100 charities said they value diversity personally, board diversity is actually quite low.
According to the report, “Canada’s future competitiveness depends on ensuring more boards of directors are comprised of directors who are the most qualified in a greatly-expanded talent pool.”
The Founder of the Council, Pamela P. Jeffery, wrote, “…our research based on the surveys returned by 450 corporate directors revealed that women held 15% of board seats. Visible minorities, persons with disabilities and aboriginal peoples held 5.3%, 2.9% and 0.8% of corporate board seats, respectively.”
“One in five board seats in the utilities, finance and insurance and retail trade sectors is held by a woman versus one in ten in manufacturing and one in fifteen in the mining, quarrying, oil and gas sectors. Women are much more likely to serve on a Top 100 charity board than on a corporate board: two in five Top 100 charities board seats are held by women.”
The report connects board diversity with shareholder value – but how much are Canadian boards really concerned with boosting diversity in favor of producing better returns?
According to the survey, “98% of female board members, and 90% of male board members indicate they consider board diversity to be important or very important.”
But much fewer state that diversity is important from the perspective of their board.
It continues, “Although 35% of corporate board members state that diversity is important from their board’s perspective, only 22% of corporate board embers report their board has a written diversity policy.”
The largest segments of board members are unsure about their board’s diversity policy – which may indicate that diversity hasn’t been a topic of discussion in their particular boardroom. Of the top 500 companies, 59% board members said they did not know if their board had a written policy on diversity, and 48% of the charity board members said the same.
In fact, among survey respondents whose boards did not have written diversity policies, very few (22%) supported enacting them. Over half (59%)said they did not support developing or adopting diversity policies, and 19% said they weren’t sure.
Considering the disparity between what board directors say they value and the reality of fairly homogeneous boards, the fact that most directors do not support taking official action toward diversity is concerning, and could be challenging for efforts toward building more inclusive boardrooms moving forward.
According to Fiona Macfarlane, Chief Inclusiveness Officer, Ernst & Young Managing Partner for Western Canada, “Diversity is imperative, particularly in the boardroom. It helps to spark innovation, powerful ideas and profound change.”
In fact, the report says driving diversity can help board directors produce bigger returns for corporate shareholders, and it includes a call to action for boards to make sure they replace retiring board members with diverse candidates.
“It is all about shareholder value. It can be a challenge for directors in these economic times to increase shareholder value. With a large number of directors retiring over the next five years, now is the time to bring to your boardroom table the talents of qualified, well-credentialed, experienced and board-ready new directors through a rigorous selection process.”
Furthermore, it added:
“The Council calls on boards to replace at least one of every three retiring directors with a director of a diverse background and for Nominating/Governance committees to consider three board-ready diverse candidates for each open board seat. If boards heed our call to action, these two steps will mean more boards will be comprised of directors who are the most qualified in a greatly-expanded talent pool.”
With more diversity on the slate of candidates for a particular seat, companies can take steps toward enhancing diversity and inclusion in the boardroom, and producing better outcomes for corporate stakeholders.