Women On Boards and in the C-Suite: Will Institutional Investors Close the Gender Gap?

Torys Quarterly: Pressure Points

The Canadian securities regulators recently reported on their three-year review of women on public company boards and in executive officer positions. While progress has been made for female representation on boards and in the Canadian C-Suite, the overall pace of change has been slow.

Nearly 40 per cent of all issuers continue to have no female directors or executive officers.1 While there have been gains at the board level, the representation of women in executive officer positions has remained relatively flat over the last two years. From 60 per cent in 2016, now 62 per cent of issuers have at least one woman in an executive officer position.

Only 14 per cent of all board seats are held by women, a modest 3 per cent increase from two years ago.

Despite the overall stats, large-cap issuers continue to lead the way: women hold 20 per cent of the board seats of issuers with market caps over $1 billion (a 4 per cent increase over the last two years) and 24 per cent of the board seats of issuers with market caps over $10 billion (a 3 per cent increase over the last two years). The CSA’s review notably does not capture the larger Canadian banks who have been early implementers of diversity initiatives–last year, women held, on average, 35 per cent of the board seats of the six largest banks.2

Regulatory Impetus for Change

At the end of 2014, Canadian securities regulators implemented new disclosure requirements for Canadian issuers relating to female representation on boards of directors and in executive officer positions.3 The rules, which follow a “comply or explain” model, do not mandate the adoption of formal policies or targets. Instead they are intended to increase transparency for investors and other stakeholders about an issuer’s gender diversity practices.

Three years in, the disclosure requirements, coupled with increased public interest, appear to have produced some results. Perhaps the greatest progress has been recorded for women gaining access to previously all-male boards. More Canadian reporting issuers now have at least one woman on their board: the total has risen from 49 per cent of issuers in 2015 to 61 per cent.

More positive news: the number of issuers that have adopted a policy relating to the representation of women on their boards has more than doubled over the last two years, now reaching 35 per cent. According to the regulators, issuers with policies in place also tend to have a higher percentage of women on their boards.

But women in director positions continue to account for a significant minority of Canadian board seats.

Mixed results have also been reported in the United States. According to the Head of ISS Analytics at Institutional Shareholder Services Inc., at the end of the 2017 proxy season, boardroom gender diversity was one of the top governance issues. However, ISS notes that while the proportion of board seats occupied by women is on the rise, the number of women serving on each board is not growing as quickly. Overall, women are gaining access to more directorships, but shrinking boards appear to be contributing to a greater percentage of board seats being occupied by women.4

The Influence of Institutional Investors

Like many developments in corporate governance, we anticipate that institutional investors who form the largest shareholder base in corporate America and Canada will be critical in driving any meaningful increase in female representation on boards and in the C-Suite. Increased scrutiny on board composition, and in particular the number of women on boards, has become a growing area of focus for this class of investors.

In the United States, State Street Global Advisors, who has focused on diversity issues including gender equality, announced earlier this year that if companies failed to take action to increase the number of women on their boards, despite its best efforts to engage with them, it intended to use its proxy voting power to effect change.5

Board composition is also a top priority for BlackRock, according to its policies for 2017-2018: BlackRock intends to engage with companies to better understand their progress on improving gender balance in the boardroom. BlackRock considers that diverse boards (including diversity of expertise, experience, age, race and gender) make better decisions, and intends to hold nominating and/or governance committees accountable for an apparent lack of commitment to board effectiveness if no progress is made within a reasonable time frame.6

Increased scrutiny on board composition, and in particular the number of women on boards, has become a growing area of focus for institutional investors.

In Canada, the representation of women on boards is also garnering more attention from institutional investors. While they have traditionally engaged with boards behind closed doors to advocate for governance or other strategic initiatives, institutional investors are becoming more openly vocal about the value of a diverse board that includes women.

The Canadian Coalition for Good Governance (CCGG), which counts among its members a broad range of institutional investors, has adopted a gender diversity policy.7 In its policy, the CCGG states that the CSA should go further than the current rules and advocates for regulators to recommend the adoption of gender diversity policies in corporate governance best practice guidelines.

The CCGG states that the CSA should go further than the current rules and advocates for the adoption of gender diversity policies in governance best practices.

The topic of diversity is also a theme appearing in investors’ proxy voting guidelines, such as those of Ontario Teachers’, which expressly encourages gender diversity on boards, including a minimum representation of three women on a board, and regularly engages with companies on this topic.8

A number of chief executives of Canadian institutional investors now form part of the 30% Club, a global organization focused on encouraging the inclusion of women at all levels, “from schoolroom to boardroom.”9 The 30% Club has set an aspirational goal for 30 per cent of board seats and C-Suite positions to be held by women in Canada by 2022.

Catalyst, a nonprofit organization seeking to accelerate progress for women in the workplace, has advocated for the earlier adoption of more specific targets. In its 2016 report commissioned by the Government of Ontario, Catalyst recommended that, by the end of 2017, all issuers that currently have one woman director set a 30 per cent target for female board representation, to be met within three to five years. Catalyst also recommended a minimum target of 40 per cent of women in government’s agencies, boards, commissions and Crown corporations, to be achieved by the end of 2019.10

Meanwhile in the United Kingdom, diversity goals are moving beyond gender to ethnic diversity: the Parker Review Committee, led by Sir John Parker, has released a report in which it recommends each FTSE 100 Board should have at least one director of colour by 2021 and each FTSE 250 Board do the same by 2024.11

For the time being, as the drive for gender diversity in boardrooms and the C-Suite continues to gather momentum among U.S. and Canadian institutional investors, we expect issuers will further engage on this initiative, with the largest gains for women yet to come.

Other Highlights of the Regulators' Report

Targets Remain Unpopular. Issuers with targets set for female representation on their boards rose an additional 2 per cent, reaching a total of 11 per cent of issuers with fixed targets now in place. Formal targets are even less common at the executive office level—at 3 per cent of issuers in 2017, having inched up slightly from 2 per cent in the previous two years.

Women in Industry. Industry continues to be a significant driver in the overall results. The retail, utilities and manufacturing sectors lead the pack on female board representation while mining, oil and gas and technology issuers continue to lag behind. However, in the last year there has been a double-digit jump in the percentage of mining issuers with women on their boards, increasing by almost 20 per cent year-over-year to 54 per cent of mining issuers in 2017.

Board Renewal and Vacancies. Notwithstanding the regulatory push, only 26 per cent of board vacancies in 2017 were filled by women. Introducing term limits, as a means of fostering board renewal and increased representation, has had moderate uptake so far: only 21 per cent of issuers have adopted age or tenure limits for directors.

Reporting Woes. The regulators identified a number of disclosure deficiencies among Canadian issuers:

  • disclosure of both the number and percentage of women on the board and in executive office positions each year;
  • a clear explanation of how an issuer’s written policy (if adopted) applies to the identification of women directors;
  • annual and cumulative progress in achieving a target for female representation (where one has been set);
  • how an issuer considers the representation of women in its selection process, where the issuer discloses that it does; and
  • a description of term limits and any other mechanisms of board renewal, and how they contribute to board renewals.


1 See CSA Multilateral Staff Notice 58-309 – Staff Review of Women on Boards and in Executive Officer Positions – Compliance with NI 58-101 Disclosure of Corporate Governance Practices. This notice reports findings based on a review sample of 660 TSX-listed issuers with year-ends between December 31, 2016 and March 31, 2017.

2 At page 6 of the CSA report. The CSA’s review excludes issuers with year-ends outside of the period between December 31 and March 31.

3 See Torys’ 2014 analysis “Women in the C-Suite: Can Securities Law Advance Gender Equality?”

4 See "The Delightful Dozen: Top Governance Advances in 2017," John Roe, Institutional Shareholder Services, Inc. July 19, 2017.

5 See SSGA’s Guidance on Enhancing Gender Diversity on Boards, March 2017.

6 See BlackRock’s engagement of priorities for 2017-2018: https://www.blackrock.com/corporate/en-us/about-us/investment-stewardship/engagement-priorities#governance.

7 See CCGG Policy – Board Gender Diversity October 2015.

8 See Ontario Teachers’ 2017 Corporate Governance and Proxy Voting Guidelines.

9 See https://30percentclub.org/.

10 See Catalyst’s report "Gender Diversity on Boards in Canada – Recommendations for Accelerating Progress".

11 See "A Report into the Ethnic Diversity of UK Boards, Final Report," 12 October 2017.


The Authors

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