New study shows Canadian boards not reflecting country’s diversity

Vancouver, BC, October 21, 2010 – Some sobering findings on the lack of diversity on the boards of large Canadian companies were released today in the Canadian Board Diversity Council’s Annual Report Card. From the number of women holding directorships – about one-in-seven – to the number of visible minorities (just over five per cent) to the less than one per cent Aboriginal Peoples, FP 500 boardrooms are not reflective of the broader population of Canada.

SFU Business is a founding member of the CBDC, and PhD business student Stacey R. Fitzsimmons conducted a research review for the Report Card, examining which conditions allow gender diverse boards to flourish, and which conditions drive gender diverse boards to fail.

The Report Card establishes the first-ever baseline representation of women, visible minorities, persons with disabilities and Aboriginal Peoples on the boards of Canada’s FP 500. The Founding Members of the CBDC, which include Simon Fraser University, initiated the project to encourage greater diversity within the boardrooms of the country.

“We have a distinct gap between our perception and reality about diversity when 62 per cent of Directors believe their boards are diverse. Yet, for instance women hold only 15 per cent of board seats. When a company’s talent pool reflects the diversity of those of its customers and employees, it can only be more effective at meeting their needs and therefore meeting or exceeding its business objectives. As a large number of directors retire over the next five years, the time to address this talent and diversity gap is now.”

The Annual Report Card presents the findings of a survey of Directors and was conducted by Northstar Research in July 2010. Key findings of the survey include:

• There is a clear disconnect between the reality and perception of board diversity. While 62 per cent of Directors believe their boards are diverse, women hold just 15 per cent of board seats, visible minorities 5.3 per cent, persons with disabilities 2.9 per cent and Aboriginal Peoples including First Nations, Inuit and Métis, 0.8 per cent. Encouragingly, 39 per cent of Directors identify the issue of board diversity as very important.
• Women have greater representation on the top 100 companies than the broader FP 500 (19 per cent versus 15 per cent). The diversity gap widens for Board Chairs where, for example, women make up only 10 per cent.
• Diversity is not ingrained as a principle of good governance. Over two-thirds (68 per cent) of Directors say their board does not have a written diversity policy while 16 per cent have one and another 16 per cent are unsure if there is a diversity policy for their board. Again, the top 100 organizations fare better with 30 per cent having a written diversity policy compared to eight per cent for those ranked below the top 100.
• There is still resistance or a lack of urgency to increase diversity. Among those whose boards do not have a diversity policy, two-thirds (66 per cent) felt the board should not develop/adopt a formal diversity policy. In comparison, only 21 per cent said the board should have a diversity policy.
• The aspiration for diversity initiatives differs drastically across industries. Among those whose boards currently do not have a board diversity policy and said the board should develop/adopt a formal diversity policy, 27 per cent were from Knowledge/Service Based industries and just 10 per cent were from Industrial/Resource based industries.

“Countless studies have shown the positive impact diversity can have on the bottom line of an organization when they have diverse leadership and a diverse board,” said Michael Bach, National Director of Diversity, Equity and Inclusion for KPMG, a CBDC Founding Member and sponsor of the Annual Report Card. “The onus is on Corporate Canada to take concrete steps to support this initiative and reflect the amazing diversity of our country. Working together we can affect change that will help this great country to prosper and grow.”

Based on the results, the CBDC has set ambitious goals to improve the diversity of Canadian boards, including increasing the representation of women on boards from 15 per cent to 20 per cent by 2013, while also increasing board representation of visible minorities, Aboriginal Peoples including First Nations, Inuit, and Métis, persons with disabilities and members of the LGBT community over the next five years. To support a talent pool of diverse, highly-skilled candidates to drive this increase, the Council has developed a three-level national education program “Get on Board”. The CBDC will also hold Nominating Chair round table discussions of board diversity best practices including recruiting.

In 2011, the CBDC will address board diversity in the public sector and report on the findings in the 2011 Annual Report Card. The next FP 500 Director survey will be conducted in the Spring of 2012, with a report on the progress made by those reviewed in this year’s Annual Report Card.

The 2010 Annual Report Card is available at: www.boarddiversity.ca