Getting ahead on diversity in public companies

Brodie: [00:00:13] Hi, I'm Brodie Lawson. And on this episode of Lexpert TV, I am joined by John Valley and Jennifer Jeffrey of Osler Hoskin & Harcourt LLP. John is a corporate partner and chair of the firm's ESG practice, and Jennifer is an associate in the firm's corporate group. Recently, Osler released its eighth annual Diversity Disclosure Practices Report, and it looks at how well public companies in Canada are doing at working to improve diversity in senior leadership positions. That includes the representation of women, members of the minorities, indigenous peoples and persons with disabilities in senior leadership positions. Welcome, Jennifer and John. 

John: [00:00:55] Thanks very much for having us. 

Jennifer: [00:00:57] Yeah, thanks for having us. We're looking forward to speaking with you today. 

Brodie: [00:01:01] John, give us a description of what this report is looking at. 

John: [00:01:05] Thanks very much. Yeah. No, this is the eighth year that we've put out our Diversity Disclosure Practices report. It's something of which we're very proud. And we started the report when the securities law was amended to require public companies listed on the TSX in Canada to provide disclosure about gender diversity on their boards and in senior leadership positions. And we started the report really for two main objectives. One was to provide an update on data, both a snapshot each year to see how issuers were doing and over time to see what sort of progress was was being made over over the years, but also to provide a roadmap which we think is as or more important to show issuers. What best practices look like, how they can build the pipeline and how they can promote diversity, equity and inclusion in their organizations. So that that to us, together with some examples of strong disclosure, is really a key part of the report. So that's where the report began. It's evolved over time and most significantly, in 2020, when the Canada Business Corporations Act, the federal corporate statute was amended to require all public companies that are governed by that statute to provide disclosure not only for gender diversity on their boards and in senior leadership positions, but also visible minorities, indigenous peoples and persons with disabilities. And so we for the first time in 2020, we're able to expand our report to look at diversity beyond gender. And that's something that we think is very important as we as we carry things forward. So it's really a publication that we look forward to putting together. It's a labor of love and it really, we think is important to provide a baseline of information and an example for issuers looking to move down the continuum as they think about diversity in their own organizations. 

Brodie: [00:03:02] So, Jennifer, have there been significant gains over the last year since you started doing this survey? And if so, what are they? 

Jennifer: [00:03:10] Well, after eight years of the diversity disclosure requirement, we see the makeup of boards in Canada has really changed. And a number of Canadian public companies have passed several important diversity milestones at the board and senior management levels. Among some of the highlights we noted this year are that we're halfway to parity in the boardroom across all TSX listed companies. More than one in every four directors is a woman. Women now hold 26% of the board seats. This is a significant change from 2015 when we reported women on average representing only 10% of the number of directors at TSX listed companies. And although there's a tendency to focus on the year over year data, when you step back, that's a 260% increase in the number of women on boards at TSX listed issuers. That is meaningful. And although there's more work to be done, certainly that definitely represents a threshold we thought was worth noting and highlighting in this year's report. We also saw a sharp increase in the number of companies with over 50% female directors. This year, this number almost doubled from last year up to 27 companies, which is really great to see. 

Brodie: [00:04:21] So, John, I know that you've historically reported on the larger issues on the TSX separately, but were there any similar threshold crossed for those issuers this year? And were there any other changes of note? 

John: [00:04:35] Certainly, yeah. And I think it's a good point because there is a bit of a dichotomy in terms of how larger issuers versus the smaller issuers tend to fare when we when we dive into the data. But certainly at the larger end of the market, the S&P TSX Composite Index Company, so the largest companies on the exchange, just over 200 of them across the one third threshold. So for the first time, we saw that that group of issuers had one third of board seats were occupied by women, which which is a significant threshold. And the TSX, the S&P, TSX 60, which is the 60 largest issuers on the exchange by market cap, were at 36%. So in an increase again. So as you go up in size, the percentage of women on those boards does increase and that's consistent with something we've seen over the years. But the other the other important threshold this year was for the first time, there actually no all male boards in our data set among the S&P TSX Composite index companies. And none of the S&P TSX. 60 companies actually had any less than two female directors. So again, that's that's a big change. And I think something that we wanted to to highlight this year. It's also worth noting that among all TSX listed companies, so the broader data set, only 11.6% of those boards had no female directors. And just to give you a comparison to when we started back in 2015, 47 over 47 of those same companies had no female directors. So almost half of all boards eight years ago had no female directors on them. So that again is a big change. And we thought worth noting this year, and we've also started to see a focus on on pipelines looking at potential indicators of change in the coming years. And although we saw only modest gains in the past year and over the past couple of years, in fact, with respect to the number of women who are CEOs and board chairs compared to the prior year, this year, we did see a big jump in the number of board seats filled by women. Who are committee chairs. So there are there are significant uptick there, and that's also encouraging. Similarly, when we look at indicators of possible change in the future and pipelines, the number of companies this year that adopted targets for female directors jumped almost a third to to 42%. That's in light in part likely response to some of the institutional shareholder voting guidelines that we're seeing in the market that came into effect over the past year. But again, it's encouraging nonetheless, and it does as we look forward. Give us some reason to to expect to see some continued gains, which is encouraging. 

Brodie: [00:07:28] And Jennifer, how about chief executive officers or executive officers? Have there been any developments there? 

Jennifer: [00:07:35] Yes. We also noted that there has been some progress on diversity at the executive officer level. In past years, we've highlighted the lack of meaningful progress in increasing the proportion of women at this level among companies. And in recent years, we've noted the lack of representation of visible minorities, indigenous peoples or persons with a disability among the executive officer ranks. However, as we note in our report this year, a significant majority of executive teams today include at least one woman and one in every five executive officers is a woman. Looking back, this represents a significant improvement from 2015, when women accounted for only 13 and a half percent of executive positions on average. So just to add to this, with the progress we've seen that's been made at the board level, we're pretty keen to see if there'll be similar progress at the executive officer level going forward. 

Brodie: [00:08:33] Thank you, Jennifer. Just building on that and the progress this year, how do Canadian companies compare to similar companies in other jurisdictions when it comes to diversity at the board level? 

Jennifer: [00:08:45] Well, our results for larger companies on the S&P TSX TSX Composite Index, which were about one third woman directors, are broadly consistent with the progress that's been made in the US, where recent reports indicate about 32% of S&P 500 directors are women. And in Australia, where it's been reported among S&P ASX 300 index companies, women hold 32% of board seats as at the end of 2021. However, Canadian companies continue to lag the UK, where the UK government backed FTSE women leaders report that women held 37.6% of the board seats among the 5350 in 2021. 

Brodie: [00:09:33] John, with the relatively recent amendments to the Canada Business Corporations Act, what do you see in terms of progress on diversity beyond gender? 

John: [00:09:44] Sure. Thanks. And it's an area where I think the report highlights that there is significant room for improvement. I mean, somewhat encouragingly, just to start there, this past year, our data set for CBC companies who are now required to report not only on gender diversity at the board and among senior management positions, but also with respect to the representation of visible minorities, indigenous peoples and persons with disabilities. So our data set this year is 366 companies. By contrast, in 2020, the first year that the requirements came into force, there were only 270 or so companies in our data set, and that represented only half of CBC or just under half of all CBC companies that we thought at that time were subject to the requirement potentially. So very low compliance this year. It's a much higher proportion. It's a 35% increase in the number of companies reporting. And so that that is encouraging in the sense that companies are starting to think about this, starting to provide some more disclosure and hopefully lay the groundwork for some improvement going forward. But but in absolute terms, the numbers are still very low. To put some numbers to that, based on the most recent census data that we've got from stats, can visible minorities collectively represent about 22 and one half percent of the population, but only about 8% of board seats. There are only 162 directors who self identified this year as being visible minorities. And in the disclosure now that's up from 121 last year. So again, year over year, some good improvement, but very low still in absolute terms. And unfortunately, when we get into the representation of indigenous peoples and persons with disabilities, the numbers. Are pretty grim at this point. We had only seven individuals who identified as indigenous directors on boards in 2020. This year that number increased to 17 across 16 different issuers. So again, in percentage terms, some some growth, but but in absolute terms, still still very low and similar numbers for persons with disabilities. The other thing that's a bit concerning is there continues to be a very low uptake when it comes to target. So earlier on I'd mentioned that the target adoption rate for issuers in our broader TSX data set for the representation of women on boards was up around 44%. When you look at visible minorities, 2.1% of issuers in the data set indigenous peoples less than one and one half percent. And for persons with disabilities, we were unable to identify any issuers that had not had adopted a target with respect to the representation of persons with disabilities on their board. So a very different picture when it comes to target setting. 

Brodie: [00:12:58] Jennifer, can you reference some of the standout Canadian companies that have had good practices in place or have maybe consistently evolved in their plans to improve diversity in their organizations? 

Jennifer: [00:13:11] Yes, of course. Based on our review, we found a number of issuers that had excellent practices in place or great disclosure or both. So I'm very happy to touch on a few examples. Acorn did a great job this year on their disclosure. They include a diversity report in their circular that provides a number of really great graphic breakdowns, visuals of gender diversity at the board and executive officer level. The company's targets that they've set for women in the board and in executive officer level as well. And also self reported designated group data that they've disclosed in that graphic. The disclosure also highlights that they've adopted a diversity and inclusion strategic plan to accelerate the development of diverse leaders and really to strengthen the company's succession bench. We also noted Magna has made great progress this year in their disclosure, in particular in terms of building external partnerships. They've recognized the importance of improving gender diversity within key technical streams and partnered with certain companies that promote gender diversity in those specific streams. So they did a great job there. Maple Leaf Foods is another issuer to highlight. In 2017, the company set out its ambitions to have a gender balanced workforce in its management roles by 2022. So this year they've done a great job disclosing their measurable progress towards those goals. And since 2017, and described their other related diversity initiatives, DREAM is another issuer that's consistently produced great disclosure over the years. One example is that to further address the advancement of women in senior leadership at DREAM, they've established leaders and mentors committee to do many things, among which identify, mentor and champion exceptional talent within the organization, or see their commitment to being a leader in diversity, and also to work with a board committee to identify excellent candidates for board positions, regardless of prior board experience and to provide mentorship to those new board members. So I found that interesting. Tell us also does a great job consistently. And this year they disclose a timeline of key milestones showing progress towards achieving towards board diversity. They describe their approach to increase diversity and inclusion at the company and provide a good explanation of why they haven't adopted executive officer targets. And Enbridge also consistently prefers excellent disclosure in its proxy circular showing its DEI and accessibility strategy over a number of years. And one of those items that they highlight is its commitment to Indigenous reconciliation initiatives to train leaders to mitigate risk of unconscious bias and have talks about their employee formed and sponsored company sponsored employee resource groups that really set out to promote understanding and and support for historically represented or marginalized groups, provide education and create development opportunities for people within these groups and allies and really promote and a diverse and inclusive environment. So those are there are many, many great examples of disclosure disclosure this year, but those are just a couple that I thought I'd highlight today. 

Brodie: [00:17:15] John, do you want to follow up on that and maybe add to that list? 

John: [00:17:19] No, I mean, I think the list is pretty comprehensive. The thing I'd say, though, is that that list and some of the examples of the disclosure in the report are really, I think, one of the key things for for issuers who are looking or any organization really looking at two two things. One, what what sorts of programs can we put in place in our own organization? How can we improve our own thinking on on diversity matters generally? And the other thing is how do you communicate that to your stakeholders? And the disclosure here, I think provides a very good template for a lot of people as a reference point. It's not copy paste, but as a as an approach and as a set of ideas and as a way of communicating those those important initiatives. I think this is a really powerful set of examples in the in the report each year. 

Brodie: [00:18:17] So, John, just to sum up, what are the key takeaways from this year's report? 

John: [00:18:22] Sure. I mean, I think certainly some of the numeric milestones or thresholds that we reached or crossed that Jenny had summarized and that I discussed earlier are important. It's a long way to go even on gender diversity. But I think it is worth looking back and reflecting over the last eight years that we've put out the report. We've gone from 10% women on boards to to 26%. That is a big change, a long way to go. But but I think that. That movement is important to recognize. I think we've done some things to lay the collectively to lay the groundwork for improvements going forward. The adoption of targets, the number of women now who are in increasingly senior leadership positions on boards, and the potential that that has to potentially cause change further down in the organization, I think is is something we'll certainly be keeping an eye on in the coming years. We've seen a lot of a lot of change in the number of women in particular occupying committee chair positions on boards, which again is a bit of a pipeline for board talent once you're there. So that again, is an encouraging trend. And on diversity beyond gender, I think as I touched on earlier, there's just a lot left to do. It's a much earlier point in the journey for a lot of organizations thinking about diversity beyond gender and how to incorporate that into their board and senior leadership positions. But there's also a lot of tools out there and a lot of important thinking that that's available to issuers who are looking to make improvements in that area. And so, again, something we'll be watching with great interest is as we go through this year and look to next year's report and hope to see some significant improvements year over year. 

Brodie: [00:20:18] Thank you very much, both of you. We've been talking with John Valley and Jennifer Jeffrey of Osler Hoskin & Harcourt LLP, and they were talking about the eighth annual report on what TSX companies covered under the Canadian Business Corporations Act are doing to improve diversity in senior leadership positions. Thank you so much for joining us and thank you for watching.