Many prominent shareholders, such as institutional investors and private equity firms, are putting pressure on the companies they own to report on the diversity characteristics of their board members and to increase the number of women and other groups on their boards. And many companies are responding to this pressure, creating roadmaps to improve their board diversity.
To find out how companies are currently approaching the issue of board diversity, Toppan Merrill commissioned Mergermarket to speak with three leading experts as well as one public company executive.
Toppan Merrill question: Progress is gradually being made when it comes to female representation on corporate boards, but gender diversity in the C-suite remains very low. Do you think diversity in this area of leadership carries less weight among investors? And do you think it will take longer for the situation to change in the C-suite? Leading industry experts weigh in...
John Valley, Osler says: We’ve looked at this issue in Canada, and indeed while there has been slow but steady progress with respect to women on boards, there has been little progress on the executive officer front since our ‘comply or explain’ diversity disclosure requirements came into force in 2014. ‘Structure’ is a part of it – compared to a board, there are fewer available to fill in the C-suite, the tenures tend to be longer, and there is a cost in terms of separation payments to turn over the C-suite. That makes it harder to justify terminating your CEO in the short term without cause to facilitate a better gender balance. But that’s only part of the story, and the other issues we’ve discussed with respect to increasing gender diversity apply to the C-suite as well.
Diversity among executive officers is an area of increasing focus, and we see institutions being increasingly interested in understanding how organizations are developing diverse talent in their organizations. However, it is harder to measure and assess in some respects. Board members are easy to identify, and board sizes typically are more comparable across organizations, but the disclosure requirements in Canada relate to ‘executive officers’ which can be defined very differently across organizations and makes the data harder to compare. What we are seeing is that some companies are devoting a significant amount of space in their proxy materials to talk about what they're doing throughout the organization to develop and promote gender or other diversity in the executive officer ranks. That disclosure doesn’t show up in the numbers, but it does suggest that there may be change on the horizon.
Lori Zyskowski, Gibson Dunn adds: I think the C-suite is the next frontier for diversity. I think once you have a more diverse board, the next step will be to look at diversity in the C-suite and have programs to promote women and other minorities from within.
To view the full report, click here.