Telus director Raymond Chan, who has been an advocate for more board diversity, in Calgary on Nov. 27, 2020.When it came time last winter to prepare their 2020 disclosures, Canadian companies largely chose not to share information about racial and ethnic diversity on their boards of directors, despite new federal rules that required many of them to do so. The problem may have been that they didn’t have much to talk about.
Just four of the 211 marked companies in Board Games this year got the full two points in the question, which set a higher bar than the federal rules. There were 170 companies that received zero points, because they did not disclose any directors who were members of the groups identified in the federal law, and they did not reveal anything about their policies to promote board diversity. The zeroes included a number of major corporations that often jockey to get a near-perfect Board Games score.
A lot has changed since most companies prepared their proxy disclosures this year. The COVID-19 pandemic and the wave of social unrest in which the Black Lives Matter movement ascended have pushed issues of equality and diversity to the forefront.Advocates hope that Canadian companies are seeing the light on the business case for diversity.
“All we did was take a playbook from a basic tenet of investment management, which is diversification actually adds to returns and mitigates risk,” she said. “Where very poor decisions get made that either miss real opportunities or create accidental risk, a lot of times that really comes from teams that have the same types of people and create collective blind spots.”
“And then when you look at executive officer level, there’s no change at all. So I absolutely can understand why people would believe that the existing regime doesn’t work,” he said. “People who don’t want to comply with it will always find an excuse as to why they are not going to do it. If you actually just say to the companies, you know what? This is something good for your business, this is the direction we’re going, this is a timeline in which you need to make the changes by’ – everybody will do it.”
“It’s just going to take some time and effort for everybody to fix,” said Keith Martell, a Nutrien director who is CEO of Saskatoon’s First Nations Bank and a chartered professional accountant. Mr. Martell said there needs to be more Indigenous people in accounting, corporate law, management finance and investment banking to create a pipeline of director talent.
Governments and regulators may not sit on the sidelines, however. Sophy Lambert-Racine, a spokeswoman for Innovation, Science and Economic Development Canada, said that since some companies are still holding their 2020 annual meetings, the department does not yet have the data to evaluate compliance with the new CBCA changes. Non-compliance with the new diversity disclosure rules “can result in enforcement measures against the corporation or its principals,” she said in an e-mailed statement.
As Canadian governments mull action, institutional investors, and the groups who represent and guide them, say they will continue to apply pressure. Many major pension funds have adopted proxy-voting rules that called for the funds to withhold votes from the chairs of the boards’ nominating committees if the boards didn’t have women on their boards, and have gradually ratcheted up the requirements from one woman to, for example, two, or 25 per cent.
“I think that, given the interconnectedness of the Canadian and U. S. markets and the institutional investor community, frankly, it’s just a matter of time that some of those guidelines that we’re seeing in the States creep up to Canada,” said Rima Ramchandani of Torys LLP.