CSA staff review of women on boards and in executive officer positions

Transcription

1 CSA staff review of women on boards and in executive officer positions

2 CSA staff review of women on boards and in executive officer positions In December 2014 amendments were made to National Instrument , Disclosure of Corporate Governance Practices, to increase transparency for investors and other stakeholders regarding representation of women on boards and in senior management of non-venture issuers. For most jurisdictions in Canada, the rules came into force on 31 December 2014 and are based on a comply or explain approach, which gives companies flexibility in how they tailor their disclosures to the market. The six required annual disclosures are: 1. Director term limits and other mechanisms of renewal of the board of directors 2. Policies regarding the representation of women on the board 3. The board s or nominating committee s consideration of the representation of women in the director identification and selection process 4. The issuer s consideration of the representation of women in executive officer positions when making executive officer appointments 5. Targets regarding the representation of women on the board and in executive officer positions 6. Number of women on the board and in executive officer positions On 28 September 2015 the Canadian Securities Administrators (CSA) issued Staff Notice summarizing the findings of their review of the corporate governance disclosure of 722 issuers as it relates to the rule amendments. The Ontario Securities Commission (OSC) held a roundtable on 29 September 2015 to discuss the findings from the review and the way forward. Key review findings for issuers: 51% have no women on their board 40% have no women in an executive officer position 7% set a board target and 2% set an executive officer target 15% have added one or more women to their board this year 65% have not adopted a written policy for identifying and nominating women directors 60% of issuers with a market capitalization above $2 billion have two or more female directors 19% have adopted director term limits, while 56% have adopted other mechanisms of board renewal OSC roundtable participants: Aaron Dhir Associate Professor, Osgoode Hall Law School Victor Dodig President and CEO, CIBC and Founding Member of the 30% Club Canada Pamela Jeffery Founder, Women s Executive Network and Founder, Canadian Board Diversity Council Alex Johnston Executive Director, Catalyst Canada Fiona Macfarlane Managing Partner, British Columbia and Chief Inclusiveness Officer, EY Katherine Rabin CEO, Glass, Lewis & Co. Kathleen Taylor Chair of the Board, Royal Bank of Canada 1

3 Key themes from the OSC Roundtable Some progress has been made but a lot more work needs to be done. At the current rate of progress there will be parity in 2034 which is clearly unacceptable. Transparency needs to be accompanied by a broader approach to diversification and engagement. The business community needs to move from a foundational conversation to policy development. Diversity programs need to be sponsored by the CEO and board Chair to drive cultural change. The board Chair, with the support of the Chair of Governance, should set a vision for diversity that includes measurable objectives and timeframes for achievement. This needs to be part of the board effectiveness assessment. Diversity objectives need to be embedded in the CEO s goals. What gets measured gets done. This approach is fundamental to building a sustainable pipeline of qualified women candidates. Targets are not forced quotas. Targets should be viewed as an aspirational medium to longerterm goals, not quarterly guidance, and must be accompanied by a rigorous plan and processes that hold individuals accountable. This is not a supply issue, it s a demand issue. Boards need to proactively tap into new networks with strong pools of qualified women candidates. Boards should insist that search firms produce diverse long lists and short lists that contain gender balance. As investors and regulators step up their focus on disclosures and progress in this area, issuers can expect the conversation to escalate. The OSC will be issuing a report in early 2016 which may include guidance on more prescriptive disclosures. Our goal at the OSC is to encourage credible and sustainable reform through culture change I believe we re at an inflection point on the issue of gender diversity. - Howard Wetston, OSC Chair 2

4 CSA staff review of women on boards and in executive officer positions Five key elements in a successful strategy for driving real change on gender diversity Make an authentic and visible commitment Set measurable targets to move the needle Understand barriers/biases and address them through an action plan Recognize and reward positive behaviours Embed inclusive practices into critical business processes See Appendix for further details to assist in embedding change throughout the organizational culture. Conclusion Directors are responsible for setting the tone at the top and overseeing the organization s approach to diversity as it affects the company s strategy, risk and performance. Investors and regulators will increasingly shine a spotlight on issuers that lag behind in female corporate leadership and as a consequence fail to capitalize on the transformative potential of a diverse group of talent. Genuine commitment and measurable targets can drive real change to encourage issuers to leverage the talents of all their people. For Canada to maintain and grow its competitiveness on the world stage and foster a high-performance economy, Canadian organizations must take meaningful action now. Top 5 questions directors should be asking: 1. Who champions gender diversity initiatives in our organization and what tone do the board and CEO set as to the priority of diversity goals? 2. How have we articulated our approach to board composition and the steps required to achieve increased gender diversity? Have we defined our ideal board composition? 3. Have clear and measurable targets been set that link gender diversity goals with business drivers and critical business processes? Is there an action plan and accountability for results? 4. Is there regular tracking and reporting on progress by the CEO and Chief Human Resources Officer to the Board? 5. How are we recognizing and rewarding positive inclusive behaviours? 3

5 Appendix Five key elements in a successful strategy for driving real change to increase gender diversity Underpinning each element must be a commitment to frank and open communication that builds internal understanding of, and supports, change. By helping people throughout the organization to recognize the value of improvement and the shared processes for achieving it, progressive change is more likely to be embedded throughout the organizational culture. Increasing women in executive roles Increasing women on boards Leaders act 1. Make an authentic and visible commitment Leaders track progress 2. Set measurable targets to move the needle Tone from the top comes from the CEO, who explicitly prioritizes efforts to move women into senior leadership roles. Step up and take action if the plan isn t working. Customize clear, measurable targets to the particular organization and its needs/current state. Metrics should show number of women in executive leadership positions and trending. Analyze metrics to reveal where a tactic has or hasn t worked and understand why or why not. Identify gaps between men and underrepresented groups, including women, in performance ratings, promotion rates, retention rates and more, and explore to understand what s behind these gaps, including bias or organizational culture causes. Tone from the top means the chairperson or nominating committee chair must advocate for better female representation. Again, take action if the plan isn t working. Targets must be clear and specific to each individual board, depending on where they re starting from and what s relevant to their stakeholders. Check progress at regular intervals and analyze where a tactic has or hasn t worked and understand why or why not. Overall, metrics must be able to show the number of women on a given board. 4

6 CSA staff review of women on boards and in executive officer positions Increasing women in executive roles Increasing women on boards Leaders challenge assumptions (their own and others ) 3. Understand barriers/biases and address them through an action plan Leaders celebrate 4. Recognize and reward positive behaviours Establish an inclusive talent management strategy. Identify and develop career plans for high-performing, high-potential individuals. Develop a meaningful succession plan, including goals and sponsorship so that diverse candidates are ready for promotion at each level. Ensure at least one woman is in every group of candidates for each executive role. Include women on recruitment and selection panels. Require external recruitment services to provide a balance of talented men and women candidates. Introduce a mentoring program for women and commit to active sponsorship to assist all your people in understanding the unspoken networks and success strategies within the organization. Include and support women in participating in mainstream business events. Make them and everyone part of the organization, not a special interest group. Nurture a culture of results while enabling all your people to work flexibly to succeed at work and in the broader context of personal life. Evaluate and adjust strategy where and when necessary. Share and celebrate success stories. Promote tangible rewards for inclusive behaviour. Build a transparent nomination criteria and selection process as recommended by the OSC (including a skills/experience matrix and competency gap assessment), policy with goals, principles and timeframe, and succession planning. Assess criteria for board positions. Reconsider any strict policies that require CEO experience. Whether the candidate search is managed internally or by an external recruiter, extend the search beyond traditional services to consider those with operational, public sector, notfor-profit and other leadership experience. Consider looking strictly at women candidates or only reviewing lists that have 50% women candidates. Create a board evaluation process that looks at board renewal and examines term limits. Promote board positions openly and actively encourage women to apply. Encourage young, high-potential talent to join other boards (e.g., not-for-profit boards) to gain relevant experience. Identify ways to acknowledge progress that work for each individual board (e.g., communications to management, external communications opportunities). Leaders ensure sustainability beyond themselves 5. Embed inclusive practices into critical business processes Consistently apply inclusiveness practices to ensure they become ingrained in the business s culture. Ensure leading practices are written into the board s process, charter, mission statement and beyond to help embed inclusiveness into the organization s culture. 5

7 Contact us To learn more, reach out to our Canadian contacts. Fiona Macfarlane Managing Partner, British Columbia and Chief Inclusiveness Officer Anne-Marie Hubert Managing Partner, Quebec Kam Grewal Partner, Public Policy and Regulatory Affairs kam.grewal@ca.ey.com

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