Corporate boards that include diverse members are widely viewed by shareholders as enhancing decision-making capacity, lending a wider variety of perspectives and experiences to crucial decisions. Despite this conviction, Canada’s corporate boardrooms have proven slow to embrace diversity.
In 2014, the securities regulators of Ontario, Quebec, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut and Saskatchewan passed a new rule requiring issuers to disclose their policies and approach to gender diversity on their boards and in senior management. The rules went into effect on December 31, 2014.
SHARE has a long history of engaging with company boards on increasing gender diversity in policy and practice. In 2015, SHARE focused on enhancing the case for other types of diversity, including First Nations heritage, cultural/ethnic, age, and skills/expertise, in addition to gender diversity.
In June, SHARE and the Centre for Corporate Governance and Risk Management at Simon Fraser University’s Beedie School of Business co-hosted an Investor-Issuer Roundtable to explore the topic of board diversity. More than 25 people representing institutional investors, issuers, and expert organizations like the Canadian Board Diversity Council and the Ontario Securities Commission attended. Participants discussed the importance of diversity at resource companies, a sector that currently has fewer diversity policies than others. Engaging with First Nations is essential for resource project development, particularly since the Tsiloqut’in court decision, and resource companies will benefit by bringing First Nations representation onto their board. Other competencies beyond financial, legal and direct industry experience – such as social and environmental expertise – may be important qualifications for directors to effectively oversee management’s performance in the sector.
Building on this, SHARE has initiated a new Business and Reconciliation engagement stream in 2016, which will engage with relevant companies to include Aboriginal ancestry in their criteria for board diversity policies, and increase the recruitment, training and advancement of Aboriginal people at all levels of the business.
In 2016, SHARE will also continue to support efforts to increase the representation of women and other under-represented groups on boards and in executive positions by engaging with companies without sufficient policies and no women on their Board of Directors. For example, in late 2015, SHARE helped Oceanrock Investments file a shareholder proposal at Restaurant Brands International asking the company to develop a board diversity policy and report on its timelines, process and activities for increasing gender diversity on its board. Before its merger with Burger King to form Restaurant Brands, Tim Hortons had 3 women on its board. Restaurant Brands has none. The company’s AGM is in mid-2016.
SHARE will also continue to engage with governments and market regulators and use its proxy analysis and voting recommendations to advance diversity.
Proxy Voting and Board Diversity
In order to address the lack of gender diversity on corporate boards, some shareholders have filed proposals asking companies to add a certain number or percentage of women directors to their boards. These “quota” proposals can be controversial. SHARE votes for these proposals in some cases, if the specific request made by the proposal is feasible.
A shareholder proposal filed with SNC-Lavalin in 2015 asked that company to take the necessary steps so that least 40% of its directors are of each gender by 2020. Normally, this time period would be too short for a corporate board to achieve a change of this scope. However, in the case of SNC-Lavalin the board would need to add only 2 women directors to achieve this goal. Thus the goal is both aligned with board diversity, and achievable. SHARE voted for this proposal.