Balanced representation of men and women: an issue of politics, economics and morality.

Honourable senators, I rise today to speak to you about Bill S-217, which I am sponsoring, but I would like to begin by underscoring the importance and urgency of encouraging the integration of woman into boards of directors.

Although I don’t often do this, allow me to commend the Government of Canada’s initiative in this area. One year ago, on April 5, 2013, to be precise, the former Minister of Public Works and Government Services and Minister of Status of Women, the Honourable Rona Ambrose, announced the makeup of an advisory council whose mandate would be to promote the participation of women on corporate boards in both the public and private sectors. Its goal was to increase opportunities for women to serve on corporate boards. The minister at that time said:

“[This] makes good business sense for Canadian women and for the Canadian economy….businesses with more women on their boards are more profitable and routinely outperform those with fewer.”

Unfortunately, the report from the advisory council, which was supposed to be released last fall, has yet to be released. In the meantime, there has been a cabinet shuffle. I would remind everyone that, in Economic Action Plan 2012, Prime Minister Harper committed to creating this advisory council to make it easier for women to serve on corporate boards. Also, to refresh the memories of my colleagues across the floor, I will quote the section of Economic Action Plan 2012 entitled “Women on Corporate Boards.”

Economic Action Plan 2012 announces the creation of an advisory council of leaders from the private and public sectors to promote the participation of women on corporate boards.

Here is what the action plan says about this program:

Canadian women have high levels of education and business experience. Many lead successful businesses and are active members of corporate boards. Yet they remain under- represented on boards of directors and in top leadership positions. Increasing opportunities for women to serve on corporate boards makes good business sense for Canadian women and for Canada’s economy. The Minister for Status of Women will work with the private sector to promote the participation of women on corporate boards and champion their leadership. Through the creation of an advisory council of leaders from the private and public sectors [and I know that Ms. Leroux, who runs Mouvement Desjardins, is a member], the Government [according to Mr. Harper] will work with the private sector to link corporations to a network of women with professional skills and experience.

Unfortunately, we are still at square one two years after this announcement. Therefore, my bill is certainly good news. It will be able to help the Prime Minister keep his promise.

Honourable senators, it is time that the government and we in this chamber took note of this situation, which is both socially unjust and economically counterproductive.

For the past five years, I have been introducing bills to promote female representation on boards of directors. For the past five years, I have been explaining to this chamber, the media, provincial governments and many groups that Canada would benefit tremendously from having more women on boards of directors and that we need legislation to make that happen within a reasonable period of time.

Some members of the media — such as The Globe and Mail — have been very receptive to the idea, and some provincial governments have been open to the idea or even determined to change things — Quebec has introduced legislation and Ontario is about to — but I have still not made much headway with my Conservative colleagues. I hope that Minister Ambrose’s initiative and the Prime Minister’s Economic Action Plan 2012 promise will encourage my colleagues opposite to view my bill favourably.

At this point in the preamble to my speech, I would like to clarify what is in my bill and what is not.

Bill S-217 would not establish quotas for women on boards of directors. The concept of quotas is not consistent with the spirit of the bill, and the concept of quotas for women even less so. That is why you will not hear me speak of quotas, but instead of balanced representation of men and women.

The bill’s short-term goal is to promote female representation on boards of directors, first, to give 52 per cent of the Canadian population the same access to economic decision-making positions as men and, second, to provide for more diverse and therefore more effective decision-making.

In the long run, the bill would balance the gender makeup of boards of directors and could benefit both men and women. In other words, Bill S-217 protects against imbalances in the composition of boards of directors, no matter which sex is underrepresented.

In a moment, I will explain how this issue affects our economy. For now, let me make a common-sense comparison: No good investor in Canada or elsewhere would think of putting all his or her money in a single product. To guard against economic risk, it is preferable to invest in a diversity of products. How, then, could a board of directors, which also faces economic risk and must make strategic decisions that may affect the future of a company, not itself be diversified? How could ignoring the skills of half of the population — women in this case — not hinder the performance in our country?

One of the arguments made against my bill relates to the fear some men have that they will be forced to choose a woman at the expense of a qualified man, as if there are not enough qualified women in Canada to sit on boards of directors. I would respond by asking them this: Are you sure that all the men sitting on boards of directors were chosen for their competence, and are you sure that our boards of directors are the best they can be?

Obviously, the answer is “no.” We must shatter the old beliefs that women have some biological liability that prevents them from being equal or even superior to men.

Achieving balanced representations of boards of directors will undoubtedly force some people to change their views on women, and some will also have to leave their comfort zones to find the feminine skill sets most suited to a given business. After all, if you want to succeed in business, it is better to be pragmatic than dogmatic.

So you see now that Bill S-217 is not about women; it is about all of us. This is not a bill for women or against men; it is a pragmatic bill that would optimize the effectiveness of our boards of directors while rectifying a social injustice.

Let me add that diversity on boards of directors is not just about sex. It is also about culture and age. Our businesses, particularly our export-oriented businesses, need a sound understanding of their products and their market. To achieve this, they need boards made up of women and men from different backgrounds and different generations.

Honourable senators, I told you that the purpose of my bill is twofold: to improve the economic performance of our businesses and to rectify a social injustice. To back that up, I would like to refer to a very interesting report by two researchers, Sylvie St- Onge and Michel Magnan, entitled “Women on Corporate Boards: Taking Stock and Future Research,” and an article by Sophie Landrieux-Kartochian entitled “Women in leadership, better corporate performance?”

I will conclude this speech on economic performance. First, allow me to address the issue of social justice.

Gender equality is not optional. It is a fundamental individual right.

Is democracy acceptable when women are not allowed to vote? No. Is the market economy acceptable when women are excluded from decision-making roles? No. Is a society acceptable when it allows its political, economic and legal powers to be dominated by one sex? Again, I say no.

Nothing can justify that half the population with equal skills is excluded from positions of power. Nothing can justify that Canadian women contribute to pension funds through their work, but do not have an equal say in strategic decisions regarding the investment of that money, which takes the form of majority shares in most of our major corporations. Nothing can justify that half of the skills of the Canadian population go unused because of their absence on boards of directors.

Why are women not as well represented as men on boards of directors?

Studies show that people who analyze candidates’ potential for advancement tend to select men because they have a masculine perception of leadership or power and cannot picture a woman in a leadership role.

Accordingly, we can presume that this bias comes into play when positions are filled at companies and also at the head of companies.

A 2010 study shows that according to female directors themselves, stereotypes and the old boys’ club culture are the biggest obstacles. The business community is influenced by traditional values and education and is full of prejudice and preconceptions about women. I am not the only one to say so. The governing bodies of corporations more or less consciously tolerate the inequalities that lead to the exclusion, non- recognition and non-integration of women in business.

Although no one may say out loud that they do not want women on their board of directors, there may be indirect discrimination. The requirements candidates must meet to become board members may appear to be neutral and justified, but they may exclude women from or limit their access to board positions. For example, the current trend of seeking board members who are current or retired CEOs automatically excludes qualified female candidates as few women are or have been CEOs because of this systemic problem.

According to a 2010 study conducted by Catalyst, in the United States only 3 per cent of the 500 or 1,000 largest corporations are headed by women. Consequently, despite the fact that the requirements are the same for men and women, they do not create a level playing field for women.

Honourable senators, with respect to the social injustice I have described, some of us may still wonder if it is appropriate to legislate rather than to wait for things to evolve on their own.

I would respond by quoting the conclusions of a 1998 study funded by York University’s School of Business and carried out by Ronald Burke, entitled: Women on Canadian Corporate Boards of Directors: Getting the Numbers Right! The conclusion reads as follows:

The pattern of findings [in the study] contained elements of both optimism and pessimism regarding increasing the numbers of women serving on corporate boards. The optimistic conclusions are based on the importance of a strong track record, business expertise and appropriate business job titles in attaining directorships. More and more women are acquiring these credentials….The reasons women joined boards would also appeal to male board members because they were board and business related….

The pessimistic slant on these findings stems from the fact that the nomination process is still pretty much the result of the “old boy’s network”. Many qualified women would not be visible to this small, important but insulated group of men. Thus it is unlikely that the small percentage of current board members that are women will change appreciably in the short run.

Should we embrace the study’s optimistic conclusion or its pessimistic one? Let’s look at the figures: according to research by Catalyst — a Canadian organization as well as an American one — in 1998, women held 6.2 per cent of the seats on the boards of directors of Canadian companies in the Financial Post 500 ranking. In 2013, that figure was 15.9 per cent of those same seats. That is an increase of 9.7 per cent in 15 years, an average annual increase of 1.55 per cent. At that pace, we can hope to achieve parity in 22 years, something I will probably not be around to see.

However, the situation of women on boards in the United States, Canada and the United Kingdom contrasts with that of women in other countries that have passed legislation that sets targets for their presence. In France, for example, the watchdog organization Ethics and Boards reveals that women’s representation on the boards of companies in the CAC 40 index doubled between 2009 and 2011 and reached 20.7 per cent. Most of those companies had already exceeded the 20 per cent threshold for the presence of women, a threshold not required by law until 2014.

Norway, which has a law that requires boards of directors of companies listed on the stock exchange to be made up of 40 per cent women, saw the rate increase from 7 per cent in 2002 to 44 per cent in 2011. It is important to remember that this started out as a voluntary process and, when that did not work, the Norwegian government eventually passed a law. In Spain, which has a law that requires boards of directors to be made up of 40 per cent women by 2015, the rate increased from 3 per cent in 2006 to 10 per cent in 2011.

This experience shows that, with government intervention, the representation of women on boards of directors increases rapidly. What is more, when such legislation is in place, women are more likely to put their names forward to become a member of a board of directors, since they no longer worry about or feel the pressure of being the only woman on the board or being in the minority.

As for Canada, two provinces have already shown leadership by directly addressing the issue of women on boards of directors. In 2006, the Government of Quebec passed An Act regarding the government of state-owned enterprises, which requires that women make up half of these enterprises’ boards of directors. This year, the Government of Ontario asked the Ontario Securities Commission to make recommendations on the best way to require a disclosure regarding gender diversity.

More specifically, the OSC’s proposal calls for amending the requirements of Form 58-101F1 of National Instrument 58-101 regarding the disclosure of women on boards and in senior management. I have made some representations to the OSC.

The proposed amendments would essentially provide for improved disclosure of the representation of women on boards of directors and in senior management for issuers listed on the Toronto Stock Exchange and other non-venture issuers that are reporting issuers in Ontario.

In other words, under this proposal, which is now in the process of being adopted, the issuer will disclose on a voluntary and annual basis whether they are complying with requirements such as their own policy on the representation of women on boards of directors. If they are not in compliance, issuers will have to explain why.

Honourable senators, it’s also worth remembering that in October 2013, the giant Ontario Teachers’ Pension Plan took a much more radical stance. It proposed to the OSC that TSX-listed companies that do not have at least three women on their boards be delisted, and we are talking about a private sector enterprise. This is a far stricter measure than the OSC proposal and the voluntary “comply or explain” approach, but I believe that Wayne Kozun, a senior vice-president of the Ontario Teachers’ Pension Plan at the time, has a legitimate argument:

This is something that people have been trying to promote for over a decade, and the numbers just are not showing any substantial progress in increasing female representation on boards of directors.

In its proposal to the OSC, the Ontario Teachers’ Pension Plan also noted by way of comparison that in 2011 the United Kingdom introduced a system similar to the draft amendments to Ontario’s National Instrument 58-101, namely, the voluntary “comply or explain” approach. While the policy’s initial results were dramatic, the increase in the number of women on the boards of directors at the FTSE 100 and FTSE 250 companies quickly stabilized to remedy the situation. British authorities recommended developing a mandatory quota policy to ensure consistency and increase female representation on boards.

Even though this is an attractive idea, it is not, as I mentioned, the goal of my bill. As you now know, my bill does not require the boards of directors of the corporations subject to it to be 50 per cent women and 50 per cent men. Instead, it calls for balanced representation of at least 40 per cent men and 40 per cent women. However, this bill would come into effect gradually. The corporations in question would have three years after the bill comes into force to ensure men and women each hold at least 20 per cent of the seats of their boards. The 40 per cent objective would have to be met six years after the bill comes into force.

Fellow senators, we can put an end to this injustice. That is why I introduced Bill S-217 to accelerate the process. This is especially important because this imbalance appears to be affecting the performance of our businesses and our economy. This is the point I would like to expand on now.

Based on studies conducted by Catalyst, McKinsey, Forbes, Crédit Suisse, KPMG and other organizations of similar size over the past 10 years, it seems that balanced representation on boards of directors has become synonymous with economic efficiency and profitability.

In particular, these studies mention better financial results, a bigger talent pool, the promotion of innovation and creativity, improved client perception, enhanced performance against non- financial indicators and the assurance of better governance.

More specifically, studies conclusively determined that there is a link between greater female representation on boards of directors and performance. The study conducted by Catalyst in 2004, entitled: The Bottom Line: Connecting Corporate Performance and Gender Diversity, continues to serve as a reference. It established a direct correlation between the presence of women on boards of directors and financial performance by examining a sample of 353 large American companies, as ranked by Fortune 500, from 1996 to 2000. The companies were divided into quartiles based on the gender diversity of their top management teams. Representation of women on top management teams averaged 20.3 per cent in the top-quartile companies and less than 2 per cent in the bottom- quartile companies. Overall and sector by sector, the study showed that companies in the top quartile perform better than companies with fewer women. The average return on equity for top-quartile companies was 35.1 per cent higher and the total return to shareholders was 34 per cent higher than for bottom- quartile companies.

Similarly, some researchers believe that having more women on boards of directors is a good thing because men and women have different and complementary individual characteristics. This new trend in research values differences and distinctive assets.

These researchers try to compare the attributes, skills and contributions of men and women in management positions or on boards of directors in various areas, such as aptitude (wisdom, diligence and so on), style of interaction (ability to compromise, concern for individuals), leadership style (democratic, transformational, trust-based), decision-making style, attitude toward risk, competitiveness, concern for interpersonal relationships and human factors.

The financial frauds that occurred in the early 2000s prompted researchers to compare the principles, ethical behaviour, moral development and ethical reasoning of men and women. For example, they tried to determine if having more women on boards of directors would protect organizations from financial or economic crises.

On the whole, the study results confirm the presumed characteristics of women. It was concluded that women deserve more recognition and should be called upon more often because they complement what men bring to the table and have added value. For example, researchers looked at biological differences to try and determine whether the recent stock market crisis in the financial sector could be explained by hormonal differences or the fact that men and women have different testosterone levels and how that affects their behaviour when faced with risk. Some authors go so far as to recommend that organizations place more value on so-called “feminine” qualities. That echoes the premise of the resource dependence theory, according to which organizations that have more women in management roles use their resources more wisely and create a greater competitive advantage.

In addition to studies on profitability, other studies still support the idea that there is a link between having more women on management teams and financial performance. They are backed by stock market valuation. The first study of this kind was in 1999, 15 years ago now, and it looked at the evolution of stock prices of companies that went public. It demonstrated that having women on the management team could potentially increase short- term performance. This observation held true over three years as prices and business profitability increased.

A second study in 2003 based on a sample of 638 large American Fortune 1000 companies had similar results. The comparison between the companies with the most women on their boards of directors and those that had none or few showed that there was a link between having more women on boards of directors and the companies’ value.

Another study of 110 of the largest French companies listed on Euronext also showed that having more women on boards of directors and management committees had a positive effect on the performance of companies.

Let’s move on now to other points in favour of this bill.

I will stop there, but a number of other studies also have shown the economic value of female directors. Let me conclude with a pair of quotes of people whom most of us know very well.

Earlier this month, Hillary Clinton and Christine Lagarde, the first woman to be managing director of the International Monetary Fund, said the following about this issue. Ms. Lagarde said:

If you bring more women to the job market, you create value. It makes economic sense, and growth is improved…. It’s really important to actually measure and to then identify what policies need to be fixed in order to give access, open up the economy, remove the barriers, and not just the cultural barriers, but the economic barriers as well, the tax barriers.

Ms. Clinton said:

For many of us, the argument for women’s equality, for women’s rights, was first and foremost a moral argument and it was a political argument…. But I think where it is now an economic argument is in many cases a maturing of the argument that women’s rights are human rights but also a very important way of enlisting greater support.

Honourable senators, the economic argument for more women on boards of directors does not obscure the fact that simply ensuring the equality of men and women is reason enough to have more women in companies’ decision-making bodies.

I also want to add that while many studies have examined the impact female directors have on their organizations’ performance, there is no similar study for men. As such, there is no proof that male directors have a positive impact on the performance of their companies. Is this equal treatment for men and women? If you own shares, you already know that actually it is not a great performance. You can see how much we remain subject to a gendered view of our society.

Honourable senators, implementing new practices regarding female directors and candidates for directorships is both a political and a moral issue: as citizens and legislators, are we not in favour of gender equality? Since, as you will agree, gender equality is a key moral principle in our society, any justification that would stop this equality at the boardroom doors is an unbearable and unacceptable contradiction.

I want to conclude by citing a woman who is well known in media circles. Sheryl Kara Sandberg is Chief Operating Officer of the internet giant Facebook and a member of its board. On page 159 of her book Lean In, Sandberg writes:

For decades, we have focused on giving women the choice to work inside or outside the home. We have celebrated the fact that women have the right to make this decision, and rightly so. But we have to ask ourselves if we have become so focused on supporting personal choice that we’re failing to encourage women to aspire to leadership. It is time to cheer on girls —

— and I have three daughters and five granddaughters —

— and women who want to sit at the table, seek challenges, and lean in to their careers.

Honourable senators that is why I invite you to make an independent judgment and support Bill S-217. Thank you.

Some Hon. Senators: Hear, hear!