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Women on corporate boards improve financial success


The familiar image of men sitting around a boardroom table is no longer representative of the winning business model, according to the 2007 Catalyst Census of Women Board Directors of the FP 500: Voices from the Boardroom. In fact, the study suggests that the persistent underrepresentation of women on corporate boards and the extremely slow pace of change might have disturbing implications for company performance and governance in Canada.

The 2007 Catalyst Census found that women represent just 13 per cent of corporate board seats in the Fortune 500, an increase of only one percentage point since 2005. Over 40 per cent of FP 500 companies in Canada have no women directors on their boards.

“The tendency for boards to recruit from the same narrow pool of candidates acts as a barrier to women seeking board seats,” says Catalyst vice president North America, Deborah Gillis.

“Board chairs, CEOs and corporate governance chairs are in unique positions to jump-start the process and drive change. By championing gender diversity and looking beyond the C-suite and FP 500 boards to find qualified women directors, they can provide a better, more transparent environment in which Canadian businesses can succeed.”

Additional key findings from the study support casting a wider net in order to increase women’s representation in Canadian boardrooms.

  • Over 20 per cent of vacant board seats and 30.5 per cent of board seats in public companies were filled by individuals already serving on a corporate board.
  • Women were “recycled” in public companies at greater rates than their male colleagues – 40 per cent of female directors as compared to 28.9 per cent of male directors sit on multiple FP 500 boards.

Previous research from Catalyst shows that, on average, companies with more women on corporate boards financially outperform those with the fewest. The women directors interviewed said that enhancing gender diversity at the board level raises the quality of discussion around the table. This has the potential to yield real improvements in the overall quality of governance which, in turn, will be reflected in company performance. Yet, despite this compelling business case for more women on boards, the pace of change is frustratingly slow.

To understand why, Catalyst interviewed close to 60 FP500 women board directors to gain their perspectives on the slow pace of change. They responded that the positions, opportunities and networks which have been so vital to their own success are still not available or accessible to many women in corporate Canada. They also noted that while talented potential directors exist outside the C-suite, recruiters seeking new directors usually return to this group of “usual suspects” where women’s representation continues to be low.

Although progress is slow, the census study did reveal small signs of progress:

  • The number of companies with multiple women directors increased by 2.5 percentage points since 2005 to 28.5 per cent.
  • Women’s representation as board chairs increased 1.3 percentage points since 2005 to 3.4 per cent.
  • The percentage of key public company board committee chairs held by women rose one percentage point to 6.8 per cent.

The study outlines a few ways that companies can broaden their search for potential candidates:

  • Demand a diverse slate of candidates.
  • Update and create skills matrices to determine what competencies are currently represented on the board, and what other skills are needed.
  • Search out candidates who will fulfill a company’s competency needs in various industries.
  • Look beyond the C-Suite (i.e., COO, CEO, CFO) for qualified candidates with track records in other senior level positions.

CIBC is the study’s lead sponsor. McKinsey & Company Canada and Pricewaterhouse Coopers LLP are the supporting sponsors.

For more on this topic, click here to view a video of Deborah Gillis’ speech in late September 2008 to the Canadian Club of Toronto.

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