Diversity in corporate Canada: a ten-year retrospective

John Valley: Thanks for joining us today. My name is John Valley. I’m one of the co-authors of Osler’s Diversity Disclosure Practices report, and I’m here today with my co-authors, Jessie Armour, Joanna Cameron and Andrew MacDougall, to talk about our tenth anniversary report. This is the tenth year that we have looked at diversity disclosure by public companies in Canada, and with the publication of our tenth annual report, we wanted to take the opportunity to look back at some of the trends that we’ve seen, the current state of play and where things may go from here. Andrew, this year was the tenth year that we reported on diversity disclosure in Canada. You were really the one who initiated the project at the start. What prompted Osler to begin reporting as we have?

Andrew MacDougall: That’s a great question, John. Even before the rules were finalized 10 years ago, it became clear that the prospect of increased transparency on diversity on the board was prompting a discussion at the board level that hadn’t happened in the past. And we knew from our work with the Dey Committee back in 1993, 1994, and its focus on director independence, that if you change the composition of the board of directors, it can have a profound and sustained impact on the director’s role for oversight diligence and the degree of professionalism that the directors show when they carry out their responsibilities. So the focus, really, of the report at the time was to make those conversations at the board level more meaningful by giving them relevant information. And it was to further those conversations that we gathered the data, we gave context in terms of what developments and diversity were happening elsewhere — in the U.K. and Australia and the U.S. — and we summarized some of the best practices that companies disclose so that we could inspire others to leverage the success that they have achieved. But over that 10-year period, we’ve seen a lot of change since that initial start and we’ve been reporting for a prolonged period of time. So now when we look at the report, Joanna, what do you think is the value of the reporting that we’re bringing today?

Joanna Cameron: Well, the report is an aggregator of reported data, and as much as an organization derives value from its own report in many respects, including particular accountability on issues that are especially important to management of their human capital, such as employee retention and engagement, which of course by extension for many people has a strong correlation to corporate performance. I think the aggregated data provides the same, but for corporate Canada, generally. As a result, I think it provides valuable insight into the trends on a macro level. It gives us the 30,000-foot-level perspective, and I think it’s the macro data that ultimately drives the further analysis that supports the discussion at the regulatory framework level and beyond.

Andrew MacDougall: More than just the value of being able to see how your organization is doing, it can really give a sense in terms of regulatory direction for further change in the future and longer-term planning for the organization.

Joanna Cameron: Exactly. John, can you describe how things have changed over the last 10 years of reporting?

John Valley: Just building on something you’d said, Joanna, about what the report brings, and one of the things that we focused on, particularly in the early days, and it’s still an important part of the report today, is this idea of trying to not only provide the data and the analytics, but also a roadmap to try and help issuers and organizations more generally move along in their own journey and thinking about diversity in their organization. So we did that in a couple of ways and it’s expanded over the 10 years. One was looking at best practices, so what did we see companies disclosing about what they were doing in their own organizations to try and promote diversity in their organizations and the development of people from diverse backgrounds? And also, more recently, the examples we’ve provided with respect to disclosure. How are companies that are communicating with respect to diversity effectively doing it? What are they saying? How are they saying it? How does it look and feel when you look at the documents? I think looking at the nature and the quality of that disclosure as it’s evolved over the 10 years has been a really important part of the story. And so that evolution in the report itself, to be able to highlight the good, to be able to highlight the change, as the technology’s evolved, our own ability to mine the data a little bit more effectively and provide some more nuanced slicing, I think is something that over the 10 years has been really powerful in being able to help try and tell the story. And then obviously in the data itself. We’ve seen some huge changes in 10 years. We’re not done, but you look back and when we started the first report, 10% of director positions on TSX-listed companies were held by women and last year was just shy of 30%, a significant change. And we saw steady growth over that period, right? It was just over 2% a year most years, and that’s how we’ve got to be where we are. Someone didn’t flip the switch and it didn’t go from 10% to 20%, but we’ve seen steady sustained growth over the time we’ve been reporting. We’ve also seen a pretty significant increase in the amount of disclosure, particularly for diversity beyond gender, that issuers are providing, even those not subject to the CBCA disclosure requirements for diversity beyond gender, we’ve started to see disclosure again by companies not subject to those requirements, but also with respect to individuals or groups of individuals who aren’t even necessarily picked up by any of the current disclosure requirements. So LGBTQ2S+, for example, we saw a significant increase this year in companies talking about the representation of members of those communities on boards, and that’s not something that we’d necessarily seen before. Two of the stats I think that get hidden a little bit, but that I think maybe demonstrate the extent of the progress that we’ve seen, particularly with respect to the representation of women, is we’re now almost taking for granted that there are no all-male boards on the S&P TSX Composite Index companies. And I think it would be really surprising now to find an all-male board on the composite now. And the other one is we’ve tracked for a number of years now the number of boards that have more than 50% female directors. And I think that number has increased sharply. And even just over the last five years, 10% of boards had 50% female directors, and this year it was up sharply touching on 40%. So we’ve got a really large group of companies that has a majority of female directors.

Andrew MacDougall: I’d like to pick up on just one point, John, that you mentioned that I find to be pretty inspiring. For many years we used to list the names of the companies that have 50% or more women directors or 50% or more women executive officers over multiple years. But we found, starting last year and continuing this year, that there were just too many companies for us to continue to list them for multiple years. And so now we just list the most current years and chart the overall progress over multiple years. It’s pretty impressive that we’ve gotten to the point where there’s more than just a handful of companies that have reached the 50% mark.

John Valley:

Again, the journey’s not done. We’ve got a lot of work to do, particularly for diversity beyond gender. We saw some early growth in the representation of, particularly, members of visible minorities on boards, to a certain extent, at least in percentage terms, directors who were Indigenous, but really haven’t seen the kind of growth in diversity beyond gender that we would’ve expected to see since the CBCA reporting requirements came in 2020, so I think that’s an area going forward where we’re going to have to continue to focus. And Jessie, maybe as we look at this year’s report — it was the tenth annual report that we put out — what do you think some of the most important takeaways from this year’s results were?

Jessie Armour: I think we can think of the state of diversity among Canadian boards and executive officers in 2024 as being really summarized by four key numbers. So the first is 29.8%, painstakingly close to 30%, and that’s the number of boards among TSX-listed companies that are held by women. So 30% has kind of been the industry watermark since 2022, at least for the S&P TSX Composite, who are subject to the ISS proxy guidelines. Over the years, we’ve seen a trend generally moving towards that number of 30%, but as we’ve gotten close and this year quite close, we are seeing a declining trend in the year-over-year increase. This year we did see the smallest increase since 2016, so it’s a slowing growth towards 30%. 40.4% is the second number that tells a similar story from a bit of a different angle, and that’s the rate of new women being added to boards. So the figure dropped 4.9 percentage points down to a rate below the 43.6% reported in 2022. And so alongside slowing growth towards the 30% mark of women on boards, we’re also seeing that less women are being added to boards year over year. So that’s definitely kind of a trend to watch and something that the executive officer level is not immune to either. So that’s the third number that would be 4.5%, and that’s the number of TSX-listed companies with a female CEO. So there was a decrease there from last year where we had reported 5.2% of TSX companies with a female CEO. The number is small to begin with, but declined primarily due to turnover of female CEOs without enough of a lift in new appointments of female CEOs to provide some level of counterbalance. So it’s definitely a trend that we’re seeing across the board and executive levels. To turn to a bit of a more positive story, I’d highlight 0.96. That is the average number of executive officers per company who are members of visible minorities, specifically amongst our CBCA group of companies. It’s more optimistic. It represents an increase in visible minority representation executive officer level, and a similar trend was observed to a lesser degree on the director side, but it does indicate a shift towards an increased interest, perhaps, in diversity considerations beyond gender and a shift in priorities. Andrew, I know you have some insight into how those results might fare in contrast to other jurisdictions.

Andrew MacDougall: Well, thanks, Jessie. When you look back and you compare how Canada does to some of the most comparable jurisdictions, we’re definitely not a leader. And in fact, probably just a little bit behind, I’d say, compared to them. In the U.K., 42.1% of women directors on the boards of its 350 largest companies. In Australia, amongst their 300 largest companies, women held 36% of the seats. And amongst the S&P TSX Composite, we were just at 36.2% mid-year this year. So we’re sort of around the same level as Australia, behind the U.K. We are ahead of the U.S. where, among the Russell 3000 companies, women held 29% of the board seats at the end of last year and it crossed the 30% mark this summer. When you look at diversity beyond gender, the U.K. found that 15.3% of directors were from an ethnic minority. In Australia, only 9% of the directors were non-Anglo European. In the U.S., persons of colour held 18.2% of Russell 3000 seats. And then in Canada we’re sort of in the middle, with 11.2% of seats being held by persons who were visible minorities or Indigenous Peoples. So we’re not bad, but we still need to do a little bit more work if we’re going to stay on par. We’re definitely not leaders in any of this. So we’ve covered a lot of the data and the results of the report, but what is everybody’s favourite thing about this year’s report?

Joanna Cameron: One of the items that I liked from this year’s report is something we talked about a little bit before in this conversation, was the opportunity to review the disclosure provided by the issuers and how that has really evolved. Not only were they disclosing their own initiatives, but an increasing number also had the courage and I think the candor to report against the goals and the targets, if you will, that they had set previously, whether it was for better or worse in some cases. And I think that’s a really positive data point in terms of where we’re going with the disclosure and what organizations are actually doing internally. I think we could all say that in over the 10 years there’s been material evolution in the scope and the nature of the reporting. It goes well beyond the statutory minimum and it provides some really interesting and fascinating insights on the organizations and their cultures. And I think you really get a better sightline into what is actually happening as opposed to just the number getting turned out at the end when you review their diversity strategy and the steps they’re taking from onboarding upwards. So I really enjoyed that. I thought the disclosure is increasingly interesting.

Andrew MacDougall: Right? It demonstrates that they’re taking things seriously and that they’re putting some real effort into it. It’s not just a check-the-box exercise for those issuers. And it’s a very cool piece of the report.

Jessie Armour: I think for me, the report has historically really centered around gender diversity. We report on characteristics beyond that where there are disclosure requirements that go with it. Given some influence on the U.S. and also potential requirements coming into play in Canada, we’re able to now see more disclosure around other characteristics like LGBTQ2S+ and also being able to, now for the first time, report on visible minority CEOs and bringing that data into the fold as priority shift across the issuers that we collect data on. So that’s something to really enrich our report, but also an interesting trend to start tracking in the years to come.

John Valley: Yeah, I think that’s right, and I think for me, Andrew, just going back and looking at this year’s report in particular, I think it was the opportunity to stop and really look back at where we were and where we are today because I think it is easy to get caught up in what’s happening year over year, and certainly that’s important, that’s what we’re measuring each year, but to have the opportunity to stop and look over a 10-year period and think about some of the disclosure that Joanna mentioned, some of the data points that Jessie was talking about, to see how far the discussion has come, how far the actual data is telling us that we have come with respect to the representation of women on boards in particular, and to remind ourselves that as uncomfortable as it may be, there’s still a lot that we need to do collectively to continue to ensure that the boards of public companies in Canada are representative of the population as a whole, the markets that they serve, and I think that’s something that we see people are interested in. This year’s report was just a really nice opportunity to step back and look at how things have changed over the last 10 years.

Andrew MacDougall: So I’m going to add to my thought what I really liked about this year’s report is although we are seeing a bit of a pause in terms of improvements in diversity year over year, we included audio recordings of a number of diversity leaders who note the change and note that things are a little bit more difficult this year, but are overall very optimistic about where we’re going to go in the future. I found that just listening to those recordings was, again, very inspiring and a nice contrast to what some of the data was showing for our report. Keying up on that theme, what do people predict we’re going to see next year? Any predictions you want to put out there, and we’ll see whether they come true?

Joanna Cameron: I’ll take that one. May not be the popular answer, but I’m predicting similar results for next year. But to inject some optimism in it, I don’t think it’s a bad thing. I think these plateaus ignite the harder conversations. I think that some of the really rather dramatic increases we saw in the first few years, I think it was an unlocking of immediately available talent that sort of surged through the doors that had been in the lobby for a while and we weren’t accessing it. Now we have to look at the pipeline and as I alluded to earlier, the disclosure I thought was optimistic that organizations are looking at that, we will not get those numbers up again until we are retaining and keeping engaged workforces that John alluded to as well, that more accurately reflect the Canadian population and, by extension, the stakeholders of these organizations. And I think that the plateau is going to cause us to look at some of the systemic barriers that there are there in terms of retention and advancement of diverse employees. I don’t think it’s a landing spot. In my view, it’s a pause, but I’d be interested in what Jessie or John thinks as well.

John Valley: I may be a little more optimistic on what we might see for diversity beyond gender this year, in part because I think one of the things that has, I think, driven the improvements we’ve seen for the representation of women have been institutional shareholder expectations and proxy voting guidelines and the like. And I think there’s still a lot of room to run in terms of what those expectations are and where a number of companies are. And so I think we’ll see some improvement there. But I agree, I think the rate of increase for the representation of women on boards is likely to continue, but I think unfortunately that lower rate of increase may continue, but I hold out more optimism for diversity characteristics beyond gender. The other thing I’m hopeful for is that we’ll see some movement on executive officers. It’s been really sticky, not just in Canada, but I think Andrew, to your point internationally, that’s been one that has been a harder nut to crack for a lot of businesses. Jessie, your thoughts?

Jessie Armour: Yeah, I think I would agree in terms of seeing more of a shift in diversity beyond gender characteristics. I think what that means for our report and making predictions about our report specifically is that we will evolve to track those elements as well and making sure that those are highlighted.

Andrew MacDougall: So I’m going to say that I actually agree with Joanna that we’re in a bit of a pause at the board level, but I’m also, like John, optimistic about continued progress at the executive officer level for a number of reasons. And one of the key ones being demographics are going to have an impact at that level. It’s a little harder to make sure that you do the work internally to progress the pipeline, but it has to happen. And a responsible board of directors is very much focused on their human capital and making sure that they are tapping the best talent possible. So it may be a bit of a pause at one level, but I’m optimistic about the other levels, and then we’ll just have to see where the report comes out next year.

John Valley: Thanks, Andrew. I think that sums things up nicely. Again, thanks to Jessie, Joanna and Andrew for joining us today for this discussion of Osler’s tenth anniversary Diversity Disclosure Practices report. Thanks, everyone.